New rules set for foreign investment in credit institutions
New rules set for foreign investment in credit institutions
The government has issued guidelines for the purchase of shares in Vietnamese credit institutions by foreign investors and their sale by these institutions through Decree No 01/2014/ND-CP (January 3, 2014).
The decree stipulates the regulations for buying and owning shares in these institutions by foreign investors and the terms and conditions of their sale to them by Vietnamese credit institutions. It also states that the Vietnamese dong will be the currency of transactions between foreign investors and the credit institutions.
Foreigners governed by decree
The definition of foreign investors will include foreign organisations and individuals. Foreign organisations will include organisations established and operating under the laws of a foreign country and branches of these organisations overseas or in Viet Nam and organisations, closed-ended funds, members funds or securities investment companies established and operating in Viet Nam, with a foreign capital of more than 49 per cent. Foreign individuals include individuals who do not have Vietnamese nationality.
Conditions for buying and selling shares by foreign investors and Vietnamese credit institutions
The foreign investor may buy shares of a shareholding credit institution from a shareholder or when the shareholding credit institution sells shares to increase its charter capital or sells treasury shares. The foreign investor also may purchase shares when the credit institution converts its legal form to become a shareholding credit institution.
The credit institution converting its legal form to become a shareholding credit institution must have an equitisation plan or conversion plan in which there is a plan to sell shares to foreign investors approved by the authorised agency.
The shareholding credit institution should have a plan to increase its charter capital or a plan to sell treasury shares in which the resolution to sell shares to foreign investors must be approved in a general meeting of all shareholders.
Ownership ratios
The guidelines for foreign investors' ownership ratio of charter capital in a Vietnamese credit institution are as follows:
(1) A foreign individual: not exceeding 5%
(2) A foreign organisation: not exceeding 15%
(3) A foreign strategic investor: not exceeding 20%
(4) A foreign investor and its affiliates: not exceeding 20%
(5) Total ownership of all foreign investors in a Vietnamese commercial bank: not exceeding 30%; total ownership of all foreign investors in a Vietnamese non-banking credit institution: not exceeding 49%.
The Prime Minister will make a decision for foreign investments that exceed the limits in 2, 3, and 5 on a case by case basis for the purpose of restructuring a weak credit institution or ensuring the safety of the banking system.
Capital requirements for foreign organisations purchasing shares resulting in ownership of 10 per cent or more or becoming a foreign strategic investor.
Foreign organisations that include foreign banks, finance companies or financial leasing companies must have minimum total assets of US$10 billion to gain ownership of 10 per cent or more of a Vietnamese credit institution. Other foreign organizations must have minimum charter capital of $1 billion in the year prior to the year of submitting the application to buy shares.
To become a foreign strategic investor in a Vietnamese credit institution, the foreign organisation must have minimum total assets equivalent to $20 billion in the year prior to the year of submitting the application to purchase shares, must not own 10 per cent or more of the charter capital in another credit institution in Viet Nam, and must undertake to own or has already owned 10% or more of the charter capital in the Vietnamese credit institution.
Post purchase of shares
Foreign strategic investors cannot give or sell the shares it owns in a Vietnamese credit institution to another organisation or individual for a period of five years after becoming the strategic investor as recorded in the SBV approval.
If the foreign investor is an organisation that owns 10% or more of the charter capital in a Vietnamese credit institution, it must not assign the shares it owns to another organisation or individual for a period of three years after the date of ownership of 10 per cent or more of the charter capital.
This Decree will take effect on February 20, 2014, and replace the Government Decree No 69/2007/ND-CP (April 20, 2007) on foreign investors' purchase of shareholding in Vietnamese commercial banks.
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