State capital’s representatives at banks – who are they?

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IndiState capital’s representatives at banks – who are theyviduals who represent the state’s capital at commercial banks are also officials working for state management agencies. This practice is causing concern among those who believe it to create unfair competition among banks.

Though the State has equitized most of its banks, it continues to hold controlling stakes them. The state’s capital at the institutions is managed by its representatives – in most cases, officials from the State Bank of Vietnam.

In general, the State Bank dispatches more than one official to each commercial bank. Each official is responsible for a certain percentage of the state’s capital. This allows for dispersing risk, as power is not concentrated in anyone individual, and allows those officials to monitor each other.

The “power formula” the State Bank has been applying so far is as follows: each chair of the board of directors of a bank supervises 30-40 percent of the funds, the CEO manages 30-40 percent, while a member of the board, who concurrently is an officer of the State Bank, manages the remaining stakes.

As an example, the President and CEO of Vietcombank, the first state-owned bank to equitize, holds 30 percent of the capital. Meanwhile, a member of the Board of Directors of the bank, who holds 40 percent of the stakes, is now Director of the Banking Operation Safety Policies Department of the State Bank.

At the equitized BIDV bank, President Tran Bac Ha represents 40 percent of the State’s capital, while the CEO represents another 30 percent. The remaining is managed by the Director of the State Bank’s International Auditing Department.

At Vietinbank, after Pham Huy Hung, former President retired, the state’s capital is now represented by three persons. Two of them, holding 60 percent of stakes, are State Bank officials – Le Duc Tho, who concurrently holds the post of State Bank Chief Secretariat, and Cat Duong Quang, who is now the Deputy Director of the State Bank’s Credit Department. The other 40 percent is assigned to Nguyen Van Thang, the former CEO, who has just been appointed to the post of president.

The same apparatus structure can be seen at Mekong Bank. The bank’s President Huynh Nam Dung holds 40 percent of the state’s capital, while the other 60 percent has been divided among Nguyen Phuoc Hoa, CEO, and Pham Huu Phuong, who is now the Chief Representative of the State Bank’s Office in HCM City.

A lawyer, citing current law, said that business owners have the right to determine the number of their representatives in enterprises and the volumes of shares the representatives manage. Current law also allows the representatives to hold different posts concurrently.

Therefore, the lawyer said, bankers have every reason to harbor concerns that such connections may create unfair competition between the state-invested banks and other joint stock banks.

It is clear that the state-invested banks, having board members and executives who also hold positions of influence in government, can have great competitive advantages vis-à-vis other banks. That is almost an inevitability, when the players on the field are also the policy makers.

TBKTSG

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