Cross-ownership in Vietnamese banks will be controlled with stringent new regulations (Photo: ndh.vn)Hanoi (VNA) -Cross-ownership in Vietnamese banks will be controlled with stringent newregulations.
Under a State Bank of Vietnam’s draft law, which revises theLaw on Credit Institutions, cases of purchase, sale or transfer of shares witha value of 1 percent or more of the banks’ charter capital must have the SBV’swritten approval before implementation.
The money to buy banks’ shares must be proved legally andmust not have originated through loans.
Besides these, the draft law also stipulates that majorshareholders and related persons must not own more than 5 percent of thecharter capital of another credit institution. This regulation is aimed atmaking the capital contribution of shareholders transparent, preventingcross-ownership or unreal capital hike.
Echoing the new draft regulations, General Secretary of theVietnam Banks Association Nguyen Toan Thang said that the banking sector’srestructuring now required the SBV to handle the cross-ownership thoroughly.
Nguyen Van Than, Chairman of the Vietnam Association ofSmall- and Medium-sized Enterprises, and former chairman of a commercial bank, saidthat strict regulations on cross-ownership was necessary, as it had caused manybad results for the banking system, including the high ratio of non-performingloans. Many banks increased their charter capital to several thousand billionsof dong; however, the capital source was unreal, as it came from loans takenfrom other banks.
However, together with the strict regulations, economists andNational Assembly deputies said that the SBV must also ensure its supervisionis more effective to detect violations by shareholders, as they can still findloopholes to break the law, despite its severity.
According to Director of the SBV’s Legal Department Doan ThaiSon, the cross-ownership had not been handled thoroughly, even though it hasbeen four years since the implementation of the project on restructuring thebanking system.
Commercial banks said that the slow process of divestment toreduce cross-ownership was owing to the low prices of bank shares. Selling thestake at low prices would not be fair to shareholders, and the prices must beat least equal to the prices at which the shares were bought, they said.Meanwhile, the current financial market is no more favourable than it was 10years ago, which hampers investors’ divestment plans.-VNA
Under a State Bank of Vietnam’s draft law, which revises theLaw on Credit Institutions, cases of purchase, sale or transfer of shares witha value of 1 percent or more of the banks’ charter capital must have the SBV’swritten approval before implementation.
The money to buy banks’ shares must be proved legally andmust not have originated through loans.
Besides these, the draft law also stipulates that majorshareholders and related persons must not own more than 5 percent of thecharter capital of another credit institution. This regulation is aimed atmaking the capital contribution of shareholders transparent, preventingcross-ownership or unreal capital hike.
Echoing the new draft regulations, General Secretary of theVietnam Banks Association Nguyen Toan Thang said that the banking sector’srestructuring now required the SBV to handle the cross-ownership thoroughly.
Nguyen Van Than, Chairman of the Vietnam Association ofSmall- and Medium-sized Enterprises, and former chairman of a commercial bank, saidthat strict regulations on cross-ownership was necessary, as it had caused manybad results for the banking system, including the high ratio of non-performingloans. Many banks increased their charter capital to several thousand billionsof dong; however, the capital source was unreal, as it came from loans takenfrom other banks.
However, together with the strict regulations, economists andNational Assembly deputies said that the SBV must also ensure its supervisionis more effective to detect violations by shareholders, as they can still findloopholes to break the law, despite its severity.
According to Director of the SBV’s Legal Department Doan ThaiSon, the cross-ownership had not been handled thoroughly, even though it hasbeen four years since the implementation of the project on restructuring thebanking system.
Commercial banks said that the slow process of divestment toreduce cross-ownership was owing to the low prices of bank shares. Selling thestake at low prices would not be fair to shareholders, and the prices must beat least equal to the prices at which the shares were bought, they said.Meanwhile, the current financial market is no more favourable than it was 10years ago, which hampers investors’ divestment plans.-VNA
VNA
