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Securities affiliates may cause volatility
The excessive capital support that commercial banks extend to their securities affiliates poses high risks to the stability of the nation's financial markets, said the State Securities Commission, following audits it conducted late last year of such bank-affiliated brokerages as Agribank Securities Co, Vietinbank Securities Co and BIDV Securities Co.
Agribank Securities Co posed some of the greatest risks, auditors found, although commission vice chairman Nguyen Doan Hung declined to disclose the extent to which Agribank was propping up its affiliate. However, Hung told the online news website VnExpress.net that funding was primarily provided through brokerage services and bond trading.
While the financial support received from affiliated banks by Vietinbank Securities Co and BIDV Securities Co were less significant, banks injecting capital into their securities arms had become a common situation on the market, Hung said.
"Securities companies currently have a total combined equity of about VND36 trillion (US$1.7 billion) and their total assets are estimated at VND100 trillion [$4.76 billion]," he said. "If their capital rotations are not monitored, it will be very risky."
The monitoring of capital flows between the monetary, securities and insurance markets is of current concern to financial watchdogs internationally, and the issue was discussed at the conference of the International Organization of Securities Commissions (IOSCO) held in China in May.
In Viet Nam, the commission and the Ministry of Finance have already proposed to the Government that they require banks to withdraw financial support and reduce the scope of assistance in the future, Hung said.
To strengthen its supervision of securities companies, the commission has this month put Circular No 226 into effect, classifying brokerages in three groups as good, medium or subject to special control based on half-year or whole year financial statements. Seven firms are currently under special control, including Rubber Securities Co, VinaSecurities, Ha Noi Securities Co, Truong Son Securities Co, Da Nang Securities Co, Mekong Securities Co and Viet Nam Industry and Commercial Securities Co.
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