Vietnam - Agency, experts keep arguing about securities company classification

VietNamNet Bridge – The State Securities Commission (SSC) has named the names of the six securities companies which are in big danger. However, this does not mean that the others are “safe.”

The capital adequacy ratio CAR has been used as the norm to classify securities companies and decide which companies need to be put under the special control. The minimum ratio SSC requires on securities companies is 180 percent.

However, securities companies have warned that it would be unreasonable to refer to the index to conclude about the health of the companies. Experts believe that except the 20 leading securities companies, the other 80 companies have fallen into financial difficulties.

Meanwhile, according to SSC, only 10 securities companies have CAR below 180 percent, just equal to 50 percent of the number of allegedly weak companies.

“The CAR threshold set up by SSC is not low, but the calculation method proves to be unreasonable,” said Trinh Hoai Giang, Deputy General Director of the HCM City Securities Company (HSC).

“SSC is imposing banking standards for securities companies. Therefore, there exist some problems such as the risk percentage assigned to OTC (over the counter) shares, the shares listed on the Hanoi Stock Exchange, or to long term investment deals,” Giang explained.

HSC’s CAR is 1100 percent now, or six times higher than the minimum required level. However, Giang does not think this is a good figure. “400-500 percent would be a more reasonable figure. With the CAR at 1100 percent, HSC last year nearly closed its doors to the market’s risks,” he said.

Though HSC does not intend to reserve big sum of money for securities trading, it would grab every good opportunity to buy stocks, which may lead to the CAR reduction to 700 percent and help improve the ROE index (return on equity).

The representative of a company with CAR below 180 percent said his company is not in danger and would soon escape from the special control, because the company has completed the liquidation of portfolios and debts.

“Meanwhile, many companies with CAR above 180 percent are really facing risks,” he said.

Giang went on to say that if SSC wants to eliminate the companies with low CAR, it needs to use audited finance reports, or it would have false information if referring to the reports submitted by the companies.

The increasing stock index since the beginning of the year has saved the life of many securities companies, many of which have played tricks to show the reports with high CAR. It is a big surprise to people that even the companies which take big losses and the ones with low capital also have the CAR far exceeded the required level.

The rise of the stock market has also helped alleviate the public’s annoyance about SSC’s management over securities companies.

In fact, securities companies are not commercial banks and they do not mobilize capital from the public. Therefore, once securities companies fall into difficulties, they would only influence small groups of people who are the clients of the companies.

Besides, analysts have also said that if only 10 securities companies get dissolved, this would not help much in providing more clients to the remaining companies.

Therefore, most of the securities companies and investors think that restructuring securities companies is no more an important story for now, while weak companies would have to leave the market themselves.

Nevertheless, analysts have warned that many weak companies have been making unusual effects to survive rather than eliminating themselves. No one can say for sure that the companies would not, once again, cause serious consequences to the market in the future, the thing they once did in the whole year 2011, when the market fell.

Source: Lao dong

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