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Legal Update

Vietnam Considers Loosening Foreign Shareholding Restrictions in Local Banks

7 October 2013
Mayer Brown JSM Legal Update

The State Bank of Vietnam (SBV) appears to recognise that foreign investors can play a key role in injecting sorely-needed capital into the beleaguered Vietnamese banking sector. A draft decree authored by the SBV (Draft Decree) would replace the current regulations governing foreign shareholding in Vietnamese commercial banks which date from 2007 – Decree 69/2007/ND-CP (Decree 69).

The Draft Decree would relax the limits on foreign shareholding in Vietnamese credit institutions in several key areas, as well as eliminate other restrictions on both investors and the target institutions which should facilitate foreign investment in the banking sector1. The Draft Decree is currently in the comment period, so when it becomes law (and the final form it will take) remains to be seen. However, there are two categories of investor which could benefit from the changes heralded by the Draft Decree: foreign institutional investors that are not credit institutions, which would be able to acquire up to 15% in a Vietnamese credit institution (as opposed to 5% under the current law); and foreign strategic investors, who would be able to acquire a 20% stake without the need to go through the time-consuming process of obtaining Prime Ministerial approval, as is required under Decree 69.

Shareholding Limit

The Draft Decree omits the express statement that "a foreign credit institution may only be a foreign strategic investor in one bank" under Decree 69. Instead, the Draft Decree stipulates that a foreign strategic investor in one credit institution cannot hold 10% or more of charter capital at any other Vietnamese credit institution. This opens the door to the possibility that a foreign investor could theoretically be a strategic investor in more than one local credit institution, though the 10% ceiling on ownership in the second entity may make this unattractive commercially.

The table below sets out key differences in shareholding ceilings between the Draft Decree and Decree 69:

Draft Decree Decree 69
  • Any foreign individual: 5%
  • Any foreign organisation: 15%
  • Any foreign strategic investor: 20%
  • Any foreign investor and its related parties: 20%
  • Total shareholding of all foreign investors and their related parties: 30% (exceptions may be given by the Prime Minister to weak credit institutions for restructuring purposes on a case by case basis)
  • Any foreign non credit institution investor and its related parties: 5%
  • Any foreign credit institution investor and its related parties: 10%
  • Any strategic investor and its related parties: 15% (or up to 20% with Prime Ministerial approval)
  • Total shareholding of all foreign investors and their related parties: 30% (no exception)

Defining Foreign Investors

Under the Draft Decree, the definition of "foreign investor" is wider than under Decree 69, and includes:

  • any organisation established under the foreign laws and all of their branches in Vietnam and other countries;
  • any organisation, closed ended fund, private fund, securities investment fund established and operated in Vietnam in which foreign shareholding is more than 49%; and
  • any foreign individual.

Under Decree 69, the definition of foreign investor does not include either branches of foreign organisations, or Vietnamese organisations with more than 49% foreign shareholding.

We would not view the widening of this definition as an attempt to further restrict foreign investment in Vietnamese credit institutions, however, but would rather consider it in the context of making the definition of foreign investor consistent with the one contained in Decision 88/2009/QD-TTg regulating purchase of shareholding by foreign investors in Vietnamese enterprises.

Capital Base Requirements for Investors Revisited

Under the Draft Decree, there is no minimum total asset base requirement for foreign investors wishing to acquire less than 10% of the charter capital in a Vietnamese credit institution.

Foreign investors who wish to acquire 10% or more of a Vietnamese credit institution must have minimum total assets of US$10 billion (if they are foreign banks, foreign financial institutions or foreign financial leasing institutions) or US$1 billion (if they are other types of organisation). Those who wish to become a foreign strategic investor are required to have minimum total assets of at least US$20 billion.

Under Decree 69, regardless of the stake of the acquisition, foreign credit institutions must meet certain criteria to invest in banks, namely, of having minimum total assets equivalent to at least US$20 billion.

Capital Base Requirements for Target Credit Institutions Removed

With regards to capital requirements for Vietnamese credit institutions to sell shares to foreign investors, the Draft Decree proposes to remove all requirements laid down under Decree 69. This will pave the way for all Vietnamese credit institutions, especially those most in need of restructuring, to benefit from future flows of foreign investment.


1 We also note that the scope of entities covered by the Draft Decree is broader than under Decree 69. Whereas Decree 69 relates exclusively to commercial banks, the Draft Decree applies to "credit institutions", which includes other entities such as finance and leasing companies.


  • David Harrison
    T +84 8 3513 0310

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