ID :
23326
Thu, 10/09/2008 - 08:57
Auther :
Shortlink :
http://m.oananews.org//node/23326
The shortlink copeid
New banks to face stiff regulations
Hanoi (VNA) - A new draft regulation by the State Bank of Vietnam intends to impose stricter measures on the formation of commercial joint-stock banks in a move to ensure the effectiveness and stability of the local banking system.
New banks must have charter capital of 3 trillion VND (180.72 million
USD), while existing joint-stock banks must show they have at least 1
trillion VND in charter capital by the end of this year, according to Le
Xuan Nghia, director of banking strategy development for the State Bank of
Vietnam .
" The message is clear. That is, to limit weak banks from joining the
local market amid increasing concerns about the spreading global-economic
turmoil," Vo Tri Thanh, director of the Department for Trade Policy and
International Economic Integration Studies under the Central Institute for
Economic management (CIEM), told the English language daily Vietnam News
on October 7.
A new bank must have at least 100 shareholders, as at present. However,
now each institutional founding shareholder must provide equity of at least
500 billion VND (30.12 million USD).
Moreover, an institution or enterprise that wants to be part of a new bank
must show that it has operated its own business profitably for three
consecutive years before applying.
"Such capital regulations are really strict, but good," said Nguyen Thanh
Toai, Deputy General Director of Asia Commercial Bank, a leading joint-stock
bank. He told the Vietnam News on October 7 that many State-owned economics
groups have sufficient equity of 500 billion VND, but they have been warned
not to invest in the banking sector.
He said that setting up the core of a banking system cost at least 4
million USD alone. Those with such low potential have little chance of
surviving.
State Bank expert Nghia said smaller private enterprises have almost no
chance of opening a bank with such large registered capital.
Under current regulations, each bank which wants to become a founding
shareholder of a new bank must have total assets of 10 trillion VND (1.25
billion USD), chartered capital of 1 trillion VND (62.5 million USD), and
bad debts of less than 2 percent.
No institution shareholder is allowed to hold more than 20 percent of
registered capital in the bank - and the limit is reduced to 10 percent for
individual shareholders.
A financial institution that buys a stake as a strategic investor can hold
up to 40 percent of shares and can acquire even more if the Prime Minister
rules it to be in the national interest.
Moreover, in the first three years after the establishment of a bank,
shareholders cannot transfer their stake. Founding shareholders are only
permitted to transfer stakes to outsiders after five years.
Most of the new proposed regulations will be the same as under current
rules.
The draft proposal also spells out a system of supervision of commercial
banks and determines benefits for shareholders.
The checks include several in-house supervisory commissions and nine
compulsory reports that must be ratified by the management board.
Vietnam's banking system now includes five State-owned commercial
banks, six joint - venture banks, 36 joint-stock commercial banks, 44
branches of foreign banks, 10 financial companies, 13 financial leasing
companies and 998 people's credit funds.
Since May, two new joint-stock banks have opened up - the Lien Viet Bank and
Tien Phong Bank.
Some wonder if the number of banks is too high for a market with a Gross
Domestic Product of about 70 billion USD annually.
But according to Thanh from the CIEM, the most critical issues lie in
supervision and risk management.
"Placing conditions on opening new banks is in accordance with World Trade
Organisation commitments," he said.
At one period last year, about 25 applications to establish new banks were
already on the State Bank's desk.
To stop the rush, the State Bank tightened conditions on setting up banks by
issuing Decision No 24/2007/QD-NHNN on June 7, 2007. However, two months
later, the central bank reported having already received 12 applications
from mostly large State-owned corporations and domestic financial
institutions.
However, so far, only two banks (Tien Phong and Lien Viet) have started
operation and another, Bao Viet Bank has been approved for a licence.
In August this year, the State Bank once again announced a temporary pause
in licensing new banks while it compiled new criteria for setting up
domestic joint-stock commercial banks.
The central bank will receive application to open new banks right after the
new draft is finished and ratified by the PM -Enditem
New banks must have charter capital of 3 trillion VND (180.72 million
USD), while existing joint-stock banks must show they have at least 1
trillion VND in charter capital by the end of this year, according to Le
Xuan Nghia, director of banking strategy development for the State Bank of
Vietnam .
" The message is clear. That is, to limit weak banks from joining the
local market amid increasing concerns about the spreading global-economic
turmoil," Vo Tri Thanh, director of the Department for Trade Policy and
International Economic Integration Studies under the Central Institute for
Economic management (CIEM), told the English language daily Vietnam News
on October 7.
A new bank must have at least 100 shareholders, as at present. However,
now each institutional founding shareholder must provide equity of at least
500 billion VND (30.12 million USD).
Moreover, an institution or enterprise that wants to be part of a new bank
must show that it has operated its own business profitably for three
consecutive years before applying.
"Such capital regulations are really strict, but good," said Nguyen Thanh
Toai, Deputy General Director of Asia Commercial Bank, a leading joint-stock
bank. He told the Vietnam News on October 7 that many State-owned economics
groups have sufficient equity of 500 billion VND, but they have been warned
not to invest in the banking sector.
He said that setting up the core of a banking system cost at least 4
million USD alone. Those with such low potential have little chance of
surviving.
State Bank expert Nghia said smaller private enterprises have almost no
chance of opening a bank with such large registered capital.
Under current regulations, each bank which wants to become a founding
shareholder of a new bank must have total assets of 10 trillion VND (1.25
billion USD), chartered capital of 1 trillion VND (62.5 million USD), and
bad debts of less than 2 percent.
No institution shareholder is allowed to hold more than 20 percent of
registered capital in the bank - and the limit is reduced to 10 percent for
individual shareholders.
A financial institution that buys a stake as a strategic investor can hold
up to 40 percent of shares and can acquire even more if the Prime Minister
rules it to be in the national interest.
Moreover, in the first three years after the establishment of a bank,
shareholders cannot transfer their stake. Founding shareholders are only
permitted to transfer stakes to outsiders after five years.
Most of the new proposed regulations will be the same as under current
rules.
The draft proposal also spells out a system of supervision of commercial
banks and determines benefits for shareholders.
The checks include several in-house supervisory commissions and nine
compulsory reports that must be ratified by the management board.
Vietnam's banking system now includes five State-owned commercial
banks, six joint - venture banks, 36 joint-stock commercial banks, 44
branches of foreign banks, 10 financial companies, 13 financial leasing
companies and 998 people's credit funds.
Since May, two new joint-stock banks have opened up - the Lien Viet Bank and
Tien Phong Bank.
Some wonder if the number of banks is too high for a market with a Gross
Domestic Product of about 70 billion USD annually.
But according to Thanh from the CIEM, the most critical issues lie in
supervision and risk management.
"Placing conditions on opening new banks is in accordance with World Trade
Organisation commitments," he said.
At one period last year, about 25 applications to establish new banks were
already on the State Bank's desk.
To stop the rush, the State Bank tightened conditions on setting up banks by
issuing Decision No 24/2007/QD-NHNN on June 7, 2007. However, two months
later, the central bank reported having already received 12 applications
from mostly large State-owned corporations and domestic financial
institutions.
However, so far, only two banks (Tien Phong and Lien Viet) have started
operation and another, Bao Viet Bank has been approved for a licence.
In August this year, the State Bank once again announced a temporary pause
in licensing new banks while it compiled new criteria for setting up
domestic joint-stock commercial banks.
The central bank will receive application to open new banks right after the
new draft is finished and ratified by the PM -Enditem
