Cross-ownership and share-ownership at banks: Not yet disappear

24-Jan-2019 Intellasia | Dau tu Chung khoan | 6:00 AM Print This Post

Circular 06/2015/TT-NHNN issued on 1st June 2015 regulates credit institutions (CIs) to coordinate with shareholders and related shareholder groups to resolve the situation of owning shares exceeding the limit specified in Article 55 of the Law on Credit Institutions 2010 before 31st December 2015, but so far, cross-ownership situation has not been solved thoroughly.

Regarding cross-ownership, the Governor of the State Bank of Vietnam (SBV) Le Minh Hung shared that, over the recent time, SBV has directed and supervised CIs to speed up cross-ownership handling through transfer and divestment, mergers and acquisitions, etc., and so far the ownership of shares and cross ownership has been basically solved, the situation of ownership of banks has been more transparent.

Talking to the Dau Tu Chung Khoan, a senior leader of SBV said that as of 30th September 2018, CIs have basically dealt with and overcome some of the violations of share ownership, cross-ownership:

Firstly, the number of pairs of CIs with direct cross-ownership has decreased from seven pairs in 2012 to one pair; secondly, the direct share ownership between banks and businesses decreased from 56 pairs at June 2012 to four pairs at four banks, including: Vietnam Joint Stock Export Import Bank (Eximbank) owns 2.7 percent shares of VietDragon Securities Company and the vice versa is 0.0000008 percent; An Binh Joint Stock Commercial Bank (ABBank) owns 5.2 percent of An Binh Securities Company and the vice versa is 0.58 percent; Saigon Thuong Tin Joint Stock Commercial Bank (Sacombank) owns 1.78 percent of Ben Tre Import and Export Joint Stock Company and the vice versa is 0.01 percent; Orient Joint Stock Commercial Bank (OCB) owns 0.4 percent capital of Vien Dong Insurance Company and the vice versa is 0.0016 percent.

For violations of share ownership, there are the following particular cases: firstly, four banks including Saigon Bank for Industry & Trade (Saigonbank), Petrolimex Group Joint Stock Commercial Bank (PGBank), Bao Viet Joint Stock Commercial Bank (BaoViet Bank) and Vietnam Public Joint Stock Commercial Bank (PVcomBank) have shareholders who are State-owned enterprises owning more than 15 percent of the chartered capital.

Secondly, three banks (Saigonbank banks, PG Bank and BaoViet Bank) have shareholders who are related to each other, owning shares with over 20 percent of chartered capital;

Thirdly, three banks have major shareholders and related persons owning more than five percent shares in other CIs. Specifically, Saigonbank, Dong A Joint Stock Commercial Bank (DongA Bank) and Viet A Joint Stock Commercial Bank (VietABank) have a major shareholder, the Office of the City Party Committee of HCM City with the ownership rate of 18.18 percent, 6.9 percent and 6.3 percent respectively. On the other hand, this agency and related people (including Ky Hoa Trade and Tourism One-member Limited Company, owning 3.78 percent; Phu Nhuan Construction and Housing Trading Company Limited, owning 2.14 percent) owns 12.78 percent stakes in DongA Bank;

Fourth, two banks hold shares of more than two other CIs including Construction Bank (CBBank) with four CIs, and Ocean Commercial One Member Limited Liability Bank (Ocean Bank) with three CIs.

Fifthly, one CI owns more than five percent of other CIs (reducing compared to four violations at the end of December 2017) that is ABBank.

Commenting on this situation, the leader of SBV said, basically, all violation cases have arisen before the effective date of the regulation, meaning that the violations were due to the change of the Law, and not committed intentionally. For the case of CBBank and OceanBank, the situations were not solved due to the new regulations in Decree 32/2018 that divestment can only be implemented after the restructure plan is approved.

“The situation of cross-ownership and dominant group of shareholders has basically been controlled, but not yet disappears. The main reason is that the handling of cross-ownership is actually a matter of handling and transferring shares, so the CIs need a plan, a step-by-step implementation schedule (to determine the time, price and suitable investors, etc.) to ensure maximum benefits for CIs and the State in the context of CIs being public companies and listed on the stock exchanges”, the senior leader of SBV said.

On 28th December 2018, SBV issued Circular No. 46/2018/TT-NHNN, effective from 1st March 2019, amending and supplementing a number of articles of Circular No. 06/2015/TT- SBV regulating the deadline, order and procedures for transfer of major shareholders of a CI and the related person of that shareholders owning shares of five percent or more of the chartered capital of another CI.

The CI is responsible for coordinating with other CIs and related major shareholders to make a plan to resolve and carry out this plan, ensuring the latest on 31st December 2020, share ownership ratio of major related shareholders to comply with the Law on Credit Institutions (amended and supplemented from time to time).


Category: Finance, Vietnam

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