Vietnam gov’t to have commercial banks take over ailing peers

The Vietnamese government has given in-principle approval to a scheme that will have domestic commercial banks take over two weak peers, a central bank report says, part of broader efforts to clean up the banking system and reduce the number of lenders.

The State Bank of Vietnam (SBV) report, sent to the nation’s supreme legislative body, the National Assembly, does not name the ailing banks or those that will absorb them.

It says that the central bank has directed concerned agencies to submit detailed plans on the takeover to the government for consideration.

The SBV acquired three struggling banks – CBBank, OceanBank, and GPBank – in 2015 at zero cost to prevent contagion and a systematic collapse. In the same year, it placed the DongA Bank under special scrutiny.

Unconfirmed reports have said that Hanoi-based Military Bank could take over OceanBank, while Vietcombank would acquire CBBank. Both Military Bank and Vietcombank have sent staff to manage the two target lenders; and similar steps are being prepared for the remaining two ailing banks.

The banks set to acquire the ailing peers have been asked to hire consulting firms and proceed with due diligence. The valuation certifications issued by the consultations will be forwarded to the State Audit of Vietnam for verification, the SBV report says.

SBV Governor Nguyen Thi Hong has attributed the lengthy M&A process to the need for acquiring banks to convince their shareholders, including foreign strategic investors. Other factors include limited resources and the need to garner feedback on the move from other agencies, given that the deals are complex and unprecedented.