This point of view was re-confirmed in the final draft of a decree on the purchase of shares in commercial banks by foreign credit institutions that the SBV submitted to the government last week.

In this draft, regulations for bank share trading continued with little change to the rate of ownership and some other interests compared to the previous draft.

Accordingly, only banks, financial groups, investment fund management companies, and other forms of foreign credit institutions are permitted to buy shares in Vietnamese commercial banks.

The total holding for those subjects is 30%. Each investment fund management firm can buy up to 5% of shares, other subjects 10%, and strategic investors 20%.

Once commercial banks list their shares on the bourse, the sale of their stock to foreign investors must follow the current regulations governing securities. However, the total shares owned by foreign investors in any given bank must still not exceed 30%.

After banks are listed, the allowance for each foreign investor is not restricted compared to the time prior to quotation. However, stock transactions that help a foreign institution own 5-20% of the total listed shares of a bank need to have a letter of non-opposition from the SBV Governor before purchase.

If transactions leading to the ownership of over 20% of listed shares of a bank by a foreign investor, then transactions also need the agreement of the SBV Governor.

If the draft is approved by the government, it will be bad news for foreign investors hoping to have a chance to hold more bank shares, especially those who want to further infiltrate into the Vietnamese banking market.

Sacombank is the first and currently the only commercial bank listed at the HCM City Securities Trading Centre. Before going to the bourse, the bank joined hands with three foreign partners, who contribute up to 26.3% of its capital. The remaining small room for foreign investors was fulfilled after one month of transaction, since Sacombank shares were listed on July 12.

The limited participation of foreign investors in transactions of Sacombank shares is a reason that makes the price of Sacombank stock not increase highly as expectation.

Backing the view to encouraging foreign individuals and organizations to invest in Vietnamese commercial banks, the Vietnam Association of Financial Investors (VAFI) has currently petitioned the Prime Minister to expand the range of traders of banking shares and to increase room for foreign investors to 49% of the total chartered capital of a bank, with up to 30% for strategic investors.

According to VAFI, loosening control of foreign ownership will facilitate banks to attract and select suitable strategic investors. Moreover, with the participation of many more foreign investors in banks, the liquidity of bank shares will be higher. Banks can also quickly raise their chartered capital and narrow the gap with regional and international banks in terms of capital, technology and management ability.

The risk of being swallowed if the 49% bar is applied, according to VAFI, is unlikely, because under the current Enterprise Law, important decisions need agreement of at least 75% of all shareholders with voting rights.

An official from the SBV recognized the important role of foreign investors in the domestic financial and banking market. Banks will have the chance to test themselves before the domestic market is totally opened. Moreover, according to the official, the world is a common market so it is unnecessary to consider foreign of domestic banks, as long as they provide good services and benefit the Vietnamese economy. This official supports the notion of increasing options for foreign investors to 49%, or even 100% once commercial banks are listed.

Compilers of the draft had to spend more time to consider the draft before submitting it to the Prime Minister due to the varied opinions over further expansion of the banking market.

However, according to the official viewpoint of the SBV, banking operations is “a special and sensitive field” so it needs to be controlled at a certain level. Moreover, keeping room at 30% is accepted by Vietnam’s WTO partners.

Source: VNE