Banks call for increase in foreign-owned shares limit

Friday, Nov 05, 2021 18:24

Tien Phong Commercial Joint Stock Bank (TPBank) headquarters in Ha Noi. — Photo courtesy of TPBank

Vietnam Banks' Association (VNBA) has been calling for an increase in the foreign-owned shares limit in Vietnamese commercial banks, starting with those who have implemented Basel II successfully and are on their way to upgrade to Basel III.

VNBA, in a recent meeting with the Central Institute for Economic Management (CIEM), has advocated increasing the foreign-owned shares limit to as much as 30 per cent.

The association said during 2017-20, the number of foreign investors in Viet Nam's 16 commercial banks have jumped from 42 to 90 with a vast majority internationally recognised and deep-pocket investors, who have been bringing their expertise to the table and helping the banks improve their ability to compete internationally and speed up the bad debt handling process.

Banking experts, however, said there was still a lot of room to grow for foreign investors as some 15 commercial banks in the country have yet to find their foreign strategic stakeholders, especially during a time when IT and digitalisation have been put at the forefront of the banking industry development agenda.

Commercial banks have voiced concerns over the challenges they faced in finding the right partnership and over the lengthy and complicated negotiation process, which has been bottlenecked by the limit on share percentage owned by foreign investors under current regulations.

Government decision 01/2014/ND-CP, which went into effect in February 2014, dictated the limit of shares owned by foreign investors in commercial banks in Viet Nam as follows: no more than 5 per cent of the bank's chartered capital for individual investors, 15 per cent for organisations and 20 per cent for strategic investors.

CIEM's experts have been supportive of the proposal, saying the current cap has been a limiting factor to the banks' ability to seek and successfully negotiate the best possible partnerships for them.

Therefore, CIEM has advised the country's banking authority to consider an increase to the limit and make necessary adjustments to current regulations that oversee the role of foreign investors in the banking sector to ensure a level playing field for all.

Nguyen Quoc Hung, secretary-general of the VNBA, urged policymakers to make changes to the country's current regulations to keep them in line with the industry's international norms and standards, as a key foundation for the development of Viet Nam's banking sector in the future. — VNS

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