It is Important to want control of cross ownership or not!

Could you tell about the cross-ownership issues of credit institutions (CIs) around the world, please?

As far as I know, the model of some countries is that the banks coordinate with the business system to develop together, create cross ownership. As the banks in the corporation system will support credit for the businesses in the corporation. Generally, the businesses wanting to develop must carry out many risk projects, expand the market, innovate, so, they need capital to provide and implement the project. If they have a bad relationship with the banks, it will be difficult to access credit or access credit at a high cost. So, if they borrow the banks in the same corporation system with mutual understanding, they will be provided credit with less system risk.

However, in some other countries, generally, they consider the banks to be a financial institution being independent of their operation, not part of the corporation in terms of production and business. This creates a control, separate credit from the production sector to control risk better, although borrowing costs may be high. On the whole, this model will create a safer system. Therefore, after the Asian financial crisis of 1997-1998, most countries sought to limit or reduce the cross-ownership of the credit institutions. Because even the bank has a good and rigorous risk control system, it is easy to lead to provide ineffective credits. Moreover, if the bank belongs to the corporation, the corporation can limit the development of the banks, want bank at medium scale to serve only the corporation. So when the bank is completely independent with many other retail customers, its expansion opportunity is high.

What is the situation of cross-ownership of CIs in Vietnam, Sir?

In Vietnam, there was a long development period of cross-ownership of CIs, but Vietnam has realized that if the banks depended on the businesses so deep, it could lead to currency manipulation, inconsiderate credit provision. Therefore, Vietnam has controlled cross ownership of CIs. This is the right direction, especially for a country with loose management level, it should be separated to be able to supervise, although there is still cross-ownership of credit institutions with looser and more obvious structure, not as tight as before.

There are still many cross-ownership couples that are "hiding" under different classes to serve the interests of the groups or to hide the "cranky" financial situation. Photo: collected.

Why are there "underground" ownership phenomena or concealment of information on cross-ownership of credit institutions in Vietnam, Sir?

The issue of cross-ownership is transparent or non-transparent. They concealed because our country has issued regulations to limit the cross-ownership of the credit institutions. The regulations of the State Bank of Vietnam (SBV) are quite adequate, but do not eliminate the "sphere of law". For example, the regulation does not allow the banks to own more than 5% of the equity in other commercial banks... so the individuals and the organizations have to use the cover forms, only launch a part. Because the companies have too much ownership, the individuals have too much ownership that causes the banks to be manipulated, provide the credit non-cautiously. Such a system can lead to distortions of credit, which can easily break down, and then only the banks will suffer because the banks mobilize capital from the depositors, so it becomes a social problem, not just the banks and the businesses.

The hiding of information comes from benefits, serving their backyard businesses. The businesses have high capital requirements, so they need ownership to help the businesses access to credit more easily. This is a benefit for the individuals and the organizations so they can give up hardly. Therefore, the management authorities must seek to prevent this situation.

With the above situation, how should we control the cross-ownership of the credit institutions, Sir?

Over the past time, the Government has recognized the implications of the cross-ownership of the credit institutions, so they have come up with solutions to localize the cross-ownership, solve each issue with the legal regulations. These are actions that help the cross-ownership of CIs more transparent, under the control of the SBV.

But because of "underground" ownership, concealment of information remains, so, we have to enhance surveillance, blame personal responsibility for surveillance. If the SBV finds that it is not good for the whole system, they must be a strong determination to change, have strong supervision measures. In fact, it is not difficult to control the bank system, because the banks are the most transparent system of cash flow recording, all transactions are posted to the SBV's general system. Cash flows send anywhere, withdraw anywhere, lend anyone appears on the entry of the system. The bank is not like a small business, with only regular accounting books or no bookkeeping, so it is not difficult to control the cross-ownership of the credit institutions, it is important to want control or not.

Thank you, Sir!