Will unlisted banks be forced to merge with others?

Will unlisted banks be forced to merge with others?

Commercial banks which have not listed their shares on the bourse by the end of 2016 may be forced to undergo restructuring or merge with other institutions.

The State Bank of Vietnam (SBV), in Circular 06/2015, to take effect on July 15, has decided that bank shareholders must reduce their ownership ratios at banks to under permitted levels by the end of the year.

The commercial banks which have shareholders holding more-than-allowed share ratios are required to provide detailed information about their ownership ratios and the roadmap to reduce ratios below the permitted level.

The process must be fulfilled prior to December 31, 2015. SBV will apply necessary measures to punish banks which cannot fulfill the request before the deadline.

For example, it may force related investors or investors’ representatives to leave the board of directors and/or the management positions. They will also not be allowed to receive dividends in cash for the excessive shares they hold. SBV may also consider forcing the banks to undergo compulsory restructuring.

The circular guides the implementation of the Credit Institution Law, which stipulates that every individual investor can hold no more than 5 percent, while institutional investor can hold no more than 15 percent of the chartered capital of one credit institution. The ownership ratio that shareholders and relevant parties can hold is no more than 20 percent.

The State Bank, after checking, found that the Electricity of Vietnam (EVN), an institutional investor, now holds 16 percent of ABBank’s shares, while PetroVietnam holds 52 percent of shares in PVcombank and MSN 19.5 percent in Techcombank.

Meanwhile, Tram Be, one of the most Vietnamese influential businessmen, and his family members hold 20.8 percent of shares in Southern Bank. Thai Huong, deputy chair and CEO of Bac A Bank, holds 6.99 percent of the bank’s shares.

The HCM City Securities Company (HSC) noted that the circular on dealing with the excessive ownership ratio is part of the State Bank’s efforts to settle cross-ownership.

Five out of 33 commercial banks have violated regulations on bank ownership ratio, while eight banks had shareholders and relevant parties holding more than 20 percent of capital.

However, HSC warned that once the investors have to sell shares to reduce their ownership ratios, this would create pressure on the banking system this year.

An analyst noted that it would be easy to sell the shares of big banks, while it would be difficult to find buyers for small banks’ shares.

However, he said that the information will in no way affect the shares of listed banks. Unlisted banks, which have shares traded on the OTC market, will suffer the most.

vietnamnet