Banks wanting to list shares on the nation’s stock exchange will be required to satisfy tighter requirements on bank management, under a Circular issued by the State Bank of Vietnam (SBV).
The new circular, effective as from October 29, stipulates that credit institutions seeking to list shares will have to ensure compliance with all financial safety regulations set for credit institutions for six consecutive months prior to their listing application.
They will also be required to implement loan classification and make provision against credit risks as regulated by the central bank, as well as organize internal audit and internal control divisions.
According to market insiders, this circular is likely to constrain banks from listing shares because many banks currently have not established internal audit standards or internal control divisions.
Requirements pertaining to bad debt ratios are another significant barrier. Many banks currently cannot satisfy the requirement for maintaining a bad debt ratio of less than 3 percent of total outstanding loans for two consecutive quarters. Under the new regulation, they will have to do so for two consecutive years.
“Under the current economic climate, many major banks have failed to keep a bad debt ratio of under 3 percent for two quarters in a row,” ACB Securities Co banking industry analyst Cao Tan Phat told the newspaper Dau tu Chung khoan (Securities Investment).
Eight banks and one financial company currently list shares on one of the nation’s two stock exchanges, and three of those – Vietcombank (VCB), PetroVietnam Finance (PVF) and Nam Viet Bank (NVB) – have bad debts in excess of 3 percent of outstanding loans.
The Bank for Development and Investment of Vietnam (BIDV), which applied in May to list shares on the Ho Chi Minh Stock Exchange, also has a bad debt ratio of 3.29 percent in the second quarter of this year.
Southeast Asia Bank, Southern Bank, Eastern Bank, DaiA Bank, Techcombank and HDBank all planned to debut shares last year or this year but have postponed the moves indefinitely.