Last year companies issued nearly VND640 trillion ($27.6 billion) worth of bonds, an almost 40 percent increase from 2020.
Ninety five percent of them were private placements, which is considered easier for the issuer thanks to less complicated legal requirements.
Banks and real estate developers were the two biggest issuers as they had increasing demand for capital to expand, and accounted for 69 percent.
Investors were attracted by the high coupon rates, as over 60 percent of bonds last year rewarded customers with more than 8 percent interest, higher than bank deposit rates of 5-6 percent.
The government has regulations in place to protect amateur investors.
Vietnam only allows "professional investors" to buy private placement bonds, and many companies worked hard to make their investors "professional" in a short time so that they could sell their bonds.
One method is to get an investor to buy a government or any listed bond for two to four days so that they can get a professional bond investor certificate valid for one year.
An investor having more than VND2 billion worth of stocks in their account is also deemed a professional bond investor.
Real estate developer Tan Hoang Minh adopted a novel method to flout the law: Its subsidiaries issued over VND10 trillion worth of bonds, which it bought and sold to investors masquerading as "partners," who thus paid for the bonds but never owned them.
The company’s bosses and others involved in the scam were arrested in early April.
In a recent report, the Ministry of Finance expressed concerns about the health of issuers.
Of 358 companies that issued bonds last year, 57 (or 15.9 percent) were losing money.
Forty five of them issued bonds worth 10 times their equity while 10 of them had leverage of five times.
Real estate developer Osaka Garden issued bonds worth VND7.7 trillion, 29 times its equity.
Another developer, Mediterranean Revival Villas, issued VND7.2 trillion worth of bonds, 47 times its equity.
The finance ministry is set to further tighten bond regulations, and could limit a company to issuing less than three times its equity.
Companies often use their own future projects or shares as collateral, and when one falls, the collateral has little value and might not be adequate to repay investors, the ministry said.