Vietnam's central bank will tighten lending from mid July to individuals or institutions that exceed its bank share ownership limits as part of a push to shake up financial firms and tackle the fraud that has blighted its banking sector.
The State Bank of Vietnam (SBV) said in an announcement of new regulations on Tuesday that it would also ban those in breach, or their representatives, from becoming board members or taking key posts in banks unless their stakes were reduced.
Vietnam's banking sector has been crippled by bad debt after years of careless lending to companies, mostly state-owned enterprises, and in real estate.
Cross-ownership, vested interests and a series of high-profile banking scandals dented confidence in its clogged financial sector and has led to decisive action by the SBV to reform lenders and bring rogue bankers to book.
Improved credit growth, a pickup in the economy and property market, restructured loans and mergers among its 40-plus lenders had led to a recent revival of the sector.
Non-performing loans stood at 3.57 percent of total loans in February, a sharp fall from independent estimates of double digit bad-debt ratios three years ago.
However, five of Vietnam's 33 commercial lenders are currently in breach of the SBV's rule that limits a person's holdings at 5 percent of a bank and 15 percent for an institution, according to a report on the government's news website on Tuesday, citing central bank information.
The report also said eight commercial banks were yet to comply with a 20-percent ownership restriction for a group of one shareholder and associates, which it said risks fueling irregularities.