Vietnam's Bank Restructuring a Big Opportunity for Foreign Investors - Vietnam Briefing News
By Lorenzo Martelli
Dec. 14 – Increases in the ownership ratios that foreign strategic partners can hold at Vietnamese joint stock banks, encouragement for the merger of weak banks, and not increasing the chartered capital are the main points of the European Chamber of Commerce (EuroCham)’s proposal when talking about bank restructuring.
Decree No. 69/2007/ND-CP enacted by the Prime Minister in 2007 decided to allow a strategic foreign investor to purchase from between 15 percent to 20 percent stake in a domestic bank, which, however, must not exceed 30 percent of the chartered capital of that bank.
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According to EuroCham, removing the requirements on the share holdings of foreign partners will be the only way State Bank of Vietnam will be able to consolidate an advanced banking system in the country. Besides, the institution is also convinced that Vietnam should not ask banks to increase their chartered capital to VND5 trillion or VND10 trillion by 2012 and 2015, but it should use other tools to encourage merging weak banks.
EuroCham reckons the government of Vietnam should think of raising the ownership ratios of foreign strategic partners at local banks to 49-100 percent – a policy which many other developing economies are currently applying.
“This will help create a driving force for foreign banks to help improve domestic banks,” according to Managing Director of HSBC Sumit Dutta.
It is well known that when becoming strategic partners, foreign investors not only make capital contributions, but also provide management support, such as liquidity management, risk management and debt trading. As for the fledgling banks with weak management skills, the allowed higher ownership ratios will allow to help improve the technology and corporate governance skills.
Despite a lot of challenges, foreign investors have been flocking to Vietnam to become strategic partners of Vietnamese banks. In September 2011, Japanese Mizuho Bank purchased 15 percent of Vietcombank’s shares which have been issued and are now on circulation. The investment deal was worth US$567.3 million.
Meanwhile, IFC has invested US$182 million in VietinBank, buying 10 percent of the Vietnamese bank’s stakes.
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