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Official Gazette

Wednesday, April 1, 2020

Draft decree specifies foreign investment in the banking sector

Updated: 15:48’ - 29/03/2013

The State Bank of Vietnam has recently released a draft decree on foreign investors’ acquisition of shares from local credit institutions, raising the holding cap applicable to foreign strategic investors to 20 per cent from the current 15 per cent.

In order to be a strategic investor of a domestic credit institution, foreign investors must meet certain conditions.

They must have minimum total assets of USD 20 billion in the year preceding the year of registration for share purchase and at least five years’ experience of international operation. They must also be rated by an independent international credit rating organization as capable of performing their financial commitments and maintaining their normal operation even in a worsening economic situation. In addition, a foreign strategic investor of a local credit institution may neither act as the strategic investor, major shareholder or founding shareholder of another local credit institution nor acquire 10 per cent or more of charter capital of other credit institutions elsewhere. 

For non-strategic investors, conditions for share acquisition are lower.

In order to hold 10 per cent of the charter capital of a local bank, foreign banks, financial companies or foreign financial leasing companies must have total assets of at least USD 10 billion. If operating in other sectors, they must have a prescribed capital of USD 1 billion or more in the year preceding the year of registration for share purchase.

They would be also required to have international operation experience, be rated at a stable or high level by international credit rating organizations, and  show financial resources to purchase shares, which would be determined by independent auditors’ financial statements in the year preceding the year of registration for share purchase.

The aggregate holdings of a foreign credit institution and its affiliated persons must not exceed 15 per cent of the charter capital of a local credit institution. For foreign investors other than credit institutions, this holding rate would be limited at five per cent. However, this cap may be extended to 30 per cent in some special cases to be decided by the Prime Minister. 

“Hiking foreign bank ownership in local banks is the fastest way to scale up capital flows into the banking system as well as to apply international standards in corporate governance and risk management to local banks,” said Standard Chartered Vietnam chief executive officer Louis Taylor.

A senior officer from the central bank agreed that increasing the allowable foreign ownership was a good solution to support banking sector restructuring but it must be handled with prudence to avert doing harm to national interests.-

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