Banks must speed up M&A under stakeholding regulations

Wednesday, Nov 26, 2014 19:19

A customer uses Maritime Bank services. The bank holds stakes of several other lenders. — Photo
HA NOI (Biz Hub) ─ Banks will have to accelerate merger and acquisition (M&A) and divestment activities to meet new legal regulations on lenders' stake ownership, according to Dau tu (Vietnam Investment Review) online.

Last November 20, the State Bank of Viet Nam (SBV) issued Circular No. 36/2014/TT-NHNN stipulating that a commercial bank can hold shares in a maximum of two other credit institutions, and its stake at each institution should not exceed five per cent of the total equity of that institution.

The SBV will enable higher shareholding ratios in specific cases where it designates banks to either prop up the financial situation or support the restructuring process of fragile organisations.

The circular aims to secure banking operations by restricting a cross-ownership situation, which has been singled out as responsible for the fragility of the domestic banking system in the last few years. It takes effect on February 1, 2015 and requires banks to meet its requirements 12 months afterwards at the latest.

Banks will have to adjust their holdings to ensure the stakeholder limits are met, and they have about 15 months to complete that from now, according to Dau tu.

Maritime Bank owns 9.9 per cent of Military Bank, 10.2 per cent of Mekong Development Bank (MDB) and 11 per cent of Viet Nam Textile and Garment Finance Company (GFC). It planned to merge with MDB and GFC, and the SBV had approved these merger plans in principle.

Vietcombank owns 9.6 per cent of Military Bank, 5.1 per cent of Orient Commercial Bank and 10.9 per cent of Cement Finance Company (CFC), as well as 8.2 per cent of Eximbank and 4.3 per cent of Saigonbank. Market observers said that it may acquire CFC and divest from other banks in the future.

Techcombank owns 10 per cent of Viet Nam Chemical Finance JSC and plans to acquire this company.

Senior economist Le Xuan Nghia said dealing with cross-ownership required resolute measures and the latest SBV regulations were necessary, although a roadmap for implementation was needed.

SBV's Banking Supervisory Agency official Pham Huyen Anh said the five-per cent cap would help curb market cornering in the banking sector.

The SBV will closely monitor the stakeholding ratios of every bank shareholder by co-ordinating with the State Securities Commission to supervise investor activities on the stock market, Anh added. — VNS

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