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| Before Dcree 101 took effect on december 20, 2009, State-run commercial banks such as VCB, Incombank and BIDV have resolved to turn into regional or even global finance-banking giants since 2006. |
Although the State Bank Law and the Credit Institution Law have been revised twice, they have yet to mention finance-banking groups. Most sub-law documents have not dealt with these institutions, either. The only exception is Decree 101/2009/ND-CP, dated November 5, 2009, on the “pilot establishment, organization, operation and management of State-owned groups.” Article 3, Item 11 of this decree lists “finance, banking and insurance” among sectors where such pilot establishment takes place.
However, in reality, before Decree 101 took effect on December 20, 2009, commercial banks, especially State-run ones such as VCB, Incombank and BIDV, have resolved to turn into regional or even global finance-banking giants since 2006. If the global financial crisis had not erupted, some local finance-banking groups would be in operation now, at least on a trial basis.
As part of their efforts to realize this vision, some State-run commercial banks have ventured into non-core sectors and given birth to insurance, securities, asset management, realty and construction firms, as well as affiliates in such industries as health care or sports. This approach is somewhat questionable as the main pillars of a finance-banking group are finance, insurance, securities and investment.
Article 32 of the Credit Institution Law holds that credit institutions are allowed to set up, with their own equity, legal entities which have independent accounting records and operate in finance, banking, insurance, asset management and so on. In other words, it is through the pillars of banking, finance, securities and investment that commercial banks use their own capital to set up subsidiaries.
Several commercial joint-stock banks have transformed themselves into groups such as ACB Group or Sacombank Group. State-run commercial banks are capable of doing so, too, but must await official recognition by the Government first. For a start, these State-run financial intermediaries may want to capitalize on the provisions of Decree 101.
The lack of specific regulations on finance-banking groups may hamper the sustainable development of banks once these financial intermediaries turn into groups. In particular, restrictions on the extent to which banks can enter non-core fields of endeavor are vital for sheltering these credit institutions from the problems currently gripping Vinashin.
Currently, risk-taking behavior is widespread among commercial banks. Meanwhile, laws and sub-law documents have yet to offer provisions on the establishment, organization, operation and management of finance-banking groups, private or otherwise.
It is time for the State Bank of Vietnam to take the initiative to fill this gap and, in so doing, foster sustainable development in Vietnam’s finance-banking sector in the post-crisis period. Only then can Vietnam brace itself for the proliferation of finance-banking groups in the future. It is also important to avoid blanket bans on multi-sector and giant entities such as conglomerates, which, like gold trading floors and the likes, are rather difficult to manage.
