MB, HDBank, VPBank could see foreign ownership cap raised to 49%

The State Bank of Vietnam (SBV) has proposed that the government should increase the foreign ownership if a bank buys another credit organization when mandated by it.

State-owned Vietcombank and private lenders MB, HDBank and VPBank have announced plans to buy out DongABank, Construction Bank, Oceanbank, and GPBank.

The SBV said two out of the three private banks want their foreign ownership cap to be increased to 49% since it would aid the takeover but not have a major impact on the banking system.

The two had accounted for 6.6% of the total assets, 5.26% of deposit and 5.5% of loans in the banking system as of June 30 last year.

The SBV said the proposal seeks to encourage and create favorable conditions for foreign investment in ailing banks.

The current foreign ownership limit in most banks at 30%, but some lenders consider it too low. TPBank wants a higher cap even though it does not plan to buy any ailing bank.

But the central bank is not in favor of increasing the cap.

There are already two venture banks (with foreign investors) and nine wholly foreign-owned banks in Vietnam, which shows the country has already extensively opened up its banking sector, it said.

Since 27 out of 31 banks in Vietnam are listed on the stock market, foreign investors could easily sell their stakes during times of economic difficulty, making management difficult, it said.

In the last five years some foreign investors, mostly European, have been selling their stakes in Vietnamese lenders or transferring them to other investors, it said.

However, if the foreign ownership cap in banks is increased to more than 30%, Vietnam’s commitments under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership forbid any rollback in future.