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high liquidity stocks. Shortly then, securitization
spreads to all of the bank’s assets (collectively
referred to as ABS - Asset-Backed Securities), and
become more developed, more explosive, more
advanced and complex in the next years.
However, the development of securitization
stalled since late 2006 as the housing bubble
busted in the United States and the default of
mortgage-backed loans increased, particularly
because of Subprime mortgage loans. At this time,
debt defaults have seriously affected the financial
institutions stability that hold these mortgages
as well as the financial products associated with
them throughout the United States, Europe and
other Asian countries. Securitization has played
a role as an “amplifier” for severity the crisis.
It exposed the weaknesses of the United States
financial system at that time and spread to the
rest of the world through large investment banks
and international funds around the globe.
Therefore, securitization’s application,
its regulatory body, reducing its risks while
maximizing its benefits, and making it become
an effective transmission channel for financial
market, are always the difficult tasks for financial
policymakers around the world.
The need for securization’s application
and the current status in Vietnam
The need for securization’s application in Vietnam:
Firstly,
domestic enterprises need to find new
capital mobilization channels in addition to the
traditional methods (issuance of debt securities
and bank loans). The overall size of the market
for bonds, as known as corporate bonds in
Vietnam, also treated as traditional debt securities
channel, is small compared to the potential of
the economy and market size of countries By
the end of 2016, the outstanding corporate bond
was equal to 5.27% of GDP, while the amount of
banking credit was equal to 116% of GDP. On
the other hand, the outstanding corporate bond
in Vietnam is lower than the average of about
22% of GDP of other countries in the region, of
which 99% of the volume of VDNs issued by
separated method. In addition, in terms of bank
lending, outstanding loans to small and medium
enterprises (SMEs) reached just VND 1.3 trillion
in 2016, accounting for 22% of outstanding loans
for the economy. Furthermore, just about 70%
of private enterprises, equal to nearly 400,000
businesses have not reached the source of
banking credit. Thus, securitization, which is one
of the major financial instruments used widely
in international corporate bond market, might be
an effective tool for the Vietnam’s capital market.
Therefore, Vietnamese businesses need to take
into account securitization’s application in their
long-term capital mobilization.
Secondly,
the Vietnamese stock market needs
new tools to further attract and keep international
investors. 2017 is the year when Vietnam stock
market reached the highest growth in recent 10
years, reflected by the return of foreign investors
with the net-buy reached nearly VND 26 trillion
(in 2016, the net-sell of foreign investors was
VND 6,281 billion). The portfolio value of foreign
investorsincreasedsharplybytheendofNovember
2017 to over USD 31.4 billion- an increase of 81.3%
over the end of 2016. The account numbers of
foreign investors continued to increase, up to 1.9
million accounts by the end of 2017, increased
11% compared to the end of 2016. In overall,
foreign investors in developed countries in the
region and United States investors tend to invest
more in the stock market in Vietnam. Therefore, in
order to meet the increasing investment demand
of foreign investors, the supply for products in
Vietnam stock market must also be improved
in line with the international trend in which
securitization is one of the best practical financial
instruments. Securitization not only increases the
supply of products available on the stock market,
but also gives foreign investors more choice in
terms of risk, thereby meeting more investment
needs, attracting more investment capital from
international investors and global organizations.
Thirdly,
Vietnam needs new tools to handle
non-performing loans for the financial system.
Non-performing loans securitization is a special
form of securitization, based on the re-valuation
of non-performing loans at market value, to
convert the debt into a transferable, marketable
instrument, to increase the solvency of non
performing loans. Securitization of these loans
will help banks to settle their debts to enterprises
that are in the risk of being dissolved or bankrupt.
