Three-bank Merger: Ironclad Restructuring

Governor Nguyen Van Binh of the State Bank of Vietnam announced this at a press conference in Hanoi on December 6, 2011. This is the first time banks reshuffled in accordance with the orientation of the Government and the State Bank of Vietnam. These banks operated poorly in the past time and faced temporary loss of liquidity and solvency before they sought the support of the SBV.

 

In November, BIDV provided VND5,000 billion for Ficombank to deal with liquidity problems, forming a likelihood of M&A. This prospect became clear when the Hanoi-based lender was assigned to represent the State stake at these three banks. Immediately after the amalgamation announcement was made, BIDV signed comprehensive strategic cooperation agreements with the three banks.

 

BIDV had not owned the merged bank. Following the contract signing, BIDV would discuss specific cooperation contents in different areas with the merged bank. The liquidity support for the amalgamated bank would be provided by BIDV.

 

Governor Binh affirmed that the central bank would reassess share value of these banks and settled all matters in accordance with the laws. Shareholders and shares which had been lost because of poor bank performances will be replaced by new ones, including the State which grants a guarantee that the merged bank will avoid going bankrupt afterwards, sustain development and ensure legitimate rights and interests of depositors and customers of these banks.

 

The merged bank will have a registered capital of VND10,592 billion, total assets of more than VND154,000, and more than 200 units, branches and transaction offices. After the amalgamation, the lender will be able to reduce administrative costs by reducing three apparatuses into one. However, many have started to raise a common burning question that whether the amalgamated bank is really healthier. Mr Tran Bac Ha, Chairman of the Board of Directors, BIDV, confirmed: "BIDV will cooperate with the merged bank in capital, personnel and governance to ensure that the new bank will be a strong entity.”

 

To ensure the successful reshuffle of the three banks, BIDV pledges to provide capital for SCB, Ficombank and TinNghiaBank and introduce key personnel for the merged bank. BIDV and the merged bank will forge comprehensive cooperation in administration, governance, supervision, capital source, currency trading, credit, trade finance, domestic payment, international payment, budget, card payment, information exchange and provision, training, and others.

 

This information ensures that customers at the three banks have their assets guaranteed. BIDV will provide VND2,400 billion for the three banks and the merged bank will inherit take on this credit to settle payments with depositors. According to the amalgamation plan, all networks as well as liabilities will be transferred to the merged bank. Its name and plans will be completed before December 25, 2011.

 

This amalgamation shows the State involvement in acquiring weak banks. At a press conference in November, Minister and Chairman of Government Office, Vu Duc Dam, reaffirmed that the State would acquire poor-performing banks and ensure interests of depositors. The World Bank (WB) and the Asian Development Bank (ADB) have repeatedly urged Vietnam to speed up merger and acquisition of banks to enhance the capacity of financial system.

 

This movement shows that the State Bank of Vietnam is determined to reshuffle the banking system and get rid of weak banks. At present, the list of weak banks to be reshuffled is catching the centre of attraction but the name of these banks has not been made public.