Cross-shareholding issue in Vietnam's banking industry: A review of the development and shortcomings of the regulatory framework

For the past 10 years, the world has been in the midst of a financial meltdown which is considered to be one of the worst in history. Vietnam is no exception and since early 2009 has been facing a slew of economic problems. The property market crash, frozen securities market, and the non performing loan crisis illustrate the downturn in the financial industry. The sophisticated cross-shareholding among banks and firms are among critical structural problems of Vietnam’s banking system. The Vietnamese government has been conducting projects of banking restructure and legal reform to supervise the cross-shareholding in banking industry more effectively and restrict its development. The policy-makers thus are in tremendous need of suggestions and recommendations for the reform of Vietnam’s banking regulatory framework including the restriction and supervision of cross-shareholding. This paper aims at contributing an analysis on cross-shareholding issue in the banking industry and development of the respective regulations against cross-shareholding, and proposals for the improvement of regulations on cross-shareholding and policies for unwinding cross-shareholding among banks and corporations.