Thailand
Vietnam’s large banks to end cross-ownership soon
The Hanoitimes – Favorable stock market and positive economic growth have helped large banks to step up divestment from other peers to meet the central bank’s regulation on holding shares at other credit institutions.
After success in divesting all stake holding in Orient Commercial Bank (OCB) recently, Vietcombank will put 53.4 million shares of Military Bank (MB) up for auction on October 12, aiming to reduce its ownership ratio in MB from the current 6.97 percent to 4.5 percent, equal to 97.1 million shares.
Offloading holdings at MB is one of Vietcombank’s moves to comply with the central bank’s regulation, which allows commercial banks to hold shares in a maximum of two other credit institutions, with the stake in each not exceeding 5 percent. The central bank requires unqualified banks to bring their ownership thresholds in other credit institutions to below 5 percent before June 30 next year.
Vietcombank last month sold out its entire 1.47 million shares of Orient Commercial Bank (OCB), helping it divest all share holding at OCB. Earlier, the bank also divested all holding in Saigon Bank and Cement Finance Company.
However, the bank needs to offload shares of Eximbank, where it still holds 8.19 percent of charter capital. Vietcombank has recently withdrawn its representative person at Eximbank.
Vietcombank’s chairman Nguyen Xuan Thanh said that his bank will reduce its holding at Eximbank to below 5 percent this year to meet the central bank’s Circular 36.
Besides Vietcombank, VietinBank and BIDV are also making every effort to divest from other credit institutions.
VietinBank has so far reduced its ownership in Saigon Bank from 10.4 percent to 4.9 percent through open auctions. It also succeeded in offloading all 7.8 percent holding at Sacombank.
Meanwhile, BIDV has successfully signed an agreement on transferring its 50 percent ownership ratio in BIDV-Vietnam Partners to Xuan Cau Investment JSC.
Harsh penalties on violation cases
According to analysts, the stock market has recovered significantly in the past year, thus paving the way for banks to promote divestment.
Banking expert Can Van Luc said that large banks only have begun divesting recently, though they were urged to do so years ago. But the economic conditions were unfavorable and the stock market was not bustling, while many banks were under restructuring.
At that time, as the bank share prices were low, divestment brought losses. Thus, selling the stake at low prices would not be fair to shareholders, and the prices must be at least equal to the prices at which the shares were bought.
Besides, banks also have to speed up the divestment as the central bank has planned to apply stricter measures to effectively prevent cross-ownership at commercial banks.
According to the central bank, it will impose harsh penalties on banks that fail to meet the deadline of bringing their ownership thresholds in other credit institutions to below 5 percent before June 30 next year. Penalties include disapproval of the bank’s proposals regarding top positions, such as members of the board of directors and supervisory board and the CEO.
Non-compliant shareholders will also have their dividend rights and right to serve on the board of directors suspended, in addition to being prohibited from increasing their stake in their respective banks.
Expert Bui Quang Tin said that the strict regulations on cross-ownership were necessary, as it had caused many bad results for the banking system, including the high ratio of non-performing loans.
Besides, due to the cross-ownership, many banks increased their charter capital to several thousand billions of VND, however, the capital source was unreal, as it came from loans taken from other banks.
Vietcombank last month sold out its entire 1.47 million shares of Orient Commercial Bank (OCB), helping it divest all share holding at OCB. Earlier, the bank also divested all holding in Saigon Bank and Cement Finance Company.
However, the bank needs to offload shares of Eximbank, where it still holds 8.19 percent of charter capital. Vietcombank has recently withdrawn its representative person at Eximbank.
Vietcombank’s chairman Nguyen Xuan Thanh said that his bank will reduce its holding at Eximbank to below 5 percent this year to meet the central bank’s Circular 36.
Besides Vietcombank, VietinBank and BIDV are also making every effort to divest from other credit institutions.
VietinBank has so far reduced its ownership in Saigon Bank from 10.4 percent to 4.9 percent through open auctions. It also succeeded in offloading all 7.8 percent holding at Sacombank.
Meanwhile, BIDV has successfully signed an agreement on transferring its 50 percent ownership ratio in BIDV-Vietnam Partners to Xuan Cau Investment JSC.
Harsh penalties on violation cases
According to analysts, the stock market has recovered significantly in the past year, thus paving the way for banks to promote divestment.
Banking expert Can Van Luc said that large banks only have begun divesting recently, though they were urged to do so years ago. But the economic conditions were unfavorable and the stock market was not bustling, while many banks were under restructuring.
At that time, as the bank share prices were low, divestment brought losses. Thus, selling the stake at low prices would not be fair to shareholders, and the prices must be at least equal to the prices at which the shares were bought.
Besides, banks also have to speed up the divestment as the central bank has planned to apply stricter measures to effectively prevent cross-ownership at commercial banks.
According to the central bank, it will impose harsh penalties on banks that fail to meet the deadline of bringing their ownership thresholds in other credit institutions to below 5 percent before June 30 next year. Penalties include disapproval of the bank’s proposals regarding top positions, such as members of the board of directors and supervisory board and the CEO.
Non-compliant shareholders will also have their dividend rights and right to serve on the board of directors suspended, in addition to being prohibited from increasing their stake in their respective banks.
Expert Bui Quang Tin said that the strict regulations on cross-ownership were necessary, as it had caused many bad results for the banking system, including the high ratio of non-performing loans.
Besides, due to the cross-ownership, many banks increased their charter capital to several thousand billions of VND, however, the capital source was unreal, as it came from loans taken from other banks.
Source: http://www.hanoitimes.vn/economy/2018/09/81E0CCC4/vietnam-s-large-banks-to-end-cross-ownership-soon/