Vietnam will establish domestic credit rating agencies (CRA), the first ever done in the country, which would mark a new stage in development of the domestic finance market, local Vietnam News daily reported Friday.
Accordingly, the Ministry of Finance (MoF) will receive applications for the setting up of CRAs from mid-November 2014. Authorities expected two to four CRAs to be set up in the initial stages.
Industry insiders said that an official legal framework for the establishment of CRAs will serve as a major momentum for the future growth of domestic finance and securities markets, especially the debt market.
The CRA is a familiar model to international financial markets but is new to Vietnam, where bonds have yet to be rated by independent rating organizations. As a result, Vietnam's bond market has lagged far behind world standards, said experts.
The establishment of CRAs is expected to better control bad debts, as CRAs rate the financial and solvency status of companies and organizations that borrow from credit institutions.
CRAs are barred from operating in the accounting, auditing, securities and banking sectors to ensure independence, fairness, honesty and transparency. Organizations and individuals are not allowed to use state capital to set up CRAs, according to the ministry.