Cool voices to calm market

Central Institute for Economic Management deputy chief Vo Tri Thanh said specific regulations to contain interest-based conflicts between bank main shareholders and relevant businesses have existed in many countries.

However, traders deliberately dodge regulations and cross ownership control adds to the complexity in Vietnam.

“We are looking into the issue. In the forthcoming time, the National Financial Supervisory Committee will better cross-ownership supervision through introducing more tightened regulations,” said Thanh.

Thanh argued scores of local joint stock commercial banks declared to become financial groups which carry out both investment and commercial functions. But, recent global economic recession showed that allowing commercial banks to conduct investment was one of core reasons leading to the recession.

Vietnam Capital Partner fund managing director Nguyen Nam Son said in post-recession period commercial banks were barred from taking investment ventures in many countries.

“Vietnam needs strict regulation to limit investment rights of banks. Otherwise bank boxes would use depositor money for adventurous investments which may entail serious consequences,” said Son.

Echoing the idea, former Trade Minister Truong Dinh Tuyen, a member of the National Financial and Monetary Policy Advisory Council, said: “Bank boxes should not be allowed to manage other firms and this must be put into law. South Korea has enacted such regulation after crisis.”

TienPhong Bank chairman Do Minh Phu assumed a shareholder controlling a bank would be unlikely in Vietnam since under the Law on Credit Institutions a shareholder and relevant people could not possess over 20 per cent chartered capital of a credit organisation.

Besides, there is no regulation banning investors from stepping into other fields after they have injected money into banking sector. That was why bank boxes may pump money into subsidiary firms through the tactic of ‘using other people’ to act as these firms top executives.  

Industry experts assumed bank boxes allowing cross-ownership could put the whole banking system at risk.