Vietnam raises foreign bank ownership limits to bolster system
Vietnam raises foreign bank ownership limits to bolster system
Vietnam will allow foreign investors to take bigger stakes in the nation’s lenders in a bid to bolster the ailing banking system.
The limit for foreign so-called strategic investors will be increased to 20 percent from 15 percent, while the cap for total foreign holdings at any local bank remains at 30 percent, according to a statement posted on the government website late yesterday. The prime minister can lift the limits in special cases to help weak banks “restructure and ensure their safety,” according to the decree, which takes effect Feb. 20.
Bank shares rose today on speculation that the steps will help Prime Minister Nguyen Tan Dung’s government reshape the financial system, which is burdened with the highest rate of bad debt in Southeast Asia. Vietnam’s undercapitalized banks are grappling with structural weaknesses that urgently need fixing, according to the International Monetary Fund.
“This is a very important decision and a great step forward,” Alan Pham, Ho Chi Minh City-based chief economist at VinaCapital Group, the nation’s largest fund manager, said by phone. “This decision will allow foreign investors to come and help local banks to recapitalize and restructure themselves.”
The benchmark VN Index (VNINDEX) of stocks climbed 0.6 percent at 12:06 p.m. local time, heading for the highest close since June 13.Vietnam Joint-Stock Commercial Bank for Industry and Trade jumped 2.5 percent, the biggest intraday gain since Oct. 16, while Joint-Stock Commercial Bank for Foreign Trade of Vietnam, or Vietcombank, rose 2.6 percent.
Make commitments
The stake limit for a non-strategic foreign institutional investor will be increased to 15 percent from the current 10 percent, according to the decree. A foreign strategic investor needs to make certain commitments including establishing a long-term partnership with a local bank, the rule showed.
Vietnam’s government forecasts the economy will grow 5.8 percent this year after a 5.42 percent expansion in 2013. That would be a seventh straight year of growth below 7 percent. In another attempt to boost economic expansion, the central bank cut a policy rate last July, after it devalued the currency in the previous month to improve the balance of payments.
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