Bond issuers must respect their payment commitments, reminds the Ministry of Finance

A worker counts Vietnamese banknotes at a bank in Hanoi. Photo by VnExpress/Giang Huy

Bond issuers are solely responsible for repaying their debts and investors should be aware that they are buying at their own risk, the finance ministry said.

While the bond market is a key source of raising capital for businesses, buyers should be aware of regulations, a ministry spokesperson told reporters on Tuesday after the recent arrests of property developer executives Tan Hoang Minh and Van Thinh Phat.

Companies are responsible for meeting their issuance commitments, and issuance advisers and distributors must work with the issuer and investor to ensure this, he warned.

Investors should understand that bonds carry higher risks than bank deposits, for example, and should do their own due diligence before investing, he said.

The ministry expects investors to be cautious and steer clear of rumours, he said.

Van Thinh Phat, chairwoman of Truong My Lan, was arrested last month for alleged fraud related to the issuance and trading of bonds worth trillions of dong (1 trillion VND = 40.2 million dollars) in early October.

Police blocked the transfer of assets by 762 companies and 14 people connected to the company.

Hanoi-based Tan Hoang Minh, a developer of major luxury apartment projects, had its chairman and five executives arrested in April over alleged fraud in nine bond issues worth $10 trillion from VND.

Some investors have complained that banks do not provide them with full details of the bonds they distribute and often trick them into thinking that they are making a deposit and not buying bonds.

In recent years, the government has tightened bond issuance regulations and repeatedly warned investors of the risks.

In the first 10 months, the value of bonds issued fell by 25% year-on-year to VND 328.9 trillion. Banks accounted for 41%, followed by property developers with almost 29%.

Companies redeemed 152.5 trillion dong worth of bonds during the period, up nearly 50% year-on-year.

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Elaine R. Knight