Financial markets to restructure towards balance, transparency

Deputy Governor of the State Bank of Vietnam Nguyen Kim Anh said at a conference last weekend that there existed limitations in the financial markets of Vietnam, especially imbalances in the market structure, which made it rely heavily on the banking system.

He cited statistics showing that the ratio between the total outstanding loan and the gross domestic product (GDP) was 112%, compared to the ratios of bonds, securities market capitalisation and insurance premiums to GDP, which were at 22%, 27% and 2%, respectively, adding that there was a lack of corporate bond and derivatives markets in Vietnam.

In addition, there was an inadequacy in market transparency and stability, which altogether posed systematic risks to the financial market, he said.

According to Kim Anh, during the period from 2016 to 2020 the central bank would improve the efficiency of the monetary and credit market, in line with international commitments to meet demand for development. 

This could boost the securities market and turn it into a channel for raising medium and long-term capital for the economy and gradually reducing the dependence on banks.

“A sustainable financial market will have large liquidity and capital reserves to be able to withstand risks coupled with diversity in business models that do not depend heavily on a single sector, as well as having a long-term  development strategy, transparency and reliable information system,” he said.

Experts at the conference on developing financial markets within an international integration context, held by the Banking Academy, said that efforts on restructuring the banking system and handling of bad debts must be hastened.

Boosting securities market

Vu Bang, Chairman of the State Securities Commission of Vietnam, said at the conference that the restructuring of the securities market would continue, with a focus on expanding the market’s scale and attracting foreign capital.

Bang said Vietnam had already raised policies to hasten privatisation and listings, adding that more stakes would be sold with an aim to reduce the state’s holdings, and punishments would be imposed on firms that had been privatized, but did not implement listings as regulated.

“By 2020, the market capitalisation is expected to be equivalent to 70% of the GDP,” he said. 

Bang noted that the development of the derivatives market was underway, with the legal framework completed till date. The derivatives market was expected to be launched in 2017.

He said that a project on corporate bonds was proposed to the government and hopefully Vietnam would open a corporate bond market in 2018.