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Foreign ownership at some local banks may rise to 49%

The State Bank of Vietnam (SBV) has proposed increasing the foreign ownership cap at some commercial banks from 30% to 49%.

The Governor of the SBV, the nation’s central bank, has sought the Government’s approval to amend Decree No. 01/2014/ND-CP on foreign investors’ maximum cap in Vietnamese credit institutions, in which the increase mentioned above would be applied for commercial banks with the State owning less than 50% of charter capital.

Recently, Vietcombank, MB, HDBank and VPBank announced their plans to take over four poor-performing banks: DongABank, Construction Bank, Oceanbank and GPBank.

However, Vietcombank is not eligible to increase its foreign ownership limit to 49% as the State holds over 50% of its charter capital. There is an opportunity to increase foreign ownership at MB, HDBank and VPBank.

The proposal aims to create favorable conditions for ailing credit institutions to enhance their financial capacity and facilitate the handover of poor-performing commercial banks to larger ones.

According to SBV, two banks with plans to buy poor-performing credit institutions sought approval to increase their foreign ownership to 49%.

These two banks account for nearly 6.6% of the total assets, 5.26% of the deposit market share and nearly 5.5% of the lending market share of the entire joint-stock banking system.

Therefore, it would have a major impact on Vietnam’s banking system.

SBV believes that the increase in foreign ownership limit should only be applied to banks with plans to buy poor-performing credit institutions, instead of all banks in the country.

Foreign investors may withdraw their capital from Vietnamese commercial banks amid global economic fluctuations, making it difficult to manage monetary policy and stabilize the economy.

Moreover, according to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, Vietnam could not reduce the foreign ownership limit for banks once it is raised.

Source: Saigon Times


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