Delegate Proposes Ban on 'Beer with Snacks' Practice, Citing Bank Pressure to Buy Bonds

A Vietnamese delegate has called for strict measures to prevent banks from pressuring borrowers into purchasing corporate bonds or other investment products, a practice colloquially known as "buying beer with snacks." Delegate Lê Văn Thế of Ninh Bình raised concerns during a National Assembly discussion on amendments to banking laws.

Thế emphasized the need to proactively address potential conflicts of interest that arise when commercial banks act as agents for managing collateral backing corporate bonds. While acknowledging that such a role, if well-designed, could professionalize collateral management and boost investor confidence, he expressed apprehension. He pointed out that a bank acting as both a lender and a collateral manager for bonds could see its interests diverge from those of bondholders if the borrowing company faces financial difficulties.

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The most important thing is to design a mechanism for commercial banks to perform this activity independently, transparently, and without abusing their position.

To mitigate these risks, Thế urged the government and the State Bank of Vietnam to issue detailed regulations. These rules should clearly define the conditions, scope, and principles for banks performing collateral management duties. Crucially, they must establish mechanisms for identifying, disclosing, and controlling conflicts of interest. The delegate stressed that expanding banking operations must be accompanied by robust oversight to protect investors and prevent the abuse of a bank's dominant position in lending relationships.

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Expanding banking operations must go hand in hand with controlling conflicts of interest and protecting investors.