Banks forced to declare financial health
Joint stock commercial banks have not yet publicised their financial status even when issuing new shares but in 2005 the situation will change, according to a State Bank official.
“Later this month the SBV will issue regulations that will require all joint stock commercial banks to publicise their yearly financial status,” said Kieu Huu Dung, head of the department for bank and non-banking credit institutions of the central bank.
“They will have to release the year’s information via central and local newspapers, but quarterly disclosure will not be obligatory,” Dung said at the seminar on listing joint stock banks on the stock market, jointly organised by the State Bank and the find managing company Dragon Capital on October 1.
To date his bank has received and approved listing applications from the country’s two leading joint stock banks, the Asia Commercial Bank (ACB) and the Saigon Thuong Tin Commercial Bank (Sacombank). Since approval, ACB and Sacombank have been preparing their listing files.
“The banks’ capital increase relies mainly on financial potential of their existing shareholders and on their relations rather than on share issue through the stock market,” Dung said.
The stock market will help banks raise capital for investing in modern banking technology and expanding their services to ensure their competitiveness, an important move because as of December US banks will be able to establish joint venture banks in Vietnam.
Listing will also provide banks with tie opportunities to learn international practices and gain experience in administration, inspection, risk prevention and settlement. They will attract foreign institutional investors, including investment funds, who will offer assistance in corporate administration and business strategy, among others.
According to Nguyen Ngoc Thinh, general director of the Phuong Nam Joint Stock Bank, listing on the stock market on the one hand, offers a potential source of high quality securities for the market and one the other hand, is a way to boost banks’ brand name and increase their liquidity.
“The listing will create pressure on banks to improve management while giving them tax preference,” Thinh added.
Huynh Quang Buu, HSBC’s director of business development, emphasised the role of maintaining shareholders’ trust because listed banks are vulnerable to rumours. He advised banks to work out a specific media policy that gives guidelines on managing sensitive information involving finance, price and rumour. Closely following professional ethics proves helpful.
At the seminal, Dragon Capital’s experts presented issued on bank evaluation, business value building, independent auditing, the enhancement of relations with investors, and the policy on treatment of managing board.
Under the regulations of the State Securities Commission, joint-stock banks that want to list must satisfy certain conditions.
They must have a minimum legal capital of five billion dong, two profitable years prior to applying for listing and 50 outsides holding at least 20% of the equity capital, reducing the rate to 15% if the bank is of more than 100 billion dong.
