Unable to lend more, banks tell businesses to issue bonds

Therefore, commercial banks, when refusing to give loans to clients, are increasingly trying to persuade them to issue corporate bonds.
Banks’ investment in corporate bonds can help them maintain close relations with loyal clients.
The current basic interest rate is seven percent, which means the ceiling lending interest rate is 10.5 percent per annum. The deposit interest rates offered by banks are now 8.5-9 percent per annum.
Meanwhile, the interest rates of recently issued bonds have always been higher than the ceiling lending interest rates, which makes bonds an attractive investment. The Song Da Urban & Industrial Zone Investment and Development Company’s (Sudico) 3-year term bonds, for example, which were issued on July 8, 2009, have the interest rate of 12.5 percent for the first year.
The bond interest rates for the next year are calculated by the 12-month term deposit interest rates plus four percent.
The Housing and Urban Development’s (HUD) 3-year term bonds issued in September 2009 also had the interest rate of 12.5 percent for the first year, while Song Da Thang Long Corporation offered 13 percent in interest rates for its bonds issued in October 2009.
This means that when making investment in corporate bonds, banks can get higher profits than they get from lending by 2.5-3 percent.
Besides income from bond interests, commercial banks still can earn money from the guaranteeing service and other relevant services.