VietNamNet Bridge – The State Bank of Vietnam (SBV) has decided to buy the Vietnam Construction Bank (VNCB) at zero dong per share. This is the first time in history the central bank has bought shares of a commercial bank.

The 2015 extraordinary shareholders' meeting

SBV’s Deputy Governor Nguyen Phuoc Thanh, in an interview given to Dau Tu Chung Khoan, said the central bank had bought VNCB to revive and consolidate commercial banks in a long-term plan. Meanwhile, in the immediate time, the money can be paid to depositors.

Thanh said the situation was a “delicate matter”:  the central bank has been requested by the government to “cure banks’ diseases to the very root, and not to let banks die” to ensure political and social stability. SBV is following the instruction.

Thanh said it would be better to spend money to ensure social stability than to abandon weak banks. If they were to collapse, the total expenses the state would have to pay would be much higher.

As such, SBV has clarified its view on how to deal with weak banks, despite arguments by some analysts that weak banks should not be allowed to go bankrupt, as banks would rely on the state, despite the existence of the Bankruptcy Law.

Dr. Can Van Luc from BIDV, one of the largest Vietnamese commercial banks, said SBV has made a timely and correct decision when nationalizing VNCB.

“This is a reasonable move in the current condition, which avoids any collapse as a domino effect,” he said on An Ninh Tien Te, adding that the bankruptcy of one bank may cause unpredictable consequences on the entire banking system.

Regarding VNCB’s shareholders’ benefits after nationalization, Nguyen Duc Kien, deputy chair of the National Assembly’s Economics Committee, said that the shareholders should feel lucky that they would not have to bear criminal responsibility.

On Dau Tu Chung Khoan, Kien denied that the bank’s shareholders would lose money once they have to sell the bank to SBV for nothing.

“In fact, they (the shareholders) had lost their money due to the bank’s bad performance before they were forced to sell the bank to the State Bank,” he said.

SBV, after buying VNCB, has assigned Vietcombank, a joint stock commercial bank in which it holds the controlling stakes, to undertake management over the bank to help the bank return to its normal operation.

An analyst noted that asking a powerful bank to take care of weak banks is the “favored” way the State Bank had sometimes followed in the past. VietinBank was once asked to do the same with Nam Do bank in 1998.

CV