A teller at Vietcombank's head office in Hanoi (Source: VNA) Hanoi (VNS/VNA) - A draft decree beingdeveloped by the State Securities Commission to implement the amended Law onSecurities may cause local banks to lose out on potential foreign investment.
Recently, some commercial banks have curbed foreign ownership limits in theircapital to below the bar of 30 percent set by the State Bank of Vietnam(SBV).
HCM City Development Joint Stock Commercial Bank (HDBank) on September 7 lockedthe limit of foreign capital at 21.5 percent.
The Vietnam Prosperity Joint Stock Commercial Bank (VPBank) locked the rate at15 percent, while the Vietnam Technological and Commercial Joint Stock Bank(Techcombank) limited the rate at 22.5 percent.
Under existing regulations, foreign ownership in the banking sector is limitedat 30 percent because the industry is highly sensitive and has great influenceon Vietnam’s economy.
HDBank said in a statement the foreign ownership cap would allow the bank tohave more space in its capital to sell to strategic foreign investors.
Economist Nguyen Tri Hieu told local media that such moves by banks may betemporary because they have not found any foreign investors suitable tobecoming strategic investors.
“Banks should be careful with selecting foreign strategic investors. Temporaryforeign ownership cap may be a good move for them,” he said.
According to business insiders, banks are looking for investors tofill available foreign capital space. Some foreign institutionalinvestors have made offers but the key factors to select a potential investorinclude financial status and good business strategy while banks also want toensure their shares are not undervalued.
So far, the Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), theJoint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)and Orient Commercial Joint Stock Bank (OCB) have successfully sold sharesto strategic foreign investors.
BIDV in late 2019 sold 603.3 million shares to the South Korean lender KEBHana Bank for nearly 34,000 VND (1.46 USD) per share, valuing the deal atnearly 20.3 trillion VND (872.5 million USD). OCB on June 29 transferred itsshares to the Japanese bank Aozora and the value of the dealremains unknown.
But starting 2021, banks may not have the authority to decide the rate offoreign ownership in their capital.
Under a draft decree the State Securities Commission (SSC) is developing toinstruct companies and investors to implement the amended Law on Securities,public companies may not be empowered to determine the ratio of foreignownership in their capital.
Under Decree 60/2015/NĐ-CP dated June 26, 2015, public companies not operatingin national security-related sectors such as banking, real estate andtransportation or not subject to international treaties can raise foreignownership limits to 100 percent.
Business insiders said if banks are not allowed to make their own decisions onforeign ownership limits, they may struggle in negotiations with foreigninvestors.
Foreign investors will look to buy bank shares on the stock market instead ofmaking deals privately and making long-term commitments to the development ofthe bank, they said.
Responding to the draft decree, the Vietnam Banks Association (VNBA)said there are many individual investors on the stock market and revokingbanks’ power in such an issue may allow those investors to have a negativeinfluence on banks' operation and governance.
The SBV said that banks should be authorised to make decisions on foreignownership issue as long as the decisions are in line with existing regulationsand the company charter.
The central bank said banks can decide to cap foreign ownership at a specificrate as long as the rate is below the bar of 30 percent. In addition, givingbanks this power may help make their shares more attractive to foreigninvestors.
Facing the new policy, banks have expressed worries that they may lose theopportunities to make deals with foreign investors capable of lifting thebanks’ performance.
Lawyer Tran Huu Huynh, chairman of the Vietnam International Arbitration Centre(VIAC), said companies should be able to decide the foreign ownership limits ontheir own, except those subject to international agreements.
In addition, company shareholders, especially major shareholders, should makedecisions on such matters, Huynh said.
Nguyen Duc Kien, head of the Prime Minister’s economic advisory team, saidbanks are the force that helps the central bank run its monetary policies andstabilise macroeconomic conditions, so any changes with this sector should bereviewed carefully./.
VNA
