A new government decree is set to transform Vietnam’s banking landscape, taking effect on May 19. This initiative aims to attract foreign investment and establish international partnerships for local banks. Tran Tuan Minh, the CEO of TVI, an equity research and investment firm based in Hanoi, highlighted the benefits, stating, “This will facilitate foreign involvement in revitalizing struggling banks.”

Restructuring Vietnam’s Banking Sector

The State Bank of Vietnam has been actively addressing the issues surrounding underperforming banks. In a pivotal move earlier this year, the central bank facilitated the transfer of two troubled financial institutions: Global Petroleum Bank (GPBank) and DongA Bank.

• GPBank was acquired by Vietnam Prosperity Joint Stock Commercial Bank (VPBank).
• DongA Bank was taken over by Ho Chi Minh Development Joint Stock Commercial Bank (HDBank).

These transfers are a critical component of the government’s strategy to stabilize and strengthen the banking sector.

Ownership Changes and Investor Regulations

With these changes, GPBank and DongA Bank are now completely owned by VPBank and HDBank, respectively. Additionally, it is worth noting that last year, two other struggling banks underwent similar transitions:

• Construction Bank was acquired by Bank for Foreign Trade of Vietnam (Vietcombank).
• Ocean Bank was absorbed by Military Commercial Joint Stock Bank.

However, foreign investors should be aware that there are restrictions on ownership. Specifically, they cannot hold more than 30% of shares in banks where the government possesses over 50% ownership.

This decree is a significant step in reshaping the financial landscape in Vietnam, encouraging international investment while ensuring the stability of domestic banks. As the situation develops, it will be crucial to monitor how these changes influence the local and international financial markets.