The Necessity of Forming Tc-Nh Group in Ho Chi Minh City

Although the banking operation ordinance was issued, the general legal system was still incomplete, so banking management and business activities were still confusing. Joint stock commercial banks had been operating for a while, but by 1998-1999, they began to show signs of weakness, with very high bad debt levels, up to 24% of total outstanding debt (according to Vietnamese standards). In particular, some banks had almost frozen bad debt at dangerous rates, such as Nam Do 99%, Viet Hoa 65%. The insolvency situation was always present for some banks, while the scale of operations of commercial banks was also very small, making it difficult to develop services, networks and technology. Therefore, the management, operation, inspection and control activities at commercial banks were quite weak, with high risks. Some shareholders or operators disregarded the law, causing damage to the general reputation of the banking industry and the interests of depositors. Finally, some joint stock commercial banks had to merge and dissolve, such as Nam Do, Viet Hoa, and Que Do joint stock commercial banks.

However, it is from these consequences that the State Bank as well as the remaining joint stock commercial banks have drawn profound experiences in building development strategies and managing banking risks. Banks have all paid attention to establishing risk monitoring and management departments such as internal control and internal audit according to the State Bank's instructions, establishing credit and liquidity risk management councils and committees. By the end of 2011, in Ho Chi Minh City, there was the presence of almost all types of banks that the whole country had.

If we only count joint stock commercial banks with headquarters, by December 31, 2011, there were 14 joint stock commercial banks remaining in the area [22], of which some typical joint stock commercial banks that were established the earliest are as follows:

- Saigon Commercial Joint Stock Bank - SAIGONBANK

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The special feature of Saigonbank is that it is the first joint stock commercial bank established in the joint stock commercial bank system in Vietnam. Established on October 16, 1987, before the Law on Companies and the Banking Ordinance with an initial charter capital of 650 million VND and an operating period of 50 years. After more than 24 years of establishment, Saigonbank

increased its charter capital from VND650 million to VND1,412 billion in 2009. In 2010, Saigonbank offered 150 million common shares to raise its charter capital to at least VND2,460 billion by the end of 2010 and to VND3,040 billion by the end of 2011.

Currently, Saigonbank has correspondent relationships with 649 banks and branches in 75 countries and territories around the world, and is an agent for Visa, Master Card, JCB, CUP card payments and Moneygram remittances [56].

- Vietnam Export Import Commercial Joint Stock Bank - EXIMBANK

Eximbank was established on May 24, 1989 under Decision No. 140/CT of the Chairman of the Council of Ministers with the first name of Vietnam Export Import Bank, one of the first joint stock commercial banks in Vietnam.

Eximbank officially came into operation on January 17, 1990. On April 6, 1992, the Governor of the State Bank of Vietnam signed license No. 11/NH-GP allowing the Bank to operate for a period of 50 years with a registered charter capital of VND 50 billion, equivalent to USD 12.5 million under the new name of Vietnam Export Import Commercial Joint Stock Bank. To date, the charter capital has reached VND 12,355 billion. Eximbank is currently one of the banks with the largest equity in the joint stock commercial bank sector in Vietnam. Eximbank operates nationwide with its headquarters in Ho Chi Minh City and 202 branches and transaction offices nationwide. Eximbank has also established correspondent relationships with more than 750 banks in 72 countries around the world. With all its outstanding efforts, Eximbank has achieved some remarkable results in its operations in recent times [50].

- Asia Commercial Joint Stock Bank - ACB

The Ordinance on the State Bank and the Ordinance on Commercial Banks, Credit Cooperatives and Finance Companies, issued in May 1990, created a legal framework for

commercial banking activities in Vietnam. In that context, Asia Commercial Joint Stock Bank was established under License No. /NNH-GP issued by the State Bank of Vietnam on April 4, 11993, License No. 533/GP-UUB issued by the People's Committee of Ho Chi Minh City on May 13, 11993. On June 4, 11993, ACB officially came into operation.

From the very first day of operation, ACB has determined its vision to become the leading retail bank in Vietnam. In the context of Vietnam's socio-economic situation at that time, "Retail banking with target customers being individuals and small and medium enterprises" was a very new orientation for Vietnamese banks, especially a newly established bank like ACB.

The basis for building the operating strategy over the years is: high growth by creating a difference based on understanding customer needs. ACB is gradually implementing a horizontal growth strategy and diversifying services. Nationwide, ACB is actively developing a distribution channel network in the target market, urban areas of Vietnam, while researching and developing new banking products and services to provide for existing and new markets in the context of increasingly sophisticated and complex customer requirements. In addition, when conditions permit, ACB will open a representative office in the United States.

On November 1, 2006, ACB shares were officially traded at the Hanoi Stock Exchange. From 2006 to present, ACB has been one of the joint stock commercial banks with the largest charter capital in Vietnam with 9,377 billion VND at the end of 2011 [44].

- Saigon Thuong Tin Commercial Joint Stock Bank - SACOMBANK

Sacombank, established under Decision No. 05/GP-UB dated January 3, 1992 of the People's Committee of Ho Chi Minh City and operating under Decision No. 006/NH-GP dated December 5, 1991 of the State Bank of Vietnam, officially opened on December 21, 1991 on the basis of merging 4 credit institutions: Thanh Cong, Lu Gia, Tan Binh Credit Cooperatives and Go Vap District Economic Development Bank, Ho Chi Minh City. Capital

The initial charter capital was 3 billion VND. It can be said that Sacombank is one of the most pioneering joint stock commercial banks in issuing public shares, expanding foreign cooperation, accessing advanced information technology systems and modern management and administration experience to prepare for the international integration process. In particular, Sacombank is the first bank to list shares on the Vietnam Stock Exchange. By 2011, Sacombank's charter capital reached 10,740 billion VND. The network system reached 418 transaction points nationwide. This is one of the first joint stock commercial banks to develop a network system abroad such as Laos and Cambodia [55]

- Dong A Commercial Joint Stock Bank – EAB

EAB was established on July 1, 1992, with an initial charter capital of VND 20 billion. After more than 16 years of operation, EAB has affirmed itself as one of the leading joint stock commercial banks in Vietnam, especially the leading bank in implementing modern banking services, meeting the practical needs of daily life. EAB's major shareholders include: Ho Chi Minh City Party Committee Office; Phu Nhuan Jewelry Joint Stock Company (PNJ); Phu Nhuan Construction and Housing Trading Company; Viet Tien Garment Corporation; Saigon Beer - Alcohol - Beverage Corporation (SABECO); Tan Son Nhat Airport Services Company (SASCO)[48]

Currently, the operation of the main business process is standardized according to ISO standards on the basis of modern information technology. In particular, EAB has the ability to expand online services across the entire branch system, through automatic banking and electronic banking anytime, anywhere. With the motto "Popularizing banking services - Popularizing banking technology", EAB aims to become a multi-functional bank - a strong financial services group. Currently, EAB has a network of nearly 227 transaction points, with nearly 3,000 points accepting card payments nationwide. Charter capital in 2011 reached 4,500 billion VND [22].

2.1.3. The necessity of forming a TC-NH group in Ho Chi Minh City

Ho Chi Minh City is considered a major financial center because it is one of the localities with the largest relations and volume of currency transactions in the country. A dynamic and diverse locality in production, trade and service relations. A locality with a long history of foreign banking and financial institutions operating nearly a century ago. After Vietnam joined the WTO with a commitment to open up the banking sector according to a certain roadmap, banking and financial activities have grown increasingly strongly. Therefore, the trend of forming TC-NH groups of joint stock commercial banks in the area is both an objective necessity and a law of development. Through research, it has been shown that the necessity of forming banking and financial groups in the area is influenced by the following factors:

- Firstly, it is the movement according to the objective inevitable development law as well as the orientation of forming the TC-NH group of joint stock commercial banks in Ho Chi Minh City.

After joining the WTO and when the world economy was unstable due to the recent global financial crisis, the banking and finance sector became increasingly difficult. Hundreds of banks and financial companies in the US and some developed countries went bankrupt, forced to merge and receive bailout packages from the government. In the country, the competitive pressure is increasingly fierce between these credit institutions and other credit institutions, between domestic and foreign credit institutions, between credit institutions and non-credit and non-bank financial institutions in terms of interest rates, exchange rates, customers, and markets to optimize profits. Therefore, re-planning strategies and restructuring the apparatus, choosing appropriate models to meet the needs of both breadth and depth of development of joint stock commercial banks is an objective necessity, following the laws of development, especially in the context of the economy developing according to market trends and globalization as it is today.

Reality has shown that in the process of developing banks in the area, every decade there is a restructuring as an objective development movement.

to eliminate shortcomings, rebuild a new, more suitable architecture. First, it was to handle the credit cooperatives that collapsed in 1988-1989. Then, a series of joint-stock commercial banks were established and operated stably, contributing positively to monetary activities in the area, but in 1998-1999, they began to show signs of weakness, bad debts increased, forcing them to be handled. After handling, there was strong development with a high growth rate, but 10 years later, there were signs of deviation, unsustainable development due to weaknesses in organization and management, lack of transparency and bad debts exceeding the safety threshold. According to statistics of the State Bank of Vietnam, Ho Chi Minh City branch, by the end of 2011, overdue debts in the area accounted for 2.59% of total outstanding debts, but in fact, it could be many times higher than the above figure if reported honestly. Some banks have lost liquidity and are forced to violate monetary policies, causing instability and risk to the entire system, even causing chain collapse if not intervened promptly. Therefore, the formation of a banking and financial group can be considered an extremely necessary and urgent matter for local commercial banks to re-consolidate their operational capacity and continue to play an important role in economic growth.

In addition, the trend of developing into a financial-banking group also comes from the needs and desires of the local commercial banks themselves, such as ACB's orientation that by 2015, ACB will become one of the three "leading financial-banking groups in Vietnam " with total assets of over 300 trillion VND, equity of over 15,000 billion VND and profit of over 7,000 billion VND.

Or Dong A Commercial Joint Stock Bank in its 2010 annual report declared the bank's long-term vision to become the best retail bank and aim for " a model of a multi-functional, leading financial group in Vietnam".

Eximbank, one of the largest joint stock commercial banks in the area, also orients its long-term development strategy to gradually prepare conditions for "forming the multi-functional financial group Eximbank" according to an organizational and governance model in accordance with international practices.

At the General Meeting of Shareholders of Viet A Commercial Joint Stock Bank, a medium-sized bank in the area, also aims to build a multi-functional bank, diversify banking activities; strengthen and expand cooperation towards "building a strong financial group model ", striving to become one of the top 3 retail banks in Vietnam based on the criteria of efficiency - professionalism and product diversity.

Sacombank, one of the largest joint stock commercial banks in Vietnam, announced the formation of Sacombank Financial Group on May 16, 2007. This is the first private financial group with the bank playing the core role and 11 member companies, including 5 affiliated companies and 6 strategic partner member companies in the group (see Appendix 1). After 5 years of establishment, Sacombank Group has achieved some very impressive targets, which can be said to be successful when compared to the entire banking system:

+ Total assets in 2011 increased 222% compared to 2007

+ Charter capital in 2011 increased 241% compared to 2007

+ Profit after tax in 2011 increased 158% compared to 2007

- Second, the wave of foreign financial institutions buying shares, in turn becoming strategic shareholders of Vietnamese commercial banks, creates favorable conditions for improving financial capacity and scale of operations for banks.

It is no longer new that foreign banks and other financial institutions are strategic shareholders of local commercial banks. In 2005-2006, ANZ Bank of Australia spent 27 million USD to own 10% of Sacombank's shares, 20% of 2 other foreign partners, the International Finance Corporation (IFC) of the World Bank and Dragon Financial Holdings of the UK. Standard Chartered Bank of the UK bought 8.56% of ACB's shares with a total expenditure of 22 million USD, more than 21% of the foreign partner's shares.

The remaining shares belong to Connaught Investor (part of Jardine Mutheson Group) and IFC part of the WB [61]

Or Singapore's OCBC bought 10% of the shares of a non-state-owned commercial joint stock bank (VP Bank) for $15.7 million. France's BNP Paris bought 10% of the shares of the Orient Commercial Joint Stock Bank (OCB).

According to statistics by the end of 2011, some banks had strategic shareholders in local joint stock commercial banks such as Standard Chartered owning 15% of ACB's charter capital; Maybank of Malaysia holding 20% of ABB's charter capital; Deutsche bank of Germany holding 10% of Habubank's charter capital; PNB Paribas holding 20% of OCB's capital... and currently there are still many foreign securities, financial and banking groups still looking for opportunities to become major shareholders in Vietnamese joint stock commercial banks. As analyzed in chapter 1, these are favorable premises for mergers, acquisitions or annexations to gradually form groups like TC-NH groups in the world.

- Third, the establishment of affiliated companies and subsidiaries of Joint Stock Commercial Banks operating in the financial and securities sectors not only supports banking activities but also lays the foundation for the formation of TC-NH groups in the future.

From a legal perspective, the Law on Credit Institutions issued in 2010, effective from January 1, 2011, has replaced the Law on Credit Institutions No. 02/1997/QH10 and the Law amending and supplementing a number of articles of the Law on Credit Institutions No. 20/2004/QH11 [18,53]. However, a number of provisions and contents in the Law on the activities of affiliated administrative and career companies and subsidiaries and associated companies still inherit, supplement and support the activities of commercial banks.

Therefore, almost all joint stock commercial banks establish affiliated companies to expand their functions and business powers to support the bank (see table 2.3). Depending on each specific time, joint stock commercial banks establish companies with different functions.

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