The State Bank of Vietnam has fixed the total portion of stakes held by foreign institutional and individual investors in both non-listed and listed local commercial banks at 30 per cent of a joint stock bank’s chartered capital, rather than lift it to 49 per cent as previously drafted.
An SBV draft has set foreign ownership of banks at 30 per cent
The latest change is the final draft decree compiled by the Bank and Non-Bank Credit Institutions Department of the State Bank of Vietnam (SBV). The document has been sent to the Ministry of Justice for legal vetting before submission to the government later this month.
The measure is expected to be passed early in the fourth quarter this year. The cap of 30 per cent on foreign holdings in a listed joint stock bank’s chartered capital is in place, originally intended to give the central bank greater control on the stake, and far lower than the 49-per-cent cap on foreign holdings in a company.
Department director Kieu Huu Dung said that the new regulations were a response to foreign banks’ queries on increasing total shares available to foreign strategic partners. He said foreign investors have accepted the cap because it is still enough for them once local commercial banks raise their chartered capital above VND1 trillion ($62.8 million) by 2008, a deadline required by the central bank.
“After thorough consideration, the central bank maintains its initiative,” Dung said.
“It is difficult for Vietnam to set a higher cap as most departments and agencies in the banking sector agree on keeping that figure given that it is reasonable to Vietnam’s banking sector for development,” he added.
A foreign strategic investor, excluding investment funds, may acquire up to 20 per cent of a bank’s chartered capital, doubling the previously-regulated cap.
The move aims to prevent foreign banks from holding majority shares in Vietnamese institutions, defined at 25 per cent of the body’s chartered capital in the decree on securities and the securities market issued in 2003.
Meanwhile, foreign investment funds are allowed to buy maximum 5 per cent of the bank’s chartered capital each and they may hold a total stake of up to 10 per cent.
SBV will also tighten control over shares bought by foreign credit institutions once a bank’s shares are on the bourse.
Each foreign investor must receive a letter of endorsement from the central bank before having their stake increase to 5-20 per cent of the equity of a listed bank. Foreign investors must also send documents to the central bank for approval before transactions that put them at more than 20 per cent of total holdings.
Foreign credit institutions holding convertible bonds must also ensure they do not exceed the cap after the bonds are diverted into shares. They will be able to sell shares after two years, or three years if they join the local company management board.
Local banks are also allowed to sell their shares to foreign investors once they are in the process of equitisation or in the process of increasing chartered capital. Joint stock banks must have at least VND500bn in chartered capital and strong finances to sell their shares to foreign credit institutions.
“There are a lot foreign credit institutions seeking an opportunity with small-sized banks in Vietnam and I can’t reveal their names,” said Dung.
No. 769/July 10-16, 2006