Vietnam To Open Up Banking System

Feb. 28 – In an attempt to obtain additional capital for its already debt-ridden banking system, Vietnam is further opening the door to foreign ownership of its banks.

Via a State Bank of Vietnam circular, the government announced that it has issued a draft decree that would allow the Prime Minister to permit foreigners on a case-by-case basis to obtain strategic stakes of over 30 percent in Vietnamese banks. It is stipulated that such foreign strategic partners must be a financial institution with at least US$20 billion in total assets, and also have less than a 10 percent stake in another Vietnamese bank.

The proposal also eases the rules regarding the sale of shares by local banks. The current regulations require that no more than 3 percent of total bank assets are non-performing. Currently, no Vietnamese bank comes close to meeting these requirements, and most banks are already operating in the red. The government acknowledged that non-performing loans have reached 10 percent of total bank assets.

With Vietnam having committed to join the ASEAN Link for cross-border equities trading in 2015, there is already strong interest from banks and private equity investors in Malaysia, Singapore and Thailand.