Cross ownership a big headache in banking: MPI
VietNamNet Bridge – Cross ownerships among banks are still beyond control and complicate the process of tacking bad debts, said the Ministry of Planning and Investment (MPI) in a report sent to the Government’s monthly meeting three days ago.
In its report, MPI said cross ownerships in the banking industry were rather sophisticated and too difficult to be made transparent, hindering the economic restructuring process.
The report mentions many forms of cross ownership, including between banks, and between banks and enterprises, with a group of major shareholders holding big stakes in both banks and enterprises, “creating a labyrinth of cross ownership ties that are complicated, sophisticated and uncontrollable.”
The ministry therefore observed that the process of tackling bad debts has merely begun, and the amount of non-performing loans can still grow further.
The warning by MPI is in sync with reports delivered by the National Assembly’s Economic Commission at the Autumn Economic Forum in Hue City last week, which described such cross ownerships as a matrix and at an alarming level.
Such cross relationships have been formed among State-owned commercial banks, joint-stock banks, foreign banks, finance funds, State-owned enterprises and private businesses.
The ownership by State-owned banks at joint stock banks alone poses a big problem. For example, Vietcombank as of end-2011 held an 11% stake in Military Bank, 8.2% in Eximbank, 4.7% in Orient Bank, and 5.3% in Saigon Bank. The NA report said by then there were eight joint-stock banks having ownership relationship with four State-owned banks.
Cross ownerships among joint-stock banks are also rampant, with at least six banks having other banks as stakeholders. Eximbank, for example, has a stake of 10.6% in Sacombank and 8.5% in Viet A Bank.
State conglomerates and private corporations also hold stakes in banks. By the end of 2011, there were some 40 corporations holding a stake of at least 5% in joint-stock banks. Furthermore, most State conglomerates have established finance companies of their own.
The relationship between banks and private companies is also difficult to monitor. There are banks owned by family-run companies or by members of same families, who are also top executives at private companies.
Banks themselves also have their own affiliates in areas of securities, real estate, financial investment, and insurance. Data collected from four State-owned banks and eight joint-stock banks shows that 11 out of these 12 lenders have established securities offshoots, eight out of the 12 have set up financial investment firms or fund management firms, nine with subsidiaries in real estates, and five with stakes in insurance companies.