Cross-Holding Structure of Military Bank in Vietnam

INTERNATIONAL UNIVERSITY[pic 1]

Vietnam National University

INDIVIDUAL

REPORT

Corporate Governance

Identify and critically analyze a Corporate Governance issue of a chosen listed Vietnamese company (Military Bank)

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Instructor: Ms Tram Anh Duong

Name: Ta Dang Ngoc Chau

ID: BAFNIU12014

Executive summary

In this essay, the problem of cross-holding structure, which is identified in Military Bank, will be discussed. Cross-holding structure has been popular for a long time in the world. The two well-known systems of keiretsu of Japan and chaebol of Korean were considered as the magical method to help the two countries revive after wars. Nevertheless, these two systems do have weaknesses which are eventually causing the negative impacts on the overall health of Japan and Korea finance as well as the health of keiretsu and chaebol themselves. In Vietnam, the cross-holding structure has performed both good and bad impacts.  The positive side of cross-holding is to encourage and promote of international trade of Vietnam, helped bank gain experience to improve corporate governance, increase the efficiency in capital management and exploit the opportunities and potential business advantage in other market. On the other hand, the cross-holding structure encourages the corruption due to power centralization and increases the bad debts in commercial banks. Government has imposed Circular 36/2014/TT-NHNN to limit the negative impacts, yet the problems still have not been solved completely since not all the negative form of cross – holding are restricted.

Table of contents:

1. Company Introduction        4

1. Business Descriptions        4
2. Vision, Mission and Core Value        5
3. Organization Structure        6
4. Major shareholder structure        8

1. Corporate Governance Structure: Cross-holding in Banking system.        9

1. Cross-holding and popular case practice in the world        10
2. Cross-holding structure in Vietnam        13

1. Comments and Solutions        17

Appendix        18

1. Company Introduction

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1. Business Description:

With the initial goal is to meet the needs of financial services for Military Entities, on October 4th 1994, Millitary Commercial Joint Stock Bank was officially founded. With the initial charter of only 20 billion, mainly from the contribution of the founding shareholders MB bank operated with 25 staffs. Up to now, the charter capital has increased 7.300 billion with thousands shareholders and more than 4,000 employees. Total asset of MB has been constantly increasing. MB is one of the largest scale commercial banks in the Vietnam with 109 623 billion in value (31/12/2010.)

Military Bank business line relates mainly to Bank and Securities Service such as: Financial intermediaries, property management services, rental cabinets, safety deposit boxes, processing and trading gold, insurance agents,…

MB was built and developed for nearly 17 years with good reputation in the market. MB business is known as stable banking activities with high growth rates, creating the trust for customers and investors. MB brand is recognized as a dynamic bank that still retained a stable position for sustainable development, contributing to the overall success of our customers, the bank and the community. MB has the strong financial capacity which is an advantage in competitive market, follow strictly the capital safety requirement as restricted by State Bank of Vietnam, while meet the needs of the bank expansion in the future.