SBV to tighten rules for commercial banks. (Photo: VNA)
Hanoi (VNS/VNA) -The State Bank of Vietnam (SBV) has decided to push ahead with restructuringthe banking system, applying stricter measures to effectively preventcross-ownership at commercial banks.
The SBV recently announced it is drafting a circular in a move to discouragecross-ownership among banks and encourage transparency in the capitalcontribution sources of shareholders.
Under the draft circular, a revision of Circular No 06/2015/TT-NHNN, banksmust bring their ownership thresholds in line with limitations stipulatedin Article 55 of the Law on Credit Institutions before June 30 nextyear.
Under the law, individuals are not allowed to own more than 5 percent of thecharter capital of a bank, while the permitted ratio for an institutionalshareholder should not be more than 15 percent, save for some cases such asownership in distressed or equitised banks and ownership by a strategic foreigninvestor.
The central bank willimpose harsh penalties on banks that fail to meet the deadline. Penaltiesinclude disapproval of the bank’s proposals regarding top positions, such asmembers of the board of directors and supervisory board and the CEO.
Non-compliant shareholders will also have their dividend rights and right toserve on the board of directors suspended, in addition to being prohibited fromincreasing their stake in their respective banks.
Besides the cross-ownership among banks, the Government has also take measuresto prevent cross-ownership between banks and subsidiaries.
Under the Law on Credit Institutions, which was passed by the National Assemblyand came into effect on January 15 this year, bank leaders areprohibited from taking up senior positions in other businesses.
The revised law has so far contributed in reducing cross-ownership betweenbanks and subsidiaries as many banks have recently reshuffled their leadershipat their respective 2018 annual general meetings of shareholders to comply withthe new central bank regulation.
Banking expert Can Van Luc said many bank leaders had to resign from theirpositions as chair of the board of directors or CEO of business firms tocontinue managing banks. A number of business owners also had to give upchairmanship positions at banks to comply with the new law.
They were the most obvious examples of the decrease in cross-ownership, Lucsaid.
He said cross-ownership in banks has also been put under control as a result oftheir listing in stock markets. Stock market listing means information,especially those related to internal management and the ownership rate ofshareholders, must be made public and subjected to close monitoring by theState Securities Commission.
However, experts suggested that a close supervision is still needed as someindividuals can take advantage of loopholes in the law.
Finance and banking expert Nguyen Tri Hieu said that while the new law had agood impact on transparency in the area of ownership, State agencies must stillmonitor activities closely as some individuals who do not take leadershippositions in banks may still have governing powers.-VNS/VNA
