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Tuesday, June 18, 2024

VCCI says no to bank ownership structure change

The Saigon Times

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HCMC – The Vietnam Chamber of Commerce and Industry (VCCI) has thrown no weight behind a proposal for lowering bank ownership percentages for individual and institutional investors, stating that it is not appropriate under the current market conditions.

The VCCI’s view comes as the State Bank of Vietnam (SBV) has rolled out the draft of the revised Law on Credit Institutions.

According to the draft, individual investors would be allowed to hold a maximum of 3% of the shares of a credit institution, down from the current 5%. Institutional investors would be limited to a maximum stake of 10%, instead of the current 15%. The maximum stake held by a group of shareholders would fall to 15% from the current 20%.

These proposed ownership structure changes have sparked concerns in the banking system, as they fear they may hamper economic growth.

While these measures are intended to prevent market manipulation and cross-ownership, thereby improving transparency, reducing conflicts of interest, and increasing the safety of the banking system, the VCCI believes that they might not be suitable at this time.

In practice, the current limits on bank ownership in Vietnam are relatively low compared to other countries. However, banks frequently grant credit facilities to groups of related customers, posing high risks to the entire system.

The VCCI explained that the issue is not the high percentages of shares held by some shareholders, but rather the potential conflicts of interest. This may lead to credit being granted to customers having connection with major shareholders, rather than being based on standard principles, which could pose risks to the safety of the banking system.

Instead of reducing the percentages of share ownership at banks, the VCCI suggested implementing stricter regulations on conditions and procedures for granting credit to customers related to shareholders.

If the SBV still proceeds with a reduction in bank ownership percentages, the VCCI recommended that it should not apply retroactively.

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