The State Bank has begun offering its credit rating services commercially to local enterprises, in recognition of its duty to serve state management.
The ratings service will assist firms in obtaining bank loans
The Credit Information Centre under the central bank, the first agency to provide such a service in Vietnam, will provide credit ratings for enterprises.
This is the first time the centre has dealt with enterprises. Its traditional targeted customers are the central bank, credit institutions and other government agencies. The bank is working to ensure the service runs at a professional operating standard after two-year piloting.
Ratings should provide for proper evaluation of enterprises, facilitating either borrowing processes at a bank, or for deeper understanding of their position for competition and integration.
Dao Quang Thong, centre deputy director, said this was a great change for entities served by the centre, as local enterprises can assess their financial standing.
The centre has duty to rate enterprises in eight industries such as seafood processing, garment and textiles, footwear exports, coffee, and rubber. It will also support state-owned credit institutions in establishing their own departments for credit rating, which must be operational no later than 2007.
Thong said the centre must change its rating software which evaluates firms on 14 criteria, including import-export trade, outstanding loans, general finances, market ranking and comparison to financial targets each year.
“We are also rushing to submit to the government our proposal to establish a credit rating service for general purposes later this year,” said Thong.
Of which, the centre preferred to establish a joint stock company instead of a state-owned firm for rating credit institution, enterprises, corporate bonds and shares for stock market.
Vo Tri Thanh, head of the Integration Policies Department of the Central Institute of Economic Management (CIEM), said that enterprises were being encouraged to issue corporate bonds, but it was difficult for them to find a credit rating agency to assess their business performance. There was no domestic services of the kind while those foreign are too costly.
He blamed the fledgling capital market for the lack of necessary legal framework for the establishment of credit rating agencies.
According to the centre’s analysis, as of April 30 this year, total outstanding loans of all credit institutions in Vietnam, including domestic and foreign agencies, is VND343.6 trillion ($21.6bn) and $9bn. Broken down, 32 per cent of these outstanding loans has come to 54 large-scale state-owned enterprises.
The centre will focus on analysing enterprises in garment and textile, transportation, and construction. Credit ratings for these industries can be used by the central bank and credit institutions for state asset management, and for credit operations by state-owned credit institutions.
The analysis was compiled during the last two years in order to back government consultation on new policies.
No. 771/July 24-30, 2006