Four months after the deadline set by the State Bank of Viet Nam (SBV) for resolving cross ownership in the banking system, the problem persists.

Cross ownership carries systemic risks and reduce the competition of the banking system — Photo vietstock.vn

In 2014, SBV announced that by February 01, 2016, commercial banks with stakes in more than two other credit institutions, or holding five per cent of stakes in a credit institution, have to reduce them to less than five per cent.

So far, only VietinBank sold 16.9 million shares of Saigonbank to ten individual subscribers on June 28 in accordance with the new regulation.

Vietcombank also announced the divestment in Orient Commercial Joint Stock Bank and SaigonBank, while Eximbank is proposing a divestment of seven per cent of its shares in Sacombank.

However, these actions are only initial steps in the divestment process stipulated by SBV's directive and the divestment rate by commercial banks is still very slow.

Currently, Vietcombank is holding 8.19 per cent of Eximbank, 4.3 per cent in Saigon Bank and 9.59 per cent in Military Bank, 5.07 per cent in OCB and 10.91 per cent in Cement Finance Joint Stock Company (CFC). BIDV owns 65 per cent in LaoViet Bank, 50 per cent of stakes in Viet Nam-Russia Bank. Eximbank holds 8.76 per cent of Sacombank.

Most banks think the slow pace of implementing the law is due to the low prices of bank shares.

A leader of a commercial bank in Ha Noi told the media that selling stakes for low prices was not fair to shareholders.

Hoang Trung Viet, deputy director of the central bank's Ha Noi branch, explained that while cross ownership could be positive in terms of improving capital, technology, experience and business management in some banks, it could also result in manipulations.

Some banking experts agree that limiting ownership in another bank to less than 5 per cent was reasonable in order to ensure a secure banking system. They warned that having a stake greater than 5 per cent could enable a group of ten shareholders to carry out a hostile takeover of a bank.

Cross ownership and cross investment among banks carry systemic risks and reduce the competition, given that a union of banks could be powerful enough to influence interest and exchange rates and cause market distortion and damage to the economy.

In addition, cross ownership and investments among banks also increase risks to financial markets.