The State Bank of Vietnam (SBV) has given the green light to a merger between two unlisted joint-stock commercial banks, Maritime Bank and Mekong Development Bank, according to a joint statement released by the two on Monday.

The approval was given by the central bank on March 18, according to the statement. However, the 100-word statement in Vietnamese did not offer an exact timeline for the merger. 

The go-ahead for the latest merger came after the SBV announced earlier this year that it would accelerate consolidation in an effort to reduce the number of banks and increase the efficiency of the banking system.

On March 5, SBV dispatched many senior officials of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) to take over the most important roles in the loss-making Vietnam Construction Joint Stock Commercial Bank (VNCB) after the SBV officially acquired the latter.

As announced by the Department of Organization and Personnel under the central bank, Nguyen Van Tuan, former deputy general director of Vietcombank, was appointed the new chairman of VNCB’s board of directors.

Other officials from Vietcombank, the fourth biggest bank in Vietnam by assets with VND530.22 trillion (US$24.9 billion), were also assigned to take many important positions at VNCB with a common term of five years.

SBV Deputy Governor Nguyen Phuoc Thanh once told government website chinhphu.vn the central bank was considering taking over other loss-making local financial institutions including the unlisted GP.Bank and Ocean Bank.

GP.Bank, which was said to have a 100 percent stake sold to a foreign bank at the end of last year, may be the next bank to be bought by the SBV, he said.

In the case of Ocean Bank, the central bank has required a third party to audit its assets, he said.

"If the audit reveals that Ocean Bank has negative capital, the central bank will have no choice but to take it over as we have already done to VNCB,” he said.

Regarding the possible merger between Eximbank and Nam A Bank, Thanh said the central bank advocates consolidation to merge the two banks together.

“This unity is a very good thing, because by 2018 Vietnam's banking system will have only about 20 banks,” Thanh said.

These moves followed SBV Governor Nguyen Van Binh’s bold statement at a conference in Hanoi on January 17 that the first half of 2015 will be the peak time for a restructuring scheme, resulting in more mergers and acquisitions in the banking sector.

The SBV has already set a target to firmly deal with weak banks with dim prospects of recovery and development, even forcing them to dissolve or go bankrupt.

Earlier this year, Reuters quoted a briefing note by the SBV as stating that among six to eight mergers likely in 2015, Vietcombank could merge with unlisted Saigon Bank for Industry and Trade, and Hanoi-based Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) may join with unlisted Ocean Bank.

The Bank for Investment and Development of Vietnam could take similar steps with Mekong Housing Bank and VietinBank could also merge with Petrolimex Bank, according to the note.

Similar thoughts on more M&A in banking were shared by Prime Minister Nguyen Tan Dung in a government meeting in Hanoi in late August last year, chinhphu.vn reported.

Central bank data show bad debts in the banking system edged up to 3.88 percent of total loans as of November 2014, from 3.87 percent the previous month, though independent economists believe the figure could be far higher, Reuters reported.

Like us on Facebook or follow us on Twitter to get the latest news about Vietnam!