Preventing banks from setting foreign ownership cap could hamper their growth: analysts

By Phuong Dong, Dat Nguyen   October 22, 2020 | 08:32 pm PT
Preventing banks from setting foreign ownership cap could hamper their growth: analysts
An employee counts U.S. banknotes at a bank in Hanoi. Photo by VnExpress/Giang Huy.
The Securities Bill, which seeks to prevent public companies from fixing their own foreign ownership caps, could take away banks’ rights to choose long-term strategic partners.

Banks have traditionally been setting their foreign ownership cap at below 30 percent, the rate government stipulates for commercial banks, so that they can sell stakes to investors of their choice.

HDBank caps its foreign ownership at 21.5 percent and VPBank at 15 percent, meaning they can sell the remaining 8.5 and 15 percent to foreign investors of their choice at negotiated prices.

The Ministry of Finance and the State Securities Commission of Vietnam (SSC) propose to do away with this practice in the law set to take effect next year.

This means foreign investors could acquire up to 30 percent on the stock market.

Experts said commercial banks would lose more than they gain if this proposal becomes law.

Nguyen Thanh Long, head of the legal division of the Vietnam Banks Association, said it would have a negative impact on banks’ growth strategy and cause disruptions in their shareholder structures.

A senior manager of a HCMC-based brokerage, who asked not to be identified, said not all foreign investors have a long-term vision to grow a bank, and some are traders who only care about short-term benefits from buying low and selling high.

"Most Vietnamese banks need strategic partners who could improve their management and technology to speed up growth," he said.

The State Securities Commission of Vietnam has explained that this proposal seeks to protect the rights of individual shareholders if they want to trade with foreign buyers.

Currently banks often change their foreign ownership cap at will and this prevents Vietnamese shareholders from selling their ownership to foreigners.

Economist Nguyen Tri Hieu said banking is a sensitive industry and the proposal could have negative impacts on national financial security.

Banks’ rights to sell their stake to investors of their choice should not be curtailed, he added.

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