Banking experts advocate M&A drive
Banking experts advocate M&A drive
Cross ownership and excessive ownership has put banks into deep hardship and M&A seems to be the only way out.
According to the State Bank of Vietnam (SBV), small-scale, weak banks will be merged in the near future to reduce the total number of banks in the country to 20-25.
“To best compete, banks should unite in developing technology, personnel, and also management model,” said SBV former governor Cao Sy Khiem. M&A can help prevent manipulation through cross ownership and excessive ownership in banks,” he added.
Joining Khiem, banking expert Huynh Buu Son said “M&A is one way to buy us more time, and we have to act now.” According to Son, total individual customer deposit capital is now eight to ten times that of shareholders’ capital.
“We need to respect the capital we use. It belongs to the citizens,” Son underscored.
Under the Law on Credit Institutions 2010, the ownership rate is capped at 5 per cent of the chartered capital for individual shareholders, 20 per cent for affiliated shareholders (often family) and 15 per cent for organisational-based shareholders.
However, over the three years since the law came into effect, major shareholders of many banks have been discovered violating the regulation on ownership limitations, reported the SBV.
Five banks were found to have individual shareholders with over 5 per cent ownership, another five had organisational shareholders controlling larger than regulated stakes, and eight had affiliated shareholders controlling combined stakes that exceeded the 20 per cent cap.
The SBV has requested that all banks, expect those with restructuring plans approved by the prime minister and SBV, eliminate excessive ownerships no later than March 31, 2015.
If they do not meet this deadline, shareholders and groups will be forced to transfer their shares to the SBV and may lose their voting rights and the ability to stand for a post on a supervisory board.
Additionally, the draft amendment to the Law on Credit Institutions 2010 forbade credit institutions from granting new credit to shareholders or groups with excessive ownership. Banks are also required to halt all transactions with the aforementioned.
Son underscored, “We need a change from within, to respect banking regulations, business ethics, and also the money of the people. It doesn’t matter how many banks there are, it matters that they work.”
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