The government should lift the foreign holding ratio at local commercial banks to 49 percent from the current 30 percent to help banks meet requirements in the country’s rapid integration and be able to compete with international peers, experts said.
According to finance expert Bui Quang Tin, CEO of BizLight Business School, it is necessary to increase the ratio for foreign investors as it not only helps local banks attract large amounts of capital from foreign investors, but also contributes to improving local banks’ finance capacity, governance, risk management and other standards in line with international practices.
Under current regulations, the ownership ratio of a foreign investor in a Vietnamese bank can’t exceed 20 percent of the bank’s charter capital and the total shareholding ratio of all foreign investors in the bank is capped at 30 percent.
The rise won’t have adverse impacts on the country’s finance system as with stake holding of 51 percent of the banks’ charter capital, the State still maintains its dominant rights at the banks, Tin said.
Sharing the same view, financial expert Nguyen Tri Hieu said the government and the central bank should consider the foreign holding increase to a maximum level of 49 percent as local banks are in a dire need of capital to meet the central bank’s Basel II standards while the domestic capital market is diminutive.
According to Hieu, the government should not be concerned about foreign investors’ possible manipulation of the financial market because no country has lost control of the market due to foreign capital flow.
Experts from Bao Viet Securities Company (BVSC) also said that the increase of foreign ownership limit to 49 percent is needed to help banks meet requirements in the country’s integration and be able to compete with international peers.
With the ratio increase, the State will still hold a dominant stake of 51 percent at banks and can also control banks through the Law of Credit Institutions and other legal regulations, BVSC experts said.
Foreign banks up investment
The higher foreign holding ratio at local banks are also urged in the context that foreign banks in the country are increasing charter capital and expanding their networks in Vietnam significantly in a bid to increase share in the fruitful market.
After acquiring ANZ Vietnam’s retail unit last year, Shinhan Bank, for example, has recently enlarged its investment in Vietnam, becoming the largest foreign bank in the country with US$3.3 billion in assets.
Data from the Seoul-based regulator Financial Supervisory Service show that total assets held by South Korean banks in Vietnam increased by 18.9 percent last year to US$5.7 billion. This ratio is higher than that of foreign lenders overall, whose combined total assets increased by 12.9 percent to US$42 billion during the same period. South Korean lenders‘ combined net profit in Vietnam also jumped 28.9 percent last year to US$61 million.
Earlier, other foreign banks have also invested more in their Vietnamese subsidiaries. The Bank of China (Hong Kong) Limited and NongHyup Bank, for example, have increased their charter capital from US$80 million and US$35 million to US$100 million and US$80 million, respectively.
Meanwhile, some other foreign banks, such as Malaysian’s Public Bank Vietnam Ltd and Woori Bank Vietnam Ltd, have expanded their network size in Vietnam.
Analysts say Vietnam’s growth potential and plans on loosing foreign ownership limits make it an attractive market for foreign banks.
Seo Young-soo from Kiwoom Securities told the media that Vietnam is the most desirable market among emerging countries as it has more advanced urbanization, and its market is more concentrated compared to Indonesia.