VietinBank is in a dire need of capital to meet Basel II standards. (Source: Viettinbank)Hanoi (VNS/VNA) - The Government should helpVietnamese banks lure capital and experience from prestigious foreign banks soas to help local firms develop sustainably, experts said.
Under a document sent to Governor of the State Bank of Vietnam Le Minh Hungthis week, the Vietnam Association of Financial Investors (VAFI) said in recentyears, State-owned and private banks in Vietnam have made progress inequitisation, listing on the stock market and bad debt reduction.
However, VAFI said, in order to make the domestic banking system truly healthyand sustainable, it was necessary to have a new legal framework to facilitatedomestic banks in attracting capital and governance experience from prestigiousforeign banks.
Good corporate governance from foreign banks would help prevent bad debts andwrongdoings in the banking system, VAFI said.
To help local banks to attract foreign capital, the Government shoulddrastically change the shareholder structure in both State-owned and privatebanks, allowing foreign banks to hold larger shares in domestic banks, VAFIsaid.
Specifically, VAFI said the foreign ownership limit at well-performing banksshould be increased from the current 30 percent to 49 percent.
A foreign bank should be allowed to hold a maximum of 40 percent of a localbank’s charter capital for at least five years. If transferred, the stake mustbe transferred to another prestigious foreign bank, VAFI said.
As for poorly-performing banks, prestigious foreign banks should be permittedto buy up to 100 percent of the banks’ charter capital. Conditions for foreignbanks to qualify for the purchase of poorly-performing banks or transferringtheir stake should be kept the same as those for well-performing banks.
According to experts, as the domestic capital market is underdeveloped,Vietnamese banks are in dire need of foreign capital to meet Basel II standardsby 2020 as required by the SBV.
Analysts at Bao Viet Securities Company (BVSC) said that to meet the Basel IIstandards by 2020 as planned by the central bank, listed commercial banks mustincrease capital by 237 trillion VND (10 billion USD) in 2018-19 if they wantedpermission for credit growth of 14-15 percent.
However, Le Duc Thuy, former chairman of the National Financial SupervisoryCommission, said that capital in banks had increased by only 2 billion USD overthe past two years.
The race to increase capital of local banks is forecast to be fiercer this yearas many banks had failed to do so last year. In early 2018, nearly 20 banksplanned to raise capital, but only a few had succeeded by the end of the year.
However, it isn’t easy for local banks to lure foreign capital due to the lowforeign ownership limit of 30 percent of the bank’s charter capital.
“The current foreign ownership limit of 30 percent does not encourage foreigninvestors to invest in Vietnamese banks, as they can’t be involved indecision-making with the holding rate,” said independent banking expert NguyenTri Hieu.
To make Vietnamese banks more attractive to foreign investors, Hieu alsosuggested the Government increase the foreign ownership limit, adding themeasure should be taken now as foreign investors are showing interest inVietnamese banks thanks to the country’s positive economic prospects.
Sharing the same view, expert Vo Tri Thanh said the Government now can permitbanks to either retain their profits or pay dividends in shares to raisecapital, but he noted it was only a short-term measure.
The best solution in the long term was reducing State ownership at banks andallowing higher foreign holdings, Thanh said.-VNS/VNA
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