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VAFI makes modest proposal for commercial banks selling shares
Commercial banks should be able to sell stakes of under 5 per cent to foreign investors without State Bank of Viet Nam approval, says the Viet Nam Association of Financial Investors (VAFI).
Under Government Decree No 69/2007/ND-CP of April 20, 2007 regulating purchases by foreign investors of shares in commercial banks, a foreign investor must get State Bank approval to buy unlisted or over-the-counter shares in a commercial bank, a procedure that can take up to six months, according to VAFI.
"That’s why foreign investors rarely buy a small stake in an unlisted joint stock bank," VAFI general secretary Nguyen Hoang Hai said this week.
Hai believed that foreign investors remained ready to buy into commercial banks but were scared off by complex regulatory procedures.
"I think the State Bank should temporarily waive these procedures for a period of one or two years, which would also help promote the liquidity of the markets overall," he said.
VAFI has estimated that share prices on the OTC market have lost about 60-80 per cent of their value in the past six months.
Hai commented that easing the procedures would not only encourage foreign investment in commercial bank stocks but go some ways towards solving another lingering problem about the nation’s stock market: that of the large number of shares held by commercial banks as collateral for loans made earlier to stock market investors.
Banks are currently abiding by a voluntary agreement not to dump the shares on the stock market, where share prices are already plummeting in part due to an over abundance of shares on the market.
"A majority of the mortgaged shares held by commercial banks are banking stocks," said Hai, noting that most were shares in banks with good business performance.
Allowing these banks to more readily sell these mortgaged banking shares to foreign investors would help banks liquidate the shares, Hai said.
"Meanwhile, the money that State Capital Investment Corporation pours into the market is surely not enough to buy up many of the remaining collateral shares from commercial banks, both listed and OTC shares."
An official of the State Bank, who asked to remain anonymous, acknowledged that banks were stuck with collateral shares.
"However," the official said, "commercial banks at present are complying with the instruction of the State Bank not to sell off any mortgaged shares, so their market values won’t drop further."
VNS
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