Vietnamese banks call for higher foreign ownership ratio ceiling

Lenders are eager to meet capital requirements.

Banks in Vietnam are pinning their hopes on a reform that will boost the ownership ratio of foreign investors in a bid to plug capital shortages, reports VietNamNet Bridge. 

Also read: Capital crunch clouds Vietnamese banks' stellar half-year profit results

Vietcombank is amongst those requesting for government permission to lift the 30% share limit for foreign investors to be able to meet capital requirements. Similarly, Vietinbank is not in a position where it can sell more shares to foreign investors as the foreign ownership ratio has hit the ceiling of 30% whilst the state’s ownership ratio has dropped to the lowest possible level of 65%.

Vietinbank's bank’s chair, Le Duc Tho, has reportedly said that the bank has even proposed to reduce the state’s ownership ratio to 51% from 65% after 2020.

Meanwhile, BIDV can still sell 30% of its shares to foreign investors but has lamented that the strict regulations could not allow them to complete the selling of their 15% shares to Korea’s Keb Hana Bank.

Also read: Vietnamese banks' capital shortfalls triggers bond issuance frenzy

The implementation of Basel II by January 1, 2020 lays bare the massive capital shortfall of almost $20b or around 9% of GDP that Vietnamese banks need to plug to meet regulatory norms, data from Fitch Ratings show. 

According to economist Vo Tri Thanh, the Ministry of Finance (MOF) may give a go ahead for state owned banks to pay dividends in shares to raise charter capital in 2019. However, he noted that the best solution in the long term is to continue to divest the state’s capital and to cancel the ownership ratio ceiling meant for foreign investors and suggested that the issuance of golden shares to investors would be a good substitute for the ceiling as these shares will not grant voting rights to investors.