Analysts call for further increase in bank foreign ownership limit

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Analysts call for further increase in bank foreign ownership limit

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Investors are unhappy with Vietnam for taking too small a step to open its banking system by lifting the foreign ownership for “single strategic investors” at local banks but keeping the total foreign cap, analysts said at a conference Tuesday.

The central bank February 20 allowed foreign single investors to own up to 20 percent of a local bank, up from the previous 15 percent.

But the total foreign ownership in a bank is still limited to 30 percent compared to 49 percent in other sectors.

At the conference held to discuss the Vietnamese business environment, news website Saigon Times quoted Nicolas Audier, executive board member of the European Chamber of Commerce in Vietnam, as saying that he saw no significant change as the total maximum rate stayed unchanged.

This has upset most foreign investors who have their eyes on Vietnamese banks, he said.

Investors cannot run effective banking businesses in Vietnam due to their subordinate role in management, he said, pointing out that UK-based lender Standard Chartered and the World Bank’s International Finance Corp were surprised by the news that local bank ACB, in which they had stakes, had been found a few years ago to be manipulated by a group of Vietnamese shareholders for illegal business purposes.

Audier suggested legislators consider further increasing the cap, especially given the current problems of bad debts, cross ownership, and mismanagement at banks.

He also said that ongoing mergers of weak banks without the help of foreign strategic partners would not do much to clean up bad debts in the system at all.

Non-performing loans are stymieing the banking system, which is projected to achieve a credit growth of 12-14 percent this year but has seen loans drop 1.66 percent in February end from late last year.

Remco Gaanderse from leading Dutch bank ING said Vietnam should have raised the ownership by strategic investors to up to 50-51 percent.

The economy is not really opening its doors to foreigners with the ceiling rate of 20 percent, he said, adding that local banks stand no chance of catching up with the modern administrations adopted by foreign banks.

Mac Quang Huy, managing director of local stock firm Maritime Bank Securities suggested Vietnam not be hesitant to lift the ownership limits in order to lure international investors into the local banking sector and get them to help rectify the high bad-debt ratios.

But Nguyen Manh Hung from the central bank’s Banking Strategy Institute said in fact there is still a lot of room for foreign investors since only a few banks like ABBank and state-run VietinBank have used up their ownership limit for strategic investors.

By increasing the cap by 5 percent to 20 percent, the central bank has sent the message that the system genuinely needs foreign investors, but it also needs plans to gradually open the door to them over consumption concerns, he said.

News has been circulated since late last year that the government would also raise the foreign ownership limit, currently at 49 percent, in other sectors soon.

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