Governor of State Bank explains cross-ownership control in banks

Speaking to explain and clarify a number of issues raised by National Assembly deputies on the afternoon of November 23, Governor of the State Bank of Vietnam (SBV) Nguyen Thi Hong emphasized that the Law on Credit Institutions (amended) is a very difficult, very complicated and very sensitive law.

The Governor said that, absorbing comments, the draft law has proposed contents to improve the governance of credit institutions, limit the rights of major shareholders, the responsibilities of those participating in the board of directors and executive board, and make information of shareholders transparent.

According to Ms. Hong, there are still many different opinions on special control and special lending, but this is a major issue that needs to be carefully researched on a scientific and practical basis, before submitting a report to the National Assembly for approval at the next session.

The Governor of the State Bank also said that reducing manipulation and cross-ownership in banking activities is of great concern to the Party, Government, and National Assembly, requiring thorough handling.

Ms. Hong emphasized that there must be synchronous solutions to handle this. The draft proposed a regulation to reduce the individual ownership rate from 5% to 3%, but after discussion, some delegates said that the 5% regulation was not necessary.

"In fact, if only regulating 5% cannot handle it, the most important thing is implementation," Governor Nguyen Thi Hong stated and said that through recent events, the State Bank has realized and learned from experience to have solutions.

Finance - Banking - Governor of State Bank explains cross-ownership control in banks — Governor of the State Bank Nguyen Thi Hong (Photo: Quochoi.vn).

Agreeing with the opinions of the delegates, according to Ms. Hong, the banking industry itself is not enough, the reason for the regulation of 5% of shares but "shareholders can intentionally ask others to stand in their names". How to handle and prevent this requires close coordination between banks and local management agencies. Especially, transparency of information about businesses and individuals to determine who they are, whether they are related to borrowers or bank shareholders.

In addition, the draft law states that transparency is needed, with shareholders holding more than 5% having to make public announcements. Ordinary shareholders who hold large shares will also be discovered when making public.

To reduce manipulation, the draft law stipulates a reduction in credit for customers and related customers from 15% to 10%. Some delegates said that a roadmap is needed, and the drafting agency has proposed a roadmap to reduce the rate. The Economic Committee and the National Assembly Standing Committee also gave their opinions on assigning the Government to provide detailed regulations.

Governor Nguyen Thi Hong affirmed that the State Bank of Vietnam recognizes and is aware of the need to strengthen inspection and supervision. In credit institutions, there are control and audit departments, responsible for the supreme supervision of the activities of the Board of Directors and the Executive Board. In recent times, the State Bank of Vietnam has strengthened them so that they are the supreme supervisors, not having to follow the bank owners.

Regarding early intervention, special control and special lending, these are major issues that are regulated so that when credit institutions have problems, they can be handled.

Finance - Banking - Governor of the State Bank explains cross-ownership control in banks (Figure 2). — The incident that happened at SCB bank and Van Thinh Phat is one of the very sophisticated cross-ownership.

Ms. Hong also said that in the process of handling weak banks and SCB, consulting with ministries and branches, they all asked how these things are regulated in the law. Therefore, if they are not legalized, it will be very difficult to implement.

"Credit institutions themselves must be aware of their responsibilities and the risks that may arise. However, the drafting agency is also concerned because banking activities are financial intermediaries, which can easily cause spillover effects, affecting the safety of the system and national monetary security. If the law does not have regulations, it will be difficult to have measures to handle them when necessary," the Governor stated.

After listening to the report of explanation and acceptance of the National Assembly Standing Committee and the opinions of National Assembly deputies, Governor of the State Bank Nguyen Thi Hong said that there are still different opinions on some issues in the draft law.

“These are big issues that require time to continue to study carefully and cautiously on a scientific and practical basis. Therefore, it is necessary for the National Assembly to consider not passing the draft Law on Credit Institutions (amended) at this session so that agencies have time to study, evaluate and review carefully before submitting the report to the National Assembly for approval at the next session,” Ms. Hong said .

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