According to the general director of the Saigon Hanoi Bank (SHB), merger and acquisition (M&A) is considered a normal activity in the Vietnamese banking sector and neither bankruptcy nor disruption will happen as many people have feared.
In fact, M&A among banks will become faster as the Prime Minister has officially signed Decision 254/QD-TTg, offering solutions either “hard” or “soft” to handle weak banks.
Voluntary or compulsory
At the beginning of December 2011, the merger of three joint stock commercial banks namely De Nhat (Ficombank), Sai Gon (SCB) and Vietnam Tin Nghia created a special event in the history of banking system that had not ever happened before. However, this is expected to occur more in the future.
Under the project “ Restructuring the system of credit institutions in 2011-2015” approved by the Prime Minister, weak credit institutions are at first encouraged to merge with each other voluntarily. Obviously before merging they must be treated according to specific guidelines. The first step is comprehensive and strict monitoring of management, administration, finance and operations.
During this process, banks cannot grant dividend or profits, as well as transfer shares and contributions. The State Bank of Vietnam (SBV) will ensure their solvency and support liquidity.
A tougher mechanism has also been introduced, that is in the case of weak banks not wanting to merge voluntarily, they will be enforced to merge, or the SBV will direct other commercial banks to buy back their shares. This is considered a hard measure of the Government to firmly address weak links in the system.
According to Dr Vu Viet Ngoan, Chairman of the National Financial Supervision, in the current context those solutions can be realized and there is nothing ominous. "Now the credit ceiling is controlled from 15 percent to 17 percent, therefore even when banks are pumped money, it is hard for them to grant loans massively. So certainly inflation pressure from increasing the money supply will not be too large when banks with liquidity difficulties mainly use the money to repay depositors and other banks, "said Dr Ngoan.
Currently, the SBV has claimed that there are approximately 10 banks which need to be controlled and should be handled. An expert in the banking sector said that the voluntary merger solution among banks will be more feasible, instead of enforcing banks to merge. "I think in mid March or at the very end of the month there will be some claims from banks who want to merge voluntarily" the expert said.
Mr Nguyen Van Le, General Director of Commercial Joint Stock Bank Saigon - Hanoi (SHB) said that depositors do not have to worry. "We have thought that M&A between banks is a threatening problem, uninformed people may always carry a fear of banks’ disruption or bankruptcy. But in fact, they are very ordinary activities in bank operations. There is no problem of bankruptcy or disruption here," said Mr Le.
Wave of changing ownership?
Perhaps the moment of banks merging with each other is actually an incoming wave. To prepare for that time, general director of a large joint stock commercial bank in Hanoi revealed that he had a plan to buy another bank. Before frantic trend of restructuring banks, experts forecast that there will be many banks changing ownership. From the gold market, a big financial giant has also decided to jump into the banking sector.
An experienced specialist in the financial sector said that the management authorities need to elaborate careful and take strict solutions in order not to turn the restructuring task into a game and a playground of financial giants.
Route of restructuring credit institutions according to Decision 254
2012: Assess actual operations, assets quality and bad loans of credit institutions. Evaluate and classify them. Construct plans for restructuring weak financial credit institutions. Expected outcomes: Liquidity of credit institutions is basically guaranteed.
2013: Continue to improve financial health of the credit institutions. Complete the restructuring of legal entities of weak joint stock commercial banks. Expected results: The risk of banking system collapse is eliminated. Weak credit institutions are basically handled.
2014: Complete the basic financial restructuring of credit institutions. Credit institutions are expected meet capital requirements, obligatory standards and limits ensuring safe operations. Continue voluntary M&A.
2015: Complete restructuring production and management. Reduce the number of weak credit institutions and set up several large-scale commercial banks.
TN
Vietnamese
