Sale limits relaxed for banks

Sharing the wealth: foreign credit institutions will soon be able to buy bigger slices of Vietnam’s banking sector

The Bank and Non-Bank Credit Institutions Department of the State Bank of Vietnam (SBV) last week submitted its latest proposal on bank shares sales to foreign institutions to a central bank deputy governor for approval. The department says it will finish the last version of the decree for government approval this quarter, the last of its extensions.
With the measure, a foreign credit institution may be allowed to sit on the management boards of up to two Vietnamese joint stock commercial banks.
Foreign investment funds and other credit institutions, excluding financial corporations and bankers, are allowed to buy shares in a maximum of four banks and hold up to 10 per cent of chartered capital of a bank.
The cap on foreign institutions holding shares, equivalent to 30 per cent of a joint stock bank’s chartered capital, is still in place.
Department director Kieu Huu Dung said the new regulations were a response to foreign banks’ queries on increasing total shares available to foreign strategic partners, HSBC and Citibank in particular.
The tightened regulations aim to prevent foreign banks holding majority shares, equivalent to 25 per cent of the equitised body’s chartered capital regulated in the decree on securities and securities market issued in 2003.
SBV will also tighten control over shares bought by foreign credit institutions once a bank’s shares are on the bourse, to bring the practice in line with the latest government decision to limit shares held by foreign institutions to 49 per cent of the listed shares or 49 per cent of bank’s chartered capital.
“The central bank will cooperate with the State Securities Commission to manage investment by foreign investors in local bankers to fit the two different rates [between 30 and 49 per cent],” said Dung.
Each investor must receive a letter of endorsement from the central bank before acquiring shares on the securities market equivalent of 5-20 per cent of the total listed shares of a bank. Foreign investors must also send documents to the central bank for approval before transactions that put them at 20-49 per cent of total holdings.
“The central bank will release details on the two cases in a bid to prepare for listing of local joint stock banks,” said Dung.
Three local banks preparing to list are Sacombank, Vietcombank and MHB, of which Sacombank plans to go on the bourse in June, the first such bank in Vietnam to do so.
A foreign institution buying shares in local banks must have total assets of a minimum of $20 billion in the previous year prior to the purchase. A foreign strategic partner is an investor having sufficient financial and management capability and the commitment to support local banks with technology, training and new services.
Joint stock banks must have at least VND500 billion in chartered capital and strong finances to sell their shares to foreign credit institutions. Those with less than VND500bn in chartered capital must get approval from the bank’s governors.
Foreign credit institutions will be allowed to sell their shares after two years, and after three years if they join the management board of the local joint stock banks.




No. 759/May 1-7, 2006