Right before the Lunar New Year holiday, the State Bank of Vietnam (SBV) suddenly announced the special solution to handle the situation of the Vietnam Construction Bank (VNCB): a compulsory acquisition with a price of zero VND. In early March, 2015, Mr Nguyen Phuoc Thanh, Deputy Governor of SBV, said that the SBV was also considering buying the two banks GPBank and OceanBank with the zero price, if those two failed to overcome the problem of negative capital and also could not find a buyer.
Speaking to the press, SBV Governor Nguyen Van Binh said it’s possible that this solution would continue be used for some other banks as well. He affirmed that this action was fully consistent with the law of Vietnam and international practice. When shareholders lose their capital and resort to using social capital, there’s no other option but for them to leave and let the state takeover in order to maintain the system’s stabilisation and protect legal rights for the people and businesses.
Reluctant owner
Before the announcement of the acquisition on February 02, 2015, on January 31, 2015, an irregular general meeting among VNCB’s shareholders was held in Long An to announce results of an independent audit on the financial situation, the real value and the charter capital of the bank, as well as to vote on the option of adding charter capital as prescribed by law. However, the general meeting failed to pass the option of increasing charter capital to maintain the real value of the bank’s minimum charter capital at the level required by law.
Bylaw and following the resolution of VNCB’s shareholders’ general meeting, SBV has announced the decision of a compulsory acquisition of the bank’s entire share capital with a price of VND 0/share, making this agency the owner of 100 percent of VNCB’s charter capital, meanwhile terminating all rights and interests as shareholder of the bank’s shareholders. Joint Stock Commercial Bank for Foreign Trade of Vietnam (VCB) was appointed to participate in the VNCB governing.
This event has had a huge impact, kind of an imprint, on the market, and is without precedent. Shareholders of VNCB were left with no choice but to accept the harsh reality of being empty-handed in this investment. As for outsiders, the concept of “zero price acquisition” has yet to be clear.
Saying that SBV has nationalized VNCB is not entirely accurate, because this sounds too much like an imposition. At the regular government press conference (the February 2015 press conference) held on March 2nd, Deputy Governor of SBV Nguyen Thi Hong reaffirmed that the involvement of the SBV in the VNCB’s share purchase, either directly buying or directing other banks to purchase, was one of the measures that SBV implemented during the restructuring of the banking system – it was not nationalisation.
Saying it was nationalisation was not fair to SBV, because the agency had no desire to own banks which were in a too weak condition. The acquisition was nothing but a drastic solution, and a desperate one. This was a professional and extreme move of SBV: Changing shareholders or investors showed something like paying a price, a reality of how harsh a fierce market could be to weak banks incapable of fixing themselves.
According to Ms Nguyen Thi Hong, in the first stage, SBV had evaluated and restructured weak banks, bad links that could lead to a system crash. In 2015, the banking sector would focus on complying with the solution proposed in the restructuring scheme in accordance with Decision 254 approved by the Prime Minister, which included a comprehensive bank restructuring, applying to healthy banks also.
The next names mentioned in the “zero price plan” are GPBank and OceanBank, and it is defined as acquisitions, not nationalisation.
SBV’s next step
The question posed by the market at the moment is what kind of category the zero-priced banks belong to, as a public company with just one sole shareholder as SBV, or a one-member limited company?
After purchasing and becoming the owner, how does SBV intend to inherit the liability, responsibilities and rights of VNCB? They are banks with dismal performance and creditors are concerned about SBV’s intention towards them.
In the aspect of ensuring system security as well as safety for depositors, the zero price plan is seen as optimal. According to experts’ opinion, as the restructuring of the banking system remained incomplete, SBV’s acquisition of banks with heavy negative capital for zero VND was the best choice to maintain safety and prevent the bad impact spreading through the whole system.
Another pro, killing two birds with one stone, the zero price plan helped immediately remove the cross-ownership status as well as the divestment of outside-the-sector capital in those banks. In the case of VNCB, the ownership of shareholders including the Vietnam Bank for Agriculture and Rural Development (Agribank) ended; capital of other four shareholders was also terminated. If other banks are handled similarly, it would eliminate the presence of big groups and enterprises behind banks.
However, becoming the owner also means inheriting liability, settling outstanding issues, filling the losses and reviving the banks so that they return to being sellable. This is serious challenge for the market operator.
Bao Chau
Đăng ký: VietNam News