Posted on 10/20/2013 8:42:19 PM PDT by TexGrill
Cross ownership of banks poses a threat to the entire financial system, but authorities have done little to deal with the problem.
“[Pervasive] cross ownership involving state-owned, joint stock, and foreign banks, financial companies, and state-owned and private firms is complicated and becoming a serious problem in Vietnam,” economist Dinh Tuan Minh said.
Economist Bui Kien Thanh said cross ownership is one of the main reasons for the increasing bad debts in Vietnam, which were at 8.6 percent of banks’ total loans as of the end of March, according to the central bank. The issue is serious that it was included in the discussion agenda at a recent convention of the Communist Party’s Central Committee.
When banks have companies as major shareholders, they are likely to lend for their projects without assessing the risks carefully, economist Minh said.
The issue should be resolved before restructuring the banking system, but authorities have yet to come out with specific measure to limit cross holdings, said experts.
Even their moves to assign state-owned banks to help with the restructure of weak banks seem to facilitate cross ownership, Nguyen Xuan Thanh, director of the Public Policy Program at the Ho Chi Minh City-based Fulbright School, said.
In 2011 the central bank had assigned the government’s stake in a bank formed by the merger of three small banks mired in liquidity problems - Ficombank, Saigon Commercial Bank, and Vietnam Tin Nghia Bank - to the state-run Bank for Investment and Development of Vietnam.
The government should also order state-owned firms to speed up their pullout from banks by selling their stakes, he said.
(Excerpt) Read more at thanhniennews.com ...
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