Credit institutions required to have five years of operation before merger

Credit institutions have at least five years of operation before making a merger.

The proposal was included in a recent draft circular on the restructuring of credit institutions, for which the central bank is seeking opinions from relevant agencies and individuals before approval.

The proposal also requires credit institutions to submit a feasibility plan for any mergers, have a minimum chartered capital after merger equivalent to the authorized capital and meet other ratios as defined by the laws to ensure healthy operation.

The Central People’s Credit Funds, besides meeting the above requirements, must be located in certain places defined by the SBV.

According to the central bank, has numerous credit institutions, however most of them are small. The SBV has been actively encouraging the restructuring of credit institutions with an aim to strengthen financial capacity and improve transparency in the banking system. The process was also designed with the hope to increase public trust in the domestic currency and strengthen the monetary forecasting capacity of financial institutions.

The SBV recently approved, in principal, the merger between Hanoi Building Commercial Joint Stock Bank (Habubank) and Saigon-Hanoi Commercial Joint Stock Bank (SHB). The target set was to have five to eight more banks mergers in 2012.

Late last year, Sai Gon Commercial, First Commercial Bank and Tin Nghia Commercial Bank merged under the sponsorship of the Bank for Investment and Development of Vietnam. After the merger, the charter capital of the new bank totalled nearly VND10.6 trillion ($504.7 million). The newly reconstituted Sai Gon Commercial Bank began operations of January 1.

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