Coalitions between banks and between banks and enterprises have become more popular. In theory, the coalitions will bring in advantages for banks in enhancing their strength. However, legal foundation for these activities is not clear, which can bring about risks for the economy.
For financial strength enhancement
The Bank for Investment and Development of Vietnam (BIDV) and Nam A Commercial Joint Stock Bank on July 5 signed a cooperation deal in Ho Chi Minh City to expand their mutual banking operations. This is the first cooperation between a state-run bank and a joint stock one. Accordingly, BIDV and Nam A Bank will join hands in many banking and non-banking fields such as capital mobilization, credit development, banking products and services, securities trading, insurance and training. The two sides will assist each other in taking part in credit projects under ODA loans as well as rural financial projects funded by the World Bank, in which BIDV functions as wholesale bank for disbursement.
In addition, BIDV and Nam A Bank will jointly deploy bilateral payment system and consider jointly using ATM system and other card receivers. They will plan to develop non-life insurance network via BIDV’s insurance company (BIC) on the basis of bilateral interest.
Banks target opportunities, cooperation and relation expansion in alliance with other banks. The cooperation deal between BIDV and Nam A Bank is among many other coalitions between domestic banks. It is easy to name a series of comprehensive cooperation agreements such as deals between the Bank for Foreign Trade of Vietnam (Vietcombank) with Saigon Commercial Joint Stock Bank (SCB); BIDV with SCB, the state-owned Bank for Agriculture and Rural Development of Vietnam (Agribank) with An Binh Commercial Joint Stock Bank (ABBank), Agribank with SCB; Vietnam Industrial and Commercial Bank (Incombank) with Vietnam Development Bank (VDB); Asia Commercial Joint Stock Bank (ACB) and Kien Long Commercial Joint Stock Bank.
The trend to seek for strategic partners to set up joint venture banks between Vietnamese banks and foreign banks is also becoming popular. For example, BIDV has teamed up with a foreign partner to set up PUBLICBANK joint venture bank, with Laotian Bank for Foreign Trade to establish Laos-Viet Joint Venture Bank, with the Bank for Foreign Trade of Russia to form and operate Viet-Russia Joint Venture Bank. In the privatization plan of the state-run commercial banks such as Vietcombank, BIDV and Incombank, they also plan to sell stake for foreign strong and prestigious banks to form coalitions.
For multi-service and multi- sector development
Along with coalition formed between banks, there is also concurrent trend of strategic and comprehensive cooperation between banks and economic groups, corporations inside the country.
According to the cooperation deal between the Bank for Investment and Development of Vietnam with Vincom Joint Stock Company in June in Hanoi, BIDV have been the major provider of banking and non-banking services for Vincom; and Vincom has become the priority client of the bank. The two sides will form an alliance to invest in some large projects and meet the demand of diversified development of the two sides. Under the deal, BIDV and Vincom will jointly invest in joint ventures and alliances to expand their operations to different sectors with multi management models, at the same time best deploy the strength of each side and the potential of the market.
After signing the cooperation deal, the state-run BIDV and the real estate developer Vincom have jointly invested in some projects in property sector such as North Red River New Urban Zone in Dong Anh district in Hanoi, Thong Nhat Park in Hanoi, high-ranking apartment building and trade centre at 16 Ton That Thiep Street, District 1, Ho Chi Minh City.
Together with BIDV’s other cooperation agreements with Vietnam National Posts and Telecommunication Group (VNPT), Vietnam National Coal and Minerals Group (Vinacomin), Vietnam National Shipping Lines (Vinashin) and the Corporation for Financing and Promoting Technology (FPT), other domestic banks have also inked deals with groups and corporation. Incombank signed comprehensive cooperation pacts with FPT and Vietnam National Coal Industry Group, the Bank for Agriculture and Rural Development of Vietnam (Agribank) joined hands with FPT, Vietnam International Commercial Bank (VIB Bank) with PetroVietnam Financial Company (PVFC). These coalitions have brought in opportunities to domestic banks to expand their operations to other sectors, diversify services and raise their position on the market.
Opportunities embrace high risks
However, according to Doctor Le Khac Tri, deputy director of BIDV’s Training Centre, the cooperation between banks with enterprises over the past time is still unprompted action based on the goodwill of the two sides. The government has not yet established a legal foundation for a direct management and support.
"Over the past time, some problems in economic alliances have arisen, which can cause unexpected results if there is not in-time adjustment from authorities. Some economic groups expect to team up with other partners to form electricity trading company which is likely to turn the state monopoly in power sector into monopoly of some enterprises. Some groups have establish their own banks, which can result in a close financial allocation within an economic organisation, disabling control and embracing implicit risks for the safety of the national finance and monetary system, " Tri emphasized.
Tri also said that it is a worrying problem when an enterprise can ink comprehensive strategic cooperation deals with many banks at the same time. "In principle, a company is allowed to cooperate with different partners at the same time, operating in different fields, or cooperate in different fields with many enterprises operating in the same business sector. Thus, it is a matter of concern when a company concurrently signs comprehensive cooperation agreements with many banks that operate in the same sector because an enterprise is unable to wholeheartedly cooperate at the same time at every fields with many financial partners operating in the finance-monetary market in Vietnam", Tri added.
Lan Anh
Vietnamese
