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Securities companies either raise capital or cut services
It is now really difficult for securities companies to raise capital to meet the new regulations on chartered capital. Therefore, many of them are considering narrowing their lists of offered services.
Earlier this week, the State Securities Commission (SSC) gathered securities companies together and reminded them about the regulation on required legal capital stipulated in Decree No 14, which guides the implementation of the Securities law. Under the decree, securities companies must have VND25bil in legal capital to be eligible to provide securities brokerage services, VND100bil to make securities investments themselves, VND165bil to offer securities issuance guarantee services, and VND10bil to provide consultancy.
Securities companies which want to provide all these services need to have the total of all capital sums stipulated for each service.
The securities companies established before Decree 14 was promulgated on January 19, 2007 have to raise their capital to VND300bil by December 31, 2008 if they want to provide the four kinds of services, and to VND125bil if they just plan to provide the two most popular services (securities brokerage and investing themselves).
According to local newspaper Dau tu chung khoan, there are some 30 securities companies which have the chartered capital of less than VND100bil, or in other words, are not eligible to provide the two most popular services.
SSC’s website shows that the securities company which has the lowest capital level now has VND9bil in chartered capital.
However, it is now not easy for securities companies to raise capital. Shareholders of companies are not ready to inject more money in the companies in the context of the stock market’s continued falls and low liquidity.
“We will have a shareholders’ meeting to discuss ways to raise money. I can foresee that many shareholders will not agree spending more money, as they prefer keeping cash at this moment,” said the chairman of one securities company.
The chairman said that one possible solution is reducing the number of services the company offers.
However, analysts have warned that it will not be easy for companies to stop making investments themselves. A question has been raised about how the companies will deal with the securities they are holding. If the companies try to sell securities prior to December 31, they will suffer losses. Moreover, only listed stocks are salable as the liquidity is lower for OTC securities.
Currently, most securities companies are facing big difficulties due to the sharp falls of the market. The chairman of a securities company said that though his company had not been losing money, it would only try to maintain the brokerage service through the end of 2010. If the market remains gloomy in 2011, the company will be shut down, he said.
In related news, the difficulties of the stock market have also made it difficult for commercial banks to raise chartered capital to VND1tril by the end of 2008 and VND3,500bil by 2010 as required.
Foreign investors in the framework of the Vietnam Business Forum have suggested that Vietnam consider extending the deadline for raising capital to VND1tril by another 18 months.
There are 10 joint-stock banks which still cannot meet the requirements on increased capital. They need the total of some VND5tril.
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