Foreign firms set for joint-stock bank buy

Under a new proposal from the State Bank of Vietnam (SBV), a foreign institutional investor will be able to acquire more than 10 per cent of a domestic joint stock bank’s equity instead of the 10 per cent ceiling at present.
“We have already come up with the ratio and the State Bank Governor will ratify it,” said Kieu Huu Dung, director general of SBV Banks and Non-bank Credit Institutions Department, without giving further details on the increase.
He said the new rule would be included in a regulation on foreign banks buying stakes in the local credit joint-stock organisations that is now being drafted by the central bank. The draft is being compiled to keep abreast of changes in banking and financial operations and legal system in Vietnam for international integration. The existing document covering this area was issued in 1993 and does not fully reflect the banking situation in Vietnam today.
However, the maximum total percentage that can be bought by foreign investors still stood at 30 per cent; therefore, this would not change much for the domestic joint stock banks, with the SBV not flagging plans to increase this ratio.
Le Tan Loc, general director of joint-stock commercial Sacombank, reiterated that although the ratio increase may impact on foreign institutional investors, they would not result in any real changes for domestic banks.
“It depends on each banks’ strategy to decide the ratio of each foreign stakeholder, but in general, it won’t have a huge effect,” said Loc.
The draft is part of SBV appeal to the government to give the central bank the responsibility to allow foreign banks to buy stocks of domestic credit joint-stock organisations instead of submitting proposals to the government.
SBV said they would prefer foreign banks to be selected to take stakes in local joint stock banks rather than investors from outside the banking sector.
However, Dung expected that if the government hands these rights to the SBV, administration procedures would reduce, and facilitate foreign credit institutions involvement in Vietnam’s bank sector.
Another reason for SBV’s desire to take the reins on this issue is that from last week, the central bank now applies international banking practices in terms of debt classification, accumulated risk reserve and safe ratios in banking operations.
“These practices will make clearer credit organisations’ asset values, management and transparent financial reports, and should raise the value of shares in domestic joint-stock banks,” Dung said.
Two joint-stock commercial banks - ACB and Sacombank - have arranged for foreign banks to take up the 30 per cent stake.
Sacombank has already sold its 30 per cent stake to foreign partners: the UK-based Dragon Financial Holdings, International Financial Company, arm of the World Bank, and the ANZ.
The ACB revealed to the Saigon Times Daily last week that it favours UK-based Standard Chartered Bank to become its fourth foreign partner along with three others already holding 23.8 per cent of its shares - the IFC, Dragon Capital and Jardine Matheson Group’s Connaught Investors.
The official from the bank ACB did not comment further, but said the bank would announce its final decision for foreign banks on May 6.