Vietnam to Set Up State-Owned Credit Rating Agency
Sept. 19 – The Vietnamese Ministry of Finance (MOF) is expected to launch a new state-run credit rating agency (CRA) next year in a move to create a government-run institution to reliably rate the country’s stocks and companies.
The purpose of the CRA will be to judge how likely it is that a company is able to meet its financial obligations. Furthermore, it is projected to have VND15 billion (US$714,000) in capital and will rate both private and state-owned corporations as well as financial, banking, insurance and non-financial institutions.
A number of rules have also been put into place for the regulation of new CRAs established in the future, including that no organization or individual is allowed to establish, purchase or own part of a CRA if they already own more than five percent of another CRA.
In addition, capital contributions into CRAs must comply with the existing Enterprise Law of Vietnam, and CRAs are not allowed to set up another CRA.
One problem facing the CRAs to be established in Vietnam, however, is that credit ratings are generally based on historic ratings. Unfortunately, in the case of Vietnam, there is no such ratings record to use. As such, the International Finance Corporation (of the World Bank) and the Japan-based Nomura Securities Institute have been called upon to assist with the potential problems and also help with the formation of future CRAs.
In 2005, Vietnam created the first ever CRA – Vietnamnet Credit Ratings Centre – which unfortunately closed after a little more than a year of operations.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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