Banks disagree about full foreign ownership room openness

17-Sep-2020 Intellasia | Tien Phong | 6:02 AM Print This Post

Unlike other industries, foreign ownership room at commercial banks cannot be higher than 30%. Thus, to find strategic partners, banks have had to use the right to open and close the room at an appropriate time in order to have room for long-term investment partnership to support banks to grow and get the most profitable offering price for shareholders.

Typically, HCM City Development Commercial Joint Stock Bank (HDBank) has recently announced to lock foreign ownership room at 21.5 percent (foreign investors are currently holding more than 21 percent stake of HDBank) to serve the plan with strategic partners. However, from 2021, the bank may no longer have the right to decide on foreign ownership room. The State Securities Commission (SSC) intends to give up the right to self-determine the share ownership limit for foreign investors of public businesses. This regulation makes many commercial banks worried. Representative of Military Commercial Joint Stock Bank (MBBank) proposed that the Drafting Committee should supplement a regulation to allow Shareholders Committee to decide the maximum foreign ownership ratio at public companies as before.

Explaining this regulation, SSC said that in the process of implementing the old regulation, some companies have often changed foreign ownership rooms and that has affected the rights of shareholders (unable to sell shares to foreign investors), posing inequality between companies, affecting the transparency and liquidity of shares, etc.

The Vietnam Banking Association said that banking is a special industry, the current regulation only stipulates that the ownership rate of foreign investors shall not exceed a certain limit, but not states that this limit is fixed. Accordingly, commercial banks have the right to decide a certain limit in the maximum foreign ownership room specified by the State.

According to experts, the abolition of the right to self-determine foreign ownership limit will help foreign investors to freely perform short-term buying and selling and surfing of bank stocks, helping the liquidity become better but will eliminate the big goal of commercial banks in finding and approaching long-term and strategic investors.

In fact, banks have taken full advantage of the foreign ownership room in finding strategic partners that can support banks in terms of strategy, governance, capital and help banks carry out long-term strategies. “The fact that having many short-term foreign investors in the market being banks’ shareholders may negatively influence the governance, change development orientation or cause instability to the structure of shareholders and banks’ management and administration,” the Vietnam Banking Association warned. Sharing similar view, Dr Nguyen Tri Hieu, a banking expert, the government stipulates that the maximum foreign ownership room in banks is 30%, but there is no regulation that requires banks have to use up this 30 percent shareholding limit. It is unreasonable if the draft decree requires all banks to fully open this room.

“This regulation violates the self-determination of businesses and banks. Moreover, since the banking is a sensitive industry, foreign shareholders need to be carefully selected and approved by the regulators to avoid affecting the national financial security. The openness of the “30 percent ownership room” can make it difficult to control large shareholders with foreign elements,” said Dr Hieu.


Category: Finance, Vietnam

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