All eggs in one basket

- After the recent shareholder meeting season, many banks have stepped up capital contributions and increased their ownership ratios in securities companies. Not satisfied with their position as major shareholders, banks have also aggressively bought more shares to gain a controlling percentage or 100% ownership of securities companies.

- Why this move?

- Traditional lending activities of commercial banks are under increasing competitive pressure. Banks have to keep up with credit growth limits, while profit margins are getting thinner. Meanwhile, securities brokerage and capital markets have much more lucrative profit margins. In fact, banks with securities companies have achieved impressive profits in recent times.

- Every coin has two sides. Profit is easy to understand. But what risks will be created by closely linking the bank brand with the securities company?

- The calculation of banks when extending their reach into securities is to increase income from service fees. More importantly, they will effectively exploit the customer network. The financial ecosystem of the bank will be deeper and wider to exploit long-term profits. On the other side, banks and securities companies will focus heavily on large customer groups. This is the risk. When large customers withdraw money en masse, the bank will be hurt because of the situation of putting all their eggs in one basket.

CROSSED WORDS

Source: https://www.sggp.org.vn/trung-don-mot-gio-post806533.html