PM mulling greater foreign interest in banking sector

Vietnam’s prime minister has confirmed that in the near future, the country might hike the foreign investment cap on local banks to a maximum of 49 per cent.

Singaporean financial group United Overseas Bank (UOB) is prospecting to be the first to procure a bigger stake in a local partner.

Singaporean financial group United Overseas Bank (UOB) is prospecting to be the first to procure a bigger stake in a local partner.

According to a source from Global Petroleum Joint Stock Bank (GPBank), one of nine small banks set for restructuring by the State Bank of Vietnam (SBV), the shake up plans it submitted to the central bank included selling a stake to UOB.

UOB reportedly wanted to buy out GPBank completely, but regulations still limit outsiders to 20 per cent stakes. A new decree to supersede Decree 69/2007/ND-CP which is now under consideration by the government may change this, with the ownership ratio proposed at 49 per cent with the prime minister given final authority to decide on even higher stake holdings in special cases if they serve the restructuring process.

Decree 69 regulates foreign investors’ purchase of shares of Vietnamese commercial banks.

To complete the restructuring process, many banks lack available capital and will need to seek outside sources. Domestic and foreign strategic investors are preferred.

Decree 69′s amendments are expected to facilitate foreign investors’ investment into local banks as under the new draft decree foreign investors and branches will be eligible to hold over 30 per cent stake in a local banks and foreign strategic partner can purchase up to 20 per cent stake in a local bank without seeking permission from the prime minister as they are now required.

Many Vietnamese banks are already teamed up with foreign strategic partners some of them hold up to the current maximum 20 per cent. They were also required to get the prime minister’s approval.

It is believed that foreign partners can help them increase capitalisation and improve their competitiveness.

It is not only small banks who want to partner up with foreign institutions.

Ho Chi Minh City’s Sacombank is courting potential foreign partners to realise its second-phase capital increase plan slated to be completed in the fourth quarter of this year.

Sacombank is reportedly considering selling 20 per cent.

By Thuy Vinh

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