Vietnam may allow greater foreign ownership in local banks
The State Bank of Vietnam, the country’s central bank, considers allowing greater foreign ownership in local credit institutions, especially in those defined as weak, said SBV Deputy Governor Le Minh Hung.
The move was part of a plan on restructuring local banks between 2011 and 2015, which have already approved by the prime minister, the deputy governor said at the Vietnam Business Forum on May 29.
Hung added that the central bank is mulling over amendments to the Decree No. 69 that stipulates foreign ownership ratio in local banks.
Under the decree, the maximum foreign ownership in a single local bank is capped at 30%, with a 15% limit for a single foreign strategic investor. A foreign strategic investor can own a 20% stake in a Vietnamese bank subject to the government approval.
Foreign investors have got excited in the news that the central bank may raising the maximum proportions of stakes foreign investors can hold in a Vietnamese bank. However, there has been no information about the new cap.
Sumit Dutta, Chief Executive Officer of HSBC Vietnam, said that the higher foreign ownership ratio would not only allow foreign bankers to more quickly penetrate the Vietnamese market, but also help Vietnam ease the financial pressure in the banking system reshuffle.
Louis Taylor, CEO of Standard Chartered Vietnam, said at the forum that though the SBV turns the green light on foreign bankers, allowing hem to join the banking restructure process in Vietnam, it has not showed the ways foreign bankers can follow, especially the regulations on the maximum foreign ownership ratio.
CEO of another foreign bank in Vietnam has revealed that his bank would only consider making investment in a domestic bank, if foreign banks are allowed to hold the controlling stake ratio.
Some foreign investors, however, have said they do not care about the limit on the foreign ownership ratio. The SBV may keep the current foreign ownership ratio limitation unchanged at 20%, but it needs to give foreign bankers the dominant right in operating banks.
The most important thing that foreign investors want to have when making investment in Vietnamese banks is not the percentages of stakes they can hold, but the right to rule the banks. They may hold only 20%-30% of stakes, but they need to have the right to operate the banks.
Andy Ho, Managing Director of VinaCapital, an investment fund management company, which has invested in Eximbank, has revealed that VinaCapital would invest in other banks if there are more opportunities.
Vietnam, which has fully opened its banking market to foreign players since early 2011, has 11 foreign banks owning between 10% and 20% stakes in local joint-stock commercial banks.
Currently, only HSBC Holdings Plc, Malayan Banking Bhd, and Societe Generale have a 20% stake each in Techcombank, ABBank, and SeaBank, respectively.