Finally, the Government has increased the proportion of shares a strategic shareholder can hold in a domestic joint stock bank to 15% of total shares. However, the new regulation has not satisfied foreign bankers.

Decree 69, dated April 20, and stipulates that a foreign strategic investor can hold up to 15% of the total shares of a bank. In some cases, the proportion may be higher than 15%, but it must not be higher than 20%, and foreign investors must get the Government’s approval to get more than 15% of a bank’s shares.

Analysts said that with the new regulations, there is not much room for foreign investors, and that the regulations prove to be too cautious.

Flexible, but not flexible enough

Under its WTO commitments, Vietnam is allowed to put a cap on the foreign ownership ratio of domestic joint stock banks: foreign investors must not hold more than 30% of the total shares of a bank. In the near future, there will be no changes in the foreign ownership ceiling. Therefore, what foreign bankers expected was that Vietnam would raise the proportion of shares that one investor could hold in a bank.

Previously, one foreign investor could not hold more than 10% of the chartered capital of a domestic bank. However, foreign investors, when negotiating to buy shares of Vietnamese joint stock banks, all asked to buy 20% of total shares (they believe that the proportion of 10% would be raised to 20%). Citigroup even planned to buy 30% of total shares of East Asia Bank (EAB).

Domestic banks were also ready to sell another 10% of shares to foreign strategic partners as they strongly believed that the maximum foreign ownership proportion would be adjusted to 20%. Therefore, it is understandable why domestic banks and foreign partners are disappointed with the new regulations, though the new regulations bring them more opportunities.

In principle, a domestic bank can sell shares to many foreign investors, and the total shares they can sell are 30% of the chartered capital. However, most domestic banks do not seek many foreign investors; they just want one or three at maximum.

Foreign investors, when becoming the strategic partners of local banks, give support to local banks in terms of corporate governance and technology. And this explains why foreign investors do not want other foreign investors to be shareholders of the same banks. The strategic shareholders always want a share proportion big enough to have the right to get involved in the domestic bank’s operations.

Of course, foreign bankers, which manage many billions of dollars in assets, find the 10% or even 20% of foreign ownership too small.

An official said that foreign bankers once suggested raising the total foreign ownership proportion that one foreign investor can hold to 30%, equal to the proportion foreign investors in total can hold in a domestic bank. Believing that the suggestion would be approved, nearly all foreign bankers drew up roadmaps to own 30% of chartered capital of domestic banks.

Foreign or domestic partners?

Two years ago, domestic banks seemed to think that they had only one choice – selling shares to foreign investors, and in return, getting support in finance, trademark and corporate governance.

After Sacombank sold shares to three foreign shareholders (Dragon Capital, IFC, ANZ), and ACB sold to Standard Chartered Bank, experts began talking about the new wave of selling domestic shares to foreign investors.

However, what experts forecast has not happened.

Local banks seem to be not hurrying to sell shares to foreign investors at this moment. They are still carefully considering moments and partners. Moreover, they still have to improve their operations and expand their networks, so that they can sell shares dearer.

Meanwhile, several domestic banks which have signed memorandums of understanding (MoU) on selling shares, are trying to delay MoU implementation. They do not want to sell shares right at this moment – when stock prices are at low levels.

Analysts said that raising more funds to increase their chartered capital proves to be an easy task for domestic banks as idle capital among the public is profuse. What they need from foreign partners are technology and corporate governance skills.

In fact, not all domestic banks have set the goal to sell shares to foreign investors at any cost. Eximbank, for example, has sold shares worth $90mil to Kinh Do Group.

Experts have said that the Government should only set the cap on foreign ownership in a bank, not on the proportion of shares one strategic shareholder can hold.