Ratings paint accurate company picture

The State Bank’s Credit Information Centre (CIC) announced credit ratings for the top 1,000 businesses in Vietnam on September 21 which grabbed a great deal of attention from the public, firms and banks.

“CIC’s credit rating mainly services banks, striving for information transparency of Vietnamese enterprises and credit institutions,” said CIC’s deputy director Nguyen Huu Duong, adding that rating results could be an effective information channel to credit entities in controlling risk and appraising customers.

The credit ratings, albeit a relatively new concept in Vietnam, has won praise from the business community.

LienVietPostBank deputy chairman Nguyen Duc Huong said credit activities often accounted for 50-70 per cent of the bank’s total revenue, but that was also a risky business.

“Banks can appraise risk degrees of customers to sort out credible ones through credit ratings. This is also a fundamental issue helping banks detect customers’ specific features, from there working out suitable effective measures for credit management,” said Huong.

Supportive of the idea, head of Agribank’s risk management division Nguyen Xuan Dong assumed credit rating would help banks reduce costs, shorten time required to deliver a lending decision as well as better control credit associated risks.

Credit rating results are also proven practical to firms.

“Credit rating provides basis for firms to evaluate their competitive edge, particularly in relation to businesses in the same field. It also helps abate risks to firms in sourcing business partners,” said An Phuoc Garment Embroidery Company director Nguyen Thi Dien.

The credit rating of firms is commonplace in countries worldwide, with Standard & Poor’s (S&P), Moody’s and Fitch are three leading names in this field.

In Vietnam, CIC is a single public credit rating organisation parallel to internal credit rating system of banks. The results delivered by CIC are considered the most prestigious source to banks.

CIC deputy chief Nguyen Huu Duong believed in the coming period credit rating would become more popular in Vietnam to the general interests of the economy albeit it is not widely known at present.

A stumbling block in ensuring credit rating’s information accuracy, according to Duong, was the faithfulness of enterprise financial statements as currently only 1 per cent of enterprise financial statements were audited.