Lawmakers want stronger measures to curb cross ownership in banks

National Assembly members have suggested that the government should take radical measures to restrain cross-ownership in the country’s banking sector to ensure a healthy system.

Legislators made the proposal on Monday while discussing drafted amendments to the Vietnamese Law on Credit Institutions.

Ha Sy Dong, Vice Chairman of Quang Tri province, said that cross-ownership in the banking system poses operational and management risks, and is not good for transparency.

Cross-ownership could lead to fake financial reports and cause other banking and financial risks, he noted.

Nguyen Hai Nam, a standing member of the National Assembly Economic Committee, said he was also concerned about cross-ownership among banks and financial firms. It is likely that behind one bank is another lender, and behind a financial company stands another firm, he said.

According to Nam, Vietnamese laws must be strict enough to cope with cross-ownership in banking and finance.

Dang Ngoc Huy, Standing Deputy Secretary of Quang Ngai province's Party Committee, said it is true that some banks may be backed by major companies, and regulators have failed to find radical solutions to put an end to the problem.

Lawmakers shared this concern by recalling similar ties between real estate developer Van Thinh Phat and Saigon Commercial Bank, both based in Ho Chi Minh City. Truong My Lan, chairwoman of Van Thinh Phat, was arrested in early October 2022 on charges of misappropriation by issuing corporate bonds, causing customers to withdraw their money from Saigon Commercial Bank.

To limit cross-ownership, the draft amended Law on Credit Institutions sets the ratios of share ownership of individual shareholders, institutional shareholders, institutional shareholders and their related persons at 3%, 10%, and 15%, respectively, compared to the current 5%, 15%, and 20% under the current law.

Dong from Quang Tri province suggested that Vietnamese regulators should raise foreign investors’ ownership caps in local banks to curb cross-ownership in the Vietnamese system.