The State Bank of Vietnam (SBV) has asked the Government to allow foreign investors to buy more shares in commercial banks, acting Chief Inspector of the State Bank of Vietnam, Nguyen Huu Nghia, told Vietnam News on Aug. 7.

Nghia said the SBV's proposal will be discussed at the next meeting of the Government.

State Bank Governor Nguyen Van Binh said that increasing foreign ownership of commercial banks is a solution proposed in the scheme to restructure the credit instituion system.

However, he warned that if the task is not carried out thoroughly, it will harm the interests of the nation.

Binh said Vietnam 's economy is in difficult circumstance and banking shares are low. He said it is likely that foreign investors will rush to buy bigger stakes in commercial banks.

However, when the economy gets back on track, he said it will be impossible for domestic investors to regain their majority rights in these banks.

Binh said that restructuring the banking system will be a healthy move. After that he said there is a possibility of selling more stakes at better prices to foreign investors.

Chairman of National Financial Advisory Committee Vu Viet Ngoan said Vietnam will be able to restructure its banking system without assistance from foreign capital sources.

Some economists argued that because of the bad management of weak commercial banks, opening up to more room foreign investment should be done with care.

However, if restructuring them with domestic capital sources does not work, the State Bank should sell them to foreign investors.

Vice Chairman of Hanoi Young Business Association,Tran Anh Vuong, said many European business groups want to invest in Asia .

He said that if Vietnam loosened its cap on foreign ownership of commercial banks, it will attract huge amounts of foreign capital. Many foreign investors believe investment in Vietnam 's banking market as showing good potential.

They are also keenly watching Government moves relating to the purchase of bad debts and increasing stock available to foreign investors. They said if the Government didn't increase share sales to foreign investors, their investments in Vietnam 's banking system will be at risk.-VNA