Business
New regulation makes cross-ownership at banks decline
Cross-ownership at banks has sharply decreased after the banks recently changed its top leaders at 2018 annual general meetings of shareholders (AGMs) to meet a central bank`s new regulation.
The revised Law on Credit Institutions, which was passed by the National Assembly and came into effect on January 15, 2018, prohibits bank leaders from taking up senior positions in other businesses.
According to banking expert Can Van Luc, at the banks' recent AGMs, many bank leaders had to resign from Chair of the Board, CEO of businesses. On the contrary, some business owners also had to give up the chairmanship at banks to meet the requirement of the new law.
Earlier, a fact that a leader both owns a bank and a backyard business is quite popular. However, in this year's AGMs, many bank leaders such as Duong Cong Minh (Sacombank), Do Quang Hien (SHB), Do Minh Phu (TPBank) have resigned their positions as Chair of the Board of directors at businesses to devote wholeheartedly to banks.
In contrast, Vo Quoc Thang (Kienlongbank), Vu Van Tien (ABBank) left banks when choosing to stay to manage businesses.
This is one of the most obvious examples of decreased cross-ownership, said Luc.
Besides, Luc said, the cross ownership at banks is also controlled better as more banks have recently listed on the stock markets. It means that their information, especially those related internal management and ownership rate of shareholders, must make public and is closely monitored by the State Securities Commission.
In addition, with the support of information technology, the SBV and the Ministry of Finance may connect with the banks' computer systems to timely update and correct their data and information.
Currently, some groups and banks have cross ownership rate exceeding the regulation such as Vietcombank, Eximbank, MobiFone and VNPT. However, these businesses are still making efforts to divest. Currently, Vietcombank has divested the entire capital from SaigonBank, OCB. In addition, 7-8 state-owned groups and corporation sold off directly owned finance companies to banks.
According to the data of the State Bank of Vietnam (SBV), the number of bank pairs with cross ownership in 2017 remained two only, down five pairs from the two previous years, while bank ownership with businesses only remained two pairs compared to 56 pairs earlier. Though no updated data have been available, with the selection of either banker or business leader, certainly, the number of cross ownership pairs has been further reduced.
However, banking expert Phan Minh Ngoc said that the cross-ownership situation just temporarily sunk but not really declined. The fact that the SBV does not allow bank owners to concurrently own a business does not mean much to the reduction of cross-ownership, because they can go around the rule if they want. In fact, some owners, despite holding a key position in businesses, still can run the bank.
Therefore, finance and banking expert Nguyen Tri Hieu said though the new law had very good impact in the transparency of ownership, functional agencies still cannot ignore the supervision. In fact, in many cases, some individuals who do not obtain bank leadership right (even without a share at that bank), through a number of people, still has the power to govern that bank.
Obviously, in the short term, cross-ownership cannot be completely eliminated and may continue to last in the current transitional period. However, according to experts, after weak banks overcome the difficult time and the health of the system improves, SBV should supplement regulations to disassociate the cross-ownership spider, because in fact, cross-ownership is still hidden, particularly in the relationship between banks and subsidiaries.
ABBank had new chairman at this year's AGM.
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Earlier, a fact that a leader both owns a bank and a backyard business is quite popular. However, in this year's AGMs, many bank leaders such as Duong Cong Minh (Sacombank), Do Quang Hien (SHB), Do Minh Phu (TPBank) have resigned their positions as Chair of the Board of directors at businesses to devote wholeheartedly to banks.
In contrast, Vo Quoc Thang (Kienlongbank), Vu Van Tien (ABBank) left banks when choosing to stay to manage businesses.
This is one of the most obvious examples of decreased cross-ownership, said Luc.
Besides, Luc said, the cross ownership at banks is also controlled better as more banks have recently listed on the stock markets. It means that their information, especially those related internal management and ownership rate of shareholders, must make public and is closely monitored by the State Securities Commission.
In addition, with the support of information technology, the SBV and the Ministry of Finance may connect with the banks' computer systems to timely update and correct their data and information.
Currently, some groups and banks have cross ownership rate exceeding the regulation such as Vietcombank, Eximbank, MobiFone and VNPT. However, these businesses are still making efforts to divest. Currently, Vietcombank has divested the entire capital from SaigonBank, OCB. In addition, 7-8 state-owned groups and corporation sold off directly owned finance companies to banks.
According to the data of the State Bank of Vietnam (SBV), the number of bank pairs with cross ownership in 2017 remained two only, down five pairs from the two previous years, while bank ownership with businesses only remained two pairs compared to 56 pairs earlier. Though no updated data have been available, with the selection of either banker or business leader, certainly, the number of cross ownership pairs has been further reduced.
However, banking expert Phan Minh Ngoc said that the cross-ownership situation just temporarily sunk but not really declined. The fact that the SBV does not allow bank owners to concurrently own a business does not mean much to the reduction of cross-ownership, because they can go around the rule if they want. In fact, some owners, despite holding a key position in businesses, still can run the bank.
Therefore, finance and banking expert Nguyen Tri Hieu said though the new law had very good impact in the transparency of ownership, functional agencies still cannot ignore the supervision. In fact, in many cases, some individuals who do not obtain bank leadership right (even without a share at that bank), through a number of people, still has the power to govern that bank.
Obviously, in the short term, cross-ownership cannot be completely eliminated and may continue to last in the current transitional period. However, according to experts, after weak banks overcome the difficult time and the health of the system improves, SBV should supplement regulations to disassociate the cross-ownership spider, because in fact, cross-ownership is still hidden, particularly in the relationship between banks and subsidiaries.
