Government asked to issue revised decree on foreign ownership cap at Vietnamese banks

Under a report recently submitted to the Government, the SBV said the revised decree will seek to amend and supplement a number of articles of the Government's Decree No. 01 dated January 3, 2014.

Most notably, the revised decree drafts will increase the foreign ownership limit for credit institutions that receive the compulsory transfer of weak credit institutions to 49%.

Furthermore, Decree No. 01 stipulates that the total share ownership rate of foreign investors must not exceed 30% of the charter capital of a Vietnamese credit institution.

According to details given by the SBV, four banks will receive compulsory transfer of four weak banks, with two of them being allowed to increase the foreign ownership limit to 49%, although detailed plans have yet to be released.

Vietcombank, Military Bank, HDBank, and VPBank are the four financial institutions that are reportedly known to either have already stated intentions to receive compulsory transfer, or aim to do so in the near future.

Military Bank and Vietcombank had previously intended to take over two weak credit institutions, with these plans given the green light in their shareholders’ meetings this year.

During the shareholders’ meeting last year, Luu Trung Thai, CEO of Military Bank, said the admission of a bank under the compulsory transfer programme is in line with the Government and the State’s policy on restructuring weak banks, as well as making the banking operation healthier and more sustainable. This represents a great opportunity to obtain an operational growth rate higher than the average growth rate by 1.5 to two times in the long term, as well as to improve competitiveness.

Meanwhile, with experience in the successful restructuring of credit institutions and its pioneering spirit, HDBank is getting increasingly involved in the compulsory transfer of another weak credit institution after its shareholders voted in large numbers in favour of the plan in a meeting last year.

According to SSI Securities Corporation, the mandatory transfer plan has positive long-term implications for HDBank, even for international investors increasing investment to accompany the bank.

Meanwhile, Ngo Chi Dung, chairman of VPBank, said the bank is considering the acquisition of a poor credit institution.

According to the current regulations, State-owned Vietcombank is not qualified to raise the foreign ownership cap as the State must hold more than 50% of the bank’s capital. Therefore, two of the remaining three banks MB, HDBank, and VPBank will have the opportunity to increase the cap.