Restructuring Vietnamese Banks: A Smouldering Fire

On May 23, in the interview posted on the website of State Bank of Vietnam, Mr Duong Quoc Anh (Chief Inspector) reconfirmed that the depositors’ benefits are reserved during the restructuring process, for example in the case of the merger between Hanoi Building Commercial Joint Stock Bank (Habubank) and Saigon-Hanoi Bank (SHB).

It is the latest information about this topic from the authority. Habubank-SHB is also the latest “marriage” officially known in the agenda of restructuring bank system.

 

Still in progress!
On the one hand, it can be confirmed that State Bank has missed the deadline expected, which was to treat about 5-8 banks under restructure group in the first quarter 2012.

It is coming to the end of second quarter 2012 and there has been only one member that is Habubank. The plan is still be in plan. In reality, there have been movements drawing much attention such as official mergers.

On May 26, after one year of rumor, unofficial information, the meeting of shareholders of Saigon Commercial Bank (Sacombank) released its answer. The structure of Board of Directors has basically changed with new 8 members, most of whom are from two other banks. Sacombank itself has completed an important step in self-restructuring (no matter actively or passively)

The answer of restructuring is not only for merger, combination, acquisition, which are similar as an explosion drawing much curiosity. By that way, it can be seen that some banks have self-restructured and taken important steps. For example, VietCapital Bank, Tien Phong Bank etc have witnessed significant changes in shareholder structure, administration and even business strategy.

Those are very specific results. Since October 2011 (the milestone of Central Party Committee introducing its orientation), the process of restructuring Vietnamese bank system has gone for a long road. At least 7 cases have had the results from different angles.

In terms of general requirements, on the forum of on-going National Assembly, Governor Nguyen Van Binh said that State Bank concentrated on implementing the restructuring contents, which saw some results. In particular, the first goal of system’s liquidation has been assured; weak banks have been grouped and the 6 other cases are fully supervised and monitored.

May be it is expected by many people that there will be quick, rapid steps and even noisiness. However, confronting a complicated matter with its widespread influence, State Bank has its own reasons to be cautious, which certainly is different from evasion. Accordingly, the steps taken are in the progress.

New wind from financial companies?
After flaring out in late 2011 and early 2012 with the M&A of Habubank – SHB, the fire of bank restructuring has smoldered, waiting for a new wind. It is said that the new wind will come from financial companies.

For the past time the focus of restructuring has been placed on all of commercial banks. Financial companies, which are still out of the question, are facing headaches of survival.

It is not a new issue. Since 2009, with Decree 09, the Government has requested the state corporations and groups not to make investments out of their main fields, especially those of finance, insurance, real estate, securities. In September 2011, the resolution released in the periodical meeting of the Government reconfirmed this request, milestone of capital withdrawal, coming to stop investing out of the fields by 2015.

Most of current 18 financial companies belong to groups and corporations or have high percentage of ownership. Making plan and investment in these groups is out of the field or not is still under argument whereas there is a need of capital withdrawal. Withdrawing capital, the financial companies will be more active but lose their firm foundation. If partial of financial foundation is replaceable, the rest foundation of customers is a gap which is not easily filled.

It was thought that the survival of financial companies is the internal issue of each group or corporation and the instability cannot spread on the large scale. That is the theoretical reason for appearance of non-bank credit institutions. However, at the moment, after operation, many members have expanded with their scope much exceeding the parent corporations or groups; even the total assets are equal to that of commercial banks. Accordingly, if any, impacts on financial system and the whole market in general is unpredictable.

Under pressure of capital withdrawal, instable root and increasingly fierce competition from commercial banks, the issue of survival of some financial companies is more critical. There have been some calculations considered.

It is known that the proposal of merger between a financial company and a commercial bank is under consideration. That is the way for them to survive and develop. If approved, this will be a new wind for restructuring credit institutions in coming time.

 

VNE