Vietnam Opens Doors: New 49% Foreign Ownership Rule for Select Banks

A new decree set to take effect on May 19 marks a significant shift in Vietnam’s banking sector, aiming to attract foreign investment and enhance strategic partnerships. According to Tran Tuan Minh, CEO of TVI, a renowned equity research firm based in Hanoi, this initiative will not only open doors for more foreign capital but also invite international investors to participate in the restructuring of struggling banks.

Restructuring the Banking Landscape

In a move orchestrated by the State Bank of Vietnam, two troubled financial institutions, Global Petroleum Bank (GPBank) and DongA Bank, have been successfully transferred to stronger entities. GPBank is now fully integrated into Vietnam Prosperity Joint Stock Commercial Bank (VPBank), while DongA Bank has been acquired by Ho Chi Minh Development Joint Stock Commercial Bank (HDBank). These transfers are part of a broader strategy to revitalize weak domestic banks.

Key Takeaways:
- GPBank and DongA Bank are now 100% owned by VPBank and HDBank, respectively.
- Last year, two other distressed banks, Ocean Bank and Construction Bank, were also absorbed by Vietcombank and Military Commercial Joint Stock Bank, respectively.

Foreign Investment Limitations

While the decree paves the way for increased foreign involvement, it’s essential to note that foreign investors are restricted to holding no more than 30% of shares in banks where government ownership exceeds 50%. This regulation aims to maintain a balance between foreign investment and state control in the banking sector.

As Vietnam continues to evolve its financial landscape, these strategic moves signify a commitment to strengthening the banking infrastructure, ensuring stability, and fostering growth in the economy. The upcoming changes are set to create a more dynamic environment for both local and international investors, reinforcing Vietnam’s position as an emerging market in the financial sector.

For further insights on Vietnam’s economic strategies, explore resources from the State Bank of Vietnam and reputable financial news outlets.