Establishment of Asia Bond Market Promoted

Establishment of Asia Bond Market Promoted

Asian bankers are facing great challenges in the region and the world, said Dong Soo Choi, general director of the Chohung Bank of the Republic of Korea and newly-elected chairman of the Asian Bankers' Association (ABA), at a press conference after the 21^st annual meeting in Vietnam. To overcome these challenges, Asian bankers were urged to gather into a block to exchange information and experience to create a stronger competitiveness. Among 14 ideas heard at the meeting, the idea of promoting the establishment of an Asian bond market interested many banks. This may enable strong economies, such as Japan, China, and Taiwan to find places for their investment and facilitate  capital turnover. ABA discussed with the Asian Development Bank (ADB) and the Asia-Pacific Economic Co-operation (APEC) forum about the co-operation in promoting the establishment of the market.

Rizalino S.Navarro, vice chairman of the Rizal Commercial Corporation, said that the 1997 financial crisis occurred due to economies' dependence on short-term loans, so a massive withdrawal led to the collapse of many banks. This shows the need to set up a regional bond market. Now, the Asian financial market is lagging behind other parts of the world, to overcome the challenge, ABA should consider helping member banks avoid risks. However, to set up an Asian bond market, each member bank of ABA will have to build its own bond market. ABA will set up an agency to help and supervise the observance of common principles of member banks.

Dong Soo Choi said that it was necessary to build and issue a law on insolvency of the banking sector in the region. This is also a way to address the issues of bad debts not only in Vietnam but also other countries in the region. Vu Viet Ngoan, general director of the Bank for Foreign Trade of Vietnam (Vietcombank) said that after the Government announced it would not provide more than VND 10 trillion for four State-owned commercial banks to restructure their debts, the difficulty for the banks was the low volume of capital, which is difficult to be mobilised. Therefore, since 2000, Vietcombank has studied on methods to address bad debts with initial reforms. Ngoan stressed that Vietcombank got nods from the State Bank of Vietnam to apply international standards on credit and accounting. This is a task for any bank to make its activities transparent. The only suitable way to restructure banking activities is equitisation and Vietcombank would try to complete the process in 2006. Ngoan said that when banks were equitised their bad debts would be converted to value of shares.

The Vietnamese Government has recently approved a programme on comprehensive reform for the banking sector with an improvement of safe minimum capital rate according to standards for international payment, addressing  bad debts, improving the quality of assets, building up capacity, applying international accounting and governance standards, reorganising and gradually expanding its financial market in accordance to its international commitments.                      

·         Lan Anh