This solution has helped the management avoid cultural conflicts between the two banks, avoiding major changes that affect the bank's business performance after M&A.
For Vietnamese commercial banks, in addition to arranging and using the bank staff appropriately, with the right people for the right job, ensuring effective use of human resources, while strengthening management, inspection and supervision, promoting the initiative and flexibility of each employee, it is necessary to strengthen training and retraining of staff in a comprehensive, continuous and systematic manner to constantly improve qualifications, awareness and capacity to serve business activities well. Forms of staff training need to be researched and applied appropriately to actual conditions and ensure effectiveness, meeting the development needs of banks in the post-M&A period.
3.3. RECOMMENDATIONS
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3.3.1 Recommendations to the Government
3.3.1.1. The Government continues to maintain the stability of the macro environment.
The prerequisite for M&A activities in the banking sector in Vietnam to develop is the stable and sustainable development of the Vietnamese economy. The Government continues to maintain the stability of the macro environment, build a long-term economic development strategy, investment orientation, have a stable, long-term, and oriented economic development policy, stabilize the market, stabilize prices, and maintain a reasonable inflation rate, which is considered the top and regular task of the State. Continue to implement a prudent and flexible monetary policy, harmoniously coordinate monetary policy and fiscal policy to control inflation, stabilize the value of the Vietnamese Dong and foreign exchange reserves. Strengthen management of the banking management system, foreign exchange and gold markets, avoid risks, reduce bad debts, ensure liquidity and safety of the credit institution system. The Government also needs to closely monitor and improve the quality of analysis and forecasting of domestic and international situations. Especially the fluctuations in the world economic situation, proactively build response plans, limit the adverse impact of the crisis from outside on the financial system, banks and the entire economy. Creating a stable economic - political - social environment is a favorable condition for economic development, improving the operational capacity of commercial banks, and is the basis for M&A activities of commercial banks to promote their full effectiveness.
3.3.1.2. Perfecting the legal framework for commercial bank mergers and acquisitions
The legal environment has a significant impact on the activities of banks in general and the M&A activities of commercial banks in particular. Currently, there are still many shortcomings and overlaps in legal documents. The legal system regulating M&A activities of commercial banks needs to pay attention to the issue of protecting market competitiveness, customer interests and protecting the rights of shareholders, especially minority shareholders. The Government needs to take decisive measures to enhance the effectiveness and enforcement of the legal system. Policies and regulations must be clear and transparent, and amendments to laws must be consistent with detailed guidance procedures. The Government needs to direct relevant ministries and branches to coordinate with the State Bank to issue regulations to remove difficulties for commercial banks before, during and after the M&A process. In addition, perfecting the legal framework on debt trading activities of enterprises, the legal framework for the formation, development and management of the debt trading market, and removing difficulties and obstacles in related laws are also extremely urgent requirements; Perfecting legal regulations on securities, including researching and building a legal framework for debt securitization activities, contributing to creating a legal basis for the implementation of debt trading transactions on the market and converting bad debts into securities for public and transparent trading at the appropriate time.
The commercial banking system is an important part of the financial market, playing a vital role in the capital circulation of the economy. Therefore, the completion and development of the legal framework for the operation of the commercial banking system in general and mergers and acquisitions in particular are of particular importance in improving the efficiency of this activity in the process of restructuring the economy. A complete legal environment will create conditions for the Vietnamese banking system to operate effectively, safely and strongly. Completing the legal environment to regulate the operations of banks in a complete, synchronous and consistent manner, in accordance with international practices and standards, while still maintaining the characteristics of the Vietnamese economy, creating an open environment for Vietnamese commercial banks. At the same time, improving management effectiveness to ensure unity and synchronization in the legal system governing the operations of commercial banks. M&A activities of commercial banks are considered one of the important solutions to restructure the banking system. Therefore, it is necessary to standardize concepts and unify legal documents on mergers and acquisitions.
The revised Enterprise Law must be the main and most important legal basis for this activity with more specific and clear regulations than the current law. The regulations must ensure the basic goal of a merger and acquisition transaction is to protect the rights of shareholders, especially minority shareholders; protect the rights of creditors; protect the rights of customers.[34]
Currently in Vietnam, legal regulations related to mergers and acquisitions in general and bank mergers and acquisitions in particular are stipulated in many different legal documents such as the Enterprise Law, Investment Law, Securities Law, Competition Law, etc., but there is no unified set of laws regulating mergers and acquisitions in general. The State needs to establish unified policies for the development of the mergers and acquisitions market, the legal framework needs to be built appropriately, avoiding overlaps in the implementation process, in accordance with international practices. In bank mergers and acquisitions, the government needs to build a centralized and systematic legal regulation on commercial bank mergers and acquisitions. The Law on Credit Institutions as a specialized regulatory law also needs to have specific definitions, concepts, forms, conditions, processes and contracts for bank mergers and acquisitions. At the same time, regulations on bank acquisitions and mergers need to be appropriate and meet the conditions on controlling unfair competition, market share, related markets... to avoid monopoly and limit healthy competition in the bank market.[39]
In Vietnam today, to promote the M&A process of commercial banks to take place smoothly in accordance with international practices, it is necessary to have a separate legal framework for bank mergers and acquisitions. Ensuring that this activity takes place according to market rules, ensuring the interests of banks, especially shareholders, thereby promoting cooperation and enhancing the competitiveness of banks before being acquired by foreign banks. The legal framework for M&A activities in the banking sector needs to be completed to ensure that the M&A process of banks takes place smoothly, ensuring the basic goals of an M&A deal, which are to protect the rights of shareholders, especially minority shareholders, the rights of customers and staff working at banks participating in the deal. In the current integration trend, Vietnamese commercial banks are increasingly coordinating with each other.
to enhance competitiveness. Along with the recent acceleration of bank mergers and acquisitions, banking financial groups are also gradually being formed. The State Bank needs to develop documents regulating the organizational model of banking financial groups as well as specific criteria and regulations for the formation of banking financial groups. At the same time, the State Bank should strengthen inspection and supervision activities, and closely coordinate with other state management agencies to develop a system of appropriate assessment standards to ensure the safe operation of the financial system.
In addition, the expansion of foreign ownership room for each group of commercial banks, based on the classification of the health status of each commercial bank, also needs to be considered. For weak commercial banks, if they want to improve their competitiveness, they are almost unable to restructure themselves and find it very difficult to find partners to contribute capital, supplement high-quality human resources, and invest in technology. The expansion of room for foreign investors in weak commercial banks in Vietnam will create conditions for them to have enough authority to manage and restructure the bank, helping the bank escape its weak state, improve its financial capacity, management and human resources.
3.3.1.3. Promoting the bad debt trading market
In the process of implementing M&A of commercial banks, bad debt is one of the core issues that need to be solved. Handling bad debt for the economy requires a complete legal environment and a team of knowledgeable personnel as well as good financial analysis and management skills because bad debt trading involves the obligations and rights of many parties. Currently, debt handling in Vietnam has the Vietnam Debt Trading Company (DATC), the Vietnam Asset Management Company (VAMC), banks and debt management and asset exploitation companies (AMC) of banks conducting debt trading. The government needs to introduce clear policy mechanisms, improve and simplify administrative procedures to facilitate debt handling between both banks and businesses, promoting the bad debt trading market in Vietnam. The government also needs to facilitate the expansion of international transactions and payment instruments, and securitize debts for sale on the market to expand the effective scope of debt trading transactions. In the recent period, many bad debts transferred to VAMC were for temporary handling rather than final handling. In the process of handling bad debts
The collateral of these debts accounts for a large proportion of real estate, the legal mechanism for handling collateral still has many shortcomings. Resolution 42/2017 of the 14th National Assembly " On piloting the handling of bad debts of credit institutions " effective from August 15, 2017, stipulates a number of policies on handling bad debts and handling collateral of bad debts, expected to overcome difficulties, obstacles, and legal shortcomings that have arisen in the process of handling bad debts, collateral of credit institutions, as well as of VAMC. This is also a signal that the new debt trading market is expected to be soon established by the authorities, allowing the formation of a debt trading market according to the market mechanism, creating positive conditions for banks to promote bad debt handling. However, although some measures have been taken to address bad debts, asset quality issues of commercial banks remain a concern in the M&A process among commercial banks.
3.3.1.4. Developing information control channels
The information system in banking activities includes indicators and documents reflecting banking activities at different times and periods. Information plays a particularly important role for managers, banks, customers as well as investors. The more transparent, timely updated and realistic the information is, the more accurate the decisions will be. Among the factors determining the level of transparency and efficiency of the financial market, information always plays an important role. When there is accurate information, management agencies and shareholders can monitor the operations of commercial banks more easily and accurately, thereby detecting early problems in governance and operation. On the contrary, asymmetric information will cause great impacts on the market, especially in M&A transactions. Asymmetric information affects the decision-making of the subjects in the transaction as well as the valuation of the deal. Information transparency is an urgent need for the current Vietnamese banking system because for a long time, when the provision of inaccurate information, data distortions in financial reports, and the concealment of bad debt figures have become too familiar, public trust in the banking system and the reliability of the data provided have significantly decreased. While information is an important condition to ensure the attraction of capital resources from society into the banking system, and is the basis for management agencies to make timely and correct decisions,
Developing information control channels is extremely necessary for banking operations in general and M&A activities of commercial banks in particular .
In bank mergers and acquisitions, information is one of the most important factors.
important for a successful deal. Because in M&A activities, information about price, brand, market, market share, management... is very necessary for both the buyer and the seller, as well as other markets, the M&A market operates in a chain, if a large M&A deal, especially a bank M&A deal, is unsuccessful or has non-transparent elements, the consequences for the economy are huge, directly and severely affecting the stocks, bonds, business activities, investments... of that commercial bank in particular and a series of related partners.
If information is not strictly controlled and does not ensure transparency, it will cause many losses to the participants and cause loss of trust in economic entities. Therefore, the government needs to issue regulations on the transparent disclosure of information for all types of economic entities, clearly specifying the types of information and the time of disclosure. In recent times, Vietnam has gradually implemented the disclosure of economic data and information. Much information has been disclosed on the official website. However, in the banking and finance sector, there is currently no separate information system to store and disclose information. The storage of information can be done by management agencies, so that entities participating in M&A activities can exploit information from partners and information management agencies in a timely and complete manner, best serving the selection of partners and the implementation of a bank merger and acquisition transaction. In fact, improving trust in the banking system is considered one of the most important and also the most difficult tasks of the restructuring process. First of all, to increase public trust in the system, the State Bank needs to ensure the transparency of banking activities. The Government and the State Bank need to build a mechanism for the public to have access to complete, accurate and honest information as well as require credit institutions to comply with periodic information disclosure, only then can the operations of the banking system ensure transparency, improve public trust - the most important basis for developing banking services and attracting capital from the people. On the other hand, the State Bank also needs to take corrective measures to ensure reporting discipline for credit institutions.
Accordingly, regulations and sanctions on information disclosure should also be developed and applied throughout the system to enhance the responsibility of information disclosers. For information disclosed by commercial banks, banking inspection and supervision agencies can conduct inspections and reviews of reported information to limit the provision of inaccurate information that affects the decisions of customers as well as entities participating in M&A transactions.
3.3.1.5. Enhancing the role of deposit insurance in commercial bank M&A activities
Restructuring the banking system is the consolidation and reorganization of the operations of credit institutions to ensure the development of a modern, safe, healthy and effective banking system. In the restructuring process, the operation of the Deposit Insurance Organization plays an important role in inspecting, supervising and evaluating the current situation of banks participating in deposit insurance, participating in the process of handling bank assets, protecting the rights of depositors, creating motivation for banks to compete fairly, improving the quality and efficiency of operations. Lessons from the US show that the US Federal Deposit Insurance Corporation (FDIC) has played a very good role in deposit insurance in handling crises and improving public confidence. The FDIC plays an active role in strengthening depositors' confidence in the banking system as well as preventing the spread of collapse effects, ensuring the safety of the national financial system, contributing to maintaining the stability and development of the US financial market. FDIC is given broad powers not only to guarantee bank deposits; protect depositors; inspect and supervise the operations of financial institutions; directly handle bank failures and arrange mergers and acquisitions, but also has the function of managing and rescuing crises. The deposit insurance payment limit is also adjusted promptly for each period, helping people feel more secure when depositing money in the organization and limiting the phenomenon of massive withdrawals that occur when banks encounter problems and is the basis for the US to implement regulatory moves in the banking financial market. In Thailand, full insurance is also provided to customers depositing and borrowing money at closed banks or financial institutions, creating trust and ensuring customers' deposits in the banking system. At the same time, the deposit insurance organization also performs another important task of preventing and handling banking crises to ensure macro safety for the entire financial system during the restructuring process.
In Vietnam , on March 14, 2013, the State Bank issued Circular No. 07/2013/TT-NHNN regulating special control over credit institutions. Accordingly, Special control is when a credit institution is placed under the direct control of the State Bank of Vietnam due to the risk of insolvency, insolvency or serious violation of the law leading to the risk of unsafe operations. For cases where credit institutions are under special control and participate in the Deposit Insurance, the Deposit Insurance of Vietnam is responsible for: sending staff to participate in the Special Control Board at the request of the State Bank; within a maximum of 7 days from the date of receipt of the written request of the Banking Inspection and Supervision Agency, the State Bank branch, the Special Control Board, the Deposit Insurance of Vietnam shall give written opinions on issues related to special control over credit institutions and the decision on special control will be notified to the Deposit Insurance of Vietnam. However, in order for the Deposit Insurance Organization to best perform its functions and tasks as well as to be able to apply modern methods in line with international practices in the process of M&A of commercial banks, creating trust for depositors, the State needs to clearly define the role of the Deposit Insurance of Vietnam in the process of mergers and acquisitions as well as the handling of banks. Up to now, the Deposit Insurance of Vietnam has not been assigned the authority to handle cases of urgent bank failures or failures that have a major impact on the entire financial system and the economy. In addition, the current deposit insurance payout level in Vietnam is very low compared to other countries in the region and in the world.
In Vietnam today, to promote the process of bank mergers to take place smoothly in accordance with international practices, it is necessary to have a separate legal framework for bank mergers and acquisitions, emphasizing the role of BHDT in the process of implementing transactions, ensuring that all activities take place according to market rules, ensuring the interests of banks, especially shareholders. Thereby promoting cooperation and enhancing the competitiveness of banks before being acquired by foreign banks.
The Vietnamese government needs to pay more attention to the role of deposit insurance in bank mergers and acquisitions, using deposit insurance as a necessary tool to combat crises by giving deposit insurance organizations important functions in risk monitoring and protecting the interests of depositors in bank mergers and acquisitions. The deposit insurance agency needs to be given sufficient financial and legal conditions to be able to participate in handling failed banks. When the deposit insurance agency is strong enough,