Scratching of heads at bank listing

State Bank’s Circular 26/2012/TT-NHNN of September 13 providing guidelines for the listing of shares on domestic and overseas securities markets by joint stock credit institutions will come into force from October 29, to replace Decision 787/2004/QD-NHNN of June 2004 governing issuance and listing of stocks by commercial banks.

Accordingly, to be listed credit institutions must satisfy nine strict requirements. Industry players said compared to Decision 787, the new circular was more open in listing conditions while it is stricter in management requirements.

Particularly, previously to make debut on the stock market credit institutions must have been operating for at least five years but not two years and must have maintained the ratio of non-performing loan of under 3 per cent constantly in two latest years but not in two most recent consecutive quarters as in Circular 26.

The regulation requiring to-be-listed banks to win State Bank's A grading in two most recent years seen in previous circular was also abolished.

Besides, under the new circular credit institutions must not have been subject to any administrative sanctions or fines in excess of VND30 million ($1,400) for at least 12 months prior the application to list. In the previous circular, sanction value must not exceed VND1 million ($47).

The new circular, however, added new stringent regulations on risk control and corporate governance. For instance, to-be-listed banks must satisfy debt restructuring and loan loss provision rate requirements in the most recent quarter before submitting the application and have internal auditing and supervisory systems operating pursuant to existing laws. 

Circular 26 regulations are believed to make it harder for small banks to join the stock market.

“Circular 26 would be a barrier to banks listing as at this time a number of banks drop provision requirements and do not have in place standard internal auditing and supervisory systems,” said the deputy general director of a listed commercial joint stock bank.

“The requirement banks must have maintained non-performing loan rate of under 3 per cent in two most recent consecutive quarters is another challenge,” said the bank executive.

A deputy director at Sumitomo Bank Singapore office Phan Minh Ngoc assumed many Vietnamese banks did not seriously adhere to debt classification requirements. Thereby, bad debt and provision rates at some banks were far below actual required levels.

Notwithstanding, banks were found reluctant with Circular 26 regulations when being queried though earlier many of them voiced intentions for listing.

A HDBank major shareholder representative Chu Viet Cuong said banks would be prudent with listing decision amid a hostile business environment as currently.

In reality, a string of banks like Nam A, Dai A, DongA Bank and Techcombank planned to go on bourse in 2011 or 2012. However, their listing plans were delayed without setting any time limit.

DongA Bank chairman Pham Van Bu said the bank delayed listing was because the stock market is still in a fix, so going on bourse at this time would directly hurt shareholder interests.

Nine credit institutions are now operating in Vietnam’s two stock exchanges - Hanoi Stock Exchange (HNX) and Ho Chi Minh Stock Exchange (HoSE). They are ACB, SHB and NVB in HNX and STB, VCB, CTG, EIB, MBB and PVF in HoSE.