The Government issued the Decree No. 01/2014/ND-CP to raise the ownership limit for a single foreign investor in Vietnamese banks. This decision is believed to encourage foreign investment into local banks, especially weak banks in their process of restructuring.
According to Decree 69/2007/ND-CP, the limit ownership of shares of a single foreign strategic investor and related persons to that foreign strategic investor could not exceed 15 percent. This regulation is replaced by the Decree 01/2014 which raised the limit ownership of a single foreign strategic investor at a credit institution in Vietnam to 20 percent. The ownership ratio of a foreign individual shareholder cannot exceed 5 percent of stake in a credit institution. The ownership limit of a single foreign shareholder and his/her affiliated persons in a credit institution cannot exceed 20 percent of the stake. The combined ownership of foreign investors in a commercial bank in Vietnam cannot exceed 30 percent of the stake. This ownership also counts shares foreign investors entrusted others to buy.
Notably, this decree raises the ownership limit of a single foreign investor above that of a single domestic investor which is still capped at 15 percent.
Specially, in this decree, the Government allows flexible rooms for weak banks which must be restructured to survive. The Prime Minister will decide on the share ownership ratio of a foreign institution, a foreign strategic investor, the total share ownership of foreign investors in a weak credit institution when it exceeds the common limit.
The total share ownership by foreign investors in a non-banking credit institution in Vietnam is governed by laws applicable to public companies and listed companies.
The Government provides very strict share-buying conditions for foreign institutions. If the buying sends their ownership to 10 percent or higher of the stake in a credit institution, they must satisfy five conditions: (1) Have credit ratings rated stable or equivalent or higher by prestigious credit ratings agencies; (2) have enough financial resources to purchase shares, which are determined by independent auditors in financial statements in the year preceding the year of registration of share purchases; (3) share acquisitions may not cause instability and safety of the credit system or create a monopoly or engage in unfair competition in the credit institution system; (4) Share buyers do not seriously violate the laws on currency, banking, securities and stock market in the country where they are incorporated and their head office is located within 12 months dating from the time they file purchase registration; and (5) foreign investors must have minimum total assets of US$10 billion if they are foreign banks, foreign financial companies or foreign financial leasing companies or US$1 billion or more in the year preceding the year of registration of share purchases if they are foreign investors in other sectors.
Besides, if foreign investors want to become foreign strategic investors, they must be foreign banks, foreign financial companies, or foreign financial leasing firms allowed to operate within the laws of the country where their head offices are located. Foreign financial companies will be allowed to be strategic investors only in Vietnamese financial companies, and foreign financial leasing companies only at Vietnamese finance leasing firms.
In addition, foreign strategic investors must have international financial and banking experience for at least five years and have minimum total assets of US$20 billion in the year preceding the year of registration of share purchases. They must make commitment in writing to assist Vietnamese banks in developing banking products and services, raise administration capacity and apply modern technologies. In addition, a foreign strategic investor in one credit institution cannot hold 10 percent or more of the stake in any other credit institution in Vietnam. At the same time, they must be committed to own 10 percent or more of the stake in the Vietnamese credit institution that they want to buy shares and become foreign strategic investors.
Decree 01 is believed to create more favourable conditions to attract foreign capital to restructure ailing banks. In some case, the foreign ownership may exceed the limit of 20 percent.
Bao Chau
Đăng ký: VietNam News
