Bankers suggest lifting foreign ownership ratio ceiling
While Vietcombank and VietinBank have proposed to lift the foreign ownership ratio ceiling to 35-40% to satisfy requirements of the Basel II Accord, ABBank and SCB want higher foreign ownership ratios (49% and over 50%) to speed up the restructuring process.
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Merging banks was the first choice to restructure weak credit institutions in the State Bank of Vietnam’s project in 2011-2015.
In the last five years, the merger went in two directions. First, small banks merged with big banks which have cross-ownership relations. Dai A Bank, for example, merged with HD Bank, while MDB merged with Maritime Bank.
Second, some big banks appointed by SBV admitted small banks, in exchange for benefits. Habubank was merged with SHB this way, while MHB with BIDV and PG Bank are following necessary procedures to merge with VietinBank.
However, analysts said that M&A may not be a major method for restructuring for some reasons. First, cross-ownership is no longer a problem.
Second, there are not many more banks which can admit other banks. All the three banks in which the state holds controlling stakes such as Vietcombank, BIDV and VietinBank, have admitted small banks.
Meanwhile, big joint stock banks such as MBB, VPBank, ACB and Techcombank do not show interest in M&A plan.
Some weak banks, which could not restructure, have been taken over by the State Bank in ‘zero dong deals’ (the State Bank bought them at zero dong).
While some analysts commented that the takeover deals were a creative solution, others say many problems remain unclear.
Former Governor of the State Bank Nguyen Van Binh said before the National Assembly that the purchase of banks at zero dong did not ‘cause economic losses’ to the state.
However, analysts said that in fact, the State Bank bought the commercial banks at a loss because the value of the banks were lower than zero.
The analysts also pointed out that the shareholders of Vietcombank and VietinBank, which the State Bank asked to take management of the ‘zero dong banks’, may not be satisfied with the State Bank’s decision, because banks will have to share their resources with ‘zero dong banks’.
As such, since the M&A and ‘zero dong bank’ solutions can no longer be applied, raising the foreign ownership ratio ceiling is a good alternative.
Vietnamese banks are been attractive to foreign investors. However, they still are hesitating to pour capital into the banks because of the limited foreign ownership ratio.
