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Bank investors must prove source of capital   2010-05-13 - Dau tu

Individuals who contribute capital to credit institutions will not only have to bear restrictions in the percentage of stakes held, but they must also show the sources of their capital.



The State Bank of Vietnam (SBV), in the draft law on credit institutions, plans to reduce the percentage of stakes in credit institution that can be held by an individual to five percent from 10 percent. Institutions are affected as well, with stakes lowered to 10 percent from 20 percent.


“The limit is very important and necessary to fight against the domination of some institutions, individuals and relatives in credit institutions. If no restrictions are imposed, Vietnam will see the privatisation of joint-stock banks,” observed Dang Thanh Binh, SBV Deputy Governor. He added that such privatization will not only create management difficulties, but it will also affect the banking system and the national economy as a whole.


Sharing the same view, Vu Viet Ngoan, Deputy Chair of the National Assembly’s Economics Committee, believes that it is better to reduce the proportion of stakes held by individuals to 5 percent.


Ngoan argues that individual shareholders must additionally prove that their capital comes from legal sources. He maintains that the proportion of stakes individuals and related people hold should be no more than 20 percent of the chartered capital.


According to Decree 141, the minimum chartered capital must be three trillion dong by the end of 2010 and five trillion dong by early 2013. This will make it difficult for individuals to control a bank, but Ngoan worries that a small group of relatives could become shareholders with enough capital to control a bank.


“In small banks, just 15-20 related shareholders would be enough for a group to become the members of the management board,” he estimated. “Such a group would then make decisions that could not only affect the small shareholders, but even harm the entire banking system.”


He sees no need, however, to limit the proportion of stakes that an institution can hold. With such restrictions, Ngoan asserted, big economic groups cannot expand their business and small banks will find it difficult to increase their chartered capital.


Ha Van Hien, Chair of the National Assembly’s Economics Committee, agrees that institutions should be exempt, as many credit companies look for capital from large groups to improve financial capability and governance technology.

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