Co-financing banks will limit credit risks

At the seminar “Law on Credit Institutions (amended): Effective allocation of resources” held by VnEconomy on February 3, experts and market members stated a number of opinions to prevent ownership. cross-ownership, bank manipulation and limiting credit concentration risks in banks.


Article 55 of the Law on Credit Institutions (amended) 2024 stipulates: the ownership ratio of one shareholder is reduced from 15% to 10% of the charter capital of the credit institution; The ownership ratio of shareholders and related persons decreased from 20% to 15% of the credit institution’s charter capital.

According to Lawyer Truong Thanh Duc, Director of An Vi Law Firm, to avoid negativity and bank manipulation leading to risks for the entire system, it is necessary to focus on solving a few problems. First, the share ownership ratio. When shareholders and related people hold a large ownership percentage, of course they will dominate banking operations. Second, loan ratio and third is governance and administration.

“Compared to the world, up to now, Vietnam’s bank ownership rate has been very tightly controlled, but in reality, bank manipulation cases still occur, and there are many lessons. Therefore, strict management is necessary at all stages. With the Law on Credit Institutions (amended), the share ownership ratio of an individual does not change, still 5%/person, but groups of people or related organizations/legal entities have their ownership ratio reduced. ownership”, said Lawyer Truong Thanh Duc.

Mr. Duc emphasized that not only does it limit the ownership ratio, but also the documents detailing the implementation of the law need to be designed to strictly control the source of capital contributions from shareholders. “If it was shareholders’ money contributing capital to the bank, it would be very good, but in reality there is a situation of overincreasing capital, “fat is fried” – meaning the owner withdraws money from the bank and then gives it back. That is thanks to the person who holds the shares of the credit institution”, Lawyer Truong Thanh Duc stated a not uncommon practice.

In addition, Article 49 of the Law on Credit Institutions (amended) also adds regulations on providing and disclosing information for shareholders owning 1% or more of the charter capital of a credit institution.

Transitional regulations in Clause 5, Article 210 allow shareholders and related persons exceeding the prescribed ratio to continue holding but must have a roadmap to reduce ownership.

Mr. Nguyen Quoc Hung, Vice Chairman of the Vietnam Banking Association, assessed that this regulation will have a positive impact on preventing cross-ownership and bank manipulation.

For example, in the incident that happened at SCB bank, one individual actually held over 90% of the bank’s shares through hundreds of people in their names, but the management agency did not know who that representative was. until the investigation agency gets involved.

“Shareholders who own 1% of capital must also disclose transparent information so that management agencies and people can understand their real strength. Is this real money you contributed to the bank? Through the information that must be disclosed such as personal identity, occupation, and financial status, the management agency can identify the person in whose name the household is named,” Mr. Hung analyzed.

Agreeing with Vice President of the Vietnam Banking Association, Lawyer Truong Thanh Duc said that if a person has never paid personal income tax but is a shareholder accounting for 1-2% of the bank’s capital, people will shine out.

“All lists of bank shareholders and customers with large outstanding loans accounting for 10% or 20% of total outstanding loans must be made public on the bank’s website and management agencies will truly have supervision,” said Mr. Duc expressed his opinion.

As a bank with 100% State capital, there are no outside shareholders, but the Vietnam Bank for Agriculture and Rural Development (Agribank) is also actively reviewing related persons of individuals holding management positions. Management and administration to disclose information according to new regulations.

In addition, Mr. Nguyen Quoc Hung repeatedly emphasized that in order to effectively handle the situation of bank manipulation, it is necessary to enhance the supervisory role of the Board of Directors and Supervisory Board at credit institutions.

“It is necessary to increase the number of independent members of the Board of Directors of credit institutions. Independent members of the Board of Directors and the Supervisory Board must monitor the implementation of resolutions of the General Meeting of Shareholders. Any decisions of the Board of Directors and the Executive Board that are incorrect or inconsistent with the resolutions of the shareholders’ meeting must be reported promptly,” Mr. Hung recommended.


Article 136 of the Law on Credit Institutions (amended) reduces the credit limit ratio for a customer from 15% to 10% of the equity capital of commercial banks, foreign bank branches, and credit funds. people and microfinance organizations according to the roadmap to 2029; Reduce the credit limit ratio per customer from 25% to 15% of equity capital of non-bank organizations according to the roadmap until 2029.

According to experts, with the new regulations, credit institutions will have to diversify their credit portfolios and minimize concentration risks. This regulation aims to reduce lending limits for relevant customer groups, helping lending activities develop more sustainably in the long term. However, in the short term, banks for related customer groups will face pressure to restructure loans…

The full content of the article was published in Vietnam Economic Journal No. 06-2024 published on February 5, 2024. Dear readers, we invite you to read here This: Kinh-te-viet-nam

Co-financing banks will limit credit risks - Photo 1

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