Vietnam to increase foreign shares in local banks

Vietnamese Prime Minister Nguyen Tan Dung has decided to increase ownership ratio of foreign strategic investors in local banks, which is expected to heat up banking merger and acquisition activities in the country. According to Decree 01/2014/ND-CP on buying shares of credit institutions in Vietnam of foreign investors, foreign strategic investors, from Feb. 20, 2014 when the decree takes effect, can own at most 20 percent of stake in local banks, up from the current 15 percent, said the website of the State Bank of Vietnam (SBV) on Tuesday. The ownership percentage of a foreign individual may not exceed 5 percent of a credit institution in Vietnam, and the percentage of a foreign organization may not exceed 15 percent of a credit institution, except for foreign strategic investors, said SBV. The decree regulates that total ownership of foreign investors may not exceed 30 percent of chartered capital of a commercial bank in Vietnam. In some special cases, Vietnamese prime minister can loosen the limits of foreign ownership ratio to over 30 percent in weak credit institutions. The issue of the new decree is seen as a positive move of Vietnamese government to accelerate restructuring its banking system. However, there are still worries over low transparency in Vietnam, said Le Xuan Nghia, director of institute of business development in Vietnam, an organization founded by the companies and corporations belonging to the Hanoi Union of Associations of Industry and Commerce. Though worries remain, the new decree is expected to heat up banking restructuring and merger activities in Vietnam. The rate of non-performing loans (NPL) in Vietnamese banks is at high level, therefore they have to seek ways to attract more investment, Nghia told local online newspaper VNExpress on Tuesday. The rate of NPLs in Vietnam's financial institutions rose sharply by 23.73 percent year-on-year in 2013 to 146.5 trillion Vietnamese dong (6.94 billion U.S. dollars), said a report of Vietnamese government released at a recent meeting session of Vietnamese government and localities last December.