RETAIL BANKING | Staff Reporter, Vietnam

Vietnam to put an end to cross-ownership at banks by 2020

The number of cases between direct share ownership between banks and enterprises fell to 4.

The Vietnamese central bank is moving to ban major shareholders of credit institutions (CI) and their relatives from holding over 5% of charter capital in another CI effective December 31, 2020 , reports Viet Nam News. 

Also read: Vietnam steps up effort to boost weakened banking sector

Banks in the country have been resolving cross-ownership issues through share transfers, divestment, M&As in recent years to speed up settlement and resolve a practice which may have had a negative impact in the banking system by raising the volume of non-performing loans.

In fact, central bank data showed that the number of pairs of CIs with direct cross-ownership had decreased from seven in 2012 to one. Direct share ownership between banks and enterprises also decreased from 56 pairs in June 2012 to four.

Also read: Vietnamese banks' 2018 pre-tax profit surges 40% as bad debt crackdown pays off

To comply with the rules, Vietcombank has completed a plan to bring down its holding ratio at Military Bank, Eximbank, Saigon Bank, OCB and Cement Financial Company.

The central bank circular also states that CIs are not permitted to lend to major shareholders and their relatives after 90 days from the effective date of the new circular until shareholders meet regulations on holding less than 5% of another CI’s charter capital.

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