Early last year, BIDV planned to find foreign strategic partners, selling a 15 per cent stake to a foreign strategic partner and 10 per cent to a foreign financial investor. However, it failed in its search. — Photo tapchitaichinh

HA NOI (Biz Hub) — Domestic commercial banks are finding it hard to look for foreign strategic partners due to difficulties in the financial market and the current rules on foreign ownership limits.

Restrictions in finance and governance force domestic banks to look for support from foreign partners to help them grow rapidly in the context of rising competition from the country's integration into the world market.

The Bank for Investment and Development of Viet Nam (BIDV), for example, early last year planned to find foreign strategic partners, selling a 15 per cent stake to a foreign strategic partner and 10 per cent to a foreign financial investor. However, it failed in its search.

Another example is Military Bank. After failing to find suitable foreign strategic partners for a long time, the bank recently had to change its plans, and decided to increase stakes for foreign investors from 10 per cent to 20 per cent through an additional share issue.

The same trend was seen with VP Bank after its strategic partner - the Singapore-based Overseas Chinese Banking Corporation Limited (OCBC) - withdrew its capital from late 2013. Finding no foreign strategic partners, VP Bank had to ask its shareholders in October 2015 to approve a plan to issue a number of shares, equal to 20 per cent of the bank's capital, to overseas investors in order to raise capital to serve the bank's core businesses.

Under the current regulations, a cap on foreign holdings in a Vietnamese bank is set at 30 per cent. According to experts, the rule makes investment into domestic banks less attractive as foreign investors with low stakes have no say in the decision making process in such banks.

Besides, experts said, foreign investors are also mulling other options such as setting up independent operations rather than teaming up with local institutions such as in the case of ANZ. After divesting from Sacombank, ANZ scaled up its presence as a wholly foreign-owned bank in Viet Nam.

However, to attract foreign strategic partners, experts also recommended to domestic banks that they improve their transparency.

Deputy Director of the Central Institution for Economic Management Vo Tri Thanh said that the transparency was a key factor in attracting foreign partners.

Transparency must exist at all levels and banks must commit to it, both, in their reporting and operations, he said. — VNS