Vietnam plans tighter limits on stakes in banks

Vietnam’s central bank is seeking to reduce the maximum stake investors can hold in Vietnamese banks, according to a published draft document on a regulatory change that would make the sector less attractive to foreigners.

Under the proposal, published by State Bank of Vietnam on its website, individual investors would be allowed to hold up to 3per cent of the shares of a credit institution, down from 5per cent currently, reports Reuters.

The limit for institutional shareholders, like investment or pension funds, would be reduced to 10per cent from the current 15per cent, but the draft proposal did not specify how long investors would be given to reduce their holdings to comply with the lower cap.

Currently, the combined stake of foreign investors in a bank cannot exceed 30per cent, while the cap for stakes in companies in many other sectors is set at 49per cent.

The central bank’s move to change the ownership limits follows several cases of fraud, including one that led to a run on a bank that a prominent real estate tycoon controlled through nominees and his own small holding.

In February, police in Vietnam opened an investigation into transactions made by foreign investors concerning listed domestic lender Eximbank (EIB.HM) as it suspected the share value had been manipulated, according to documents seen by Reuters and sources. The outcome of that probe is unclear.

The central bank said its proposed changes would reduce risks of market manipulation.

A Bangkok-based fund manager who declined to be named as he was not authorised to talk to media, said the lower cap would impact foreign investors more as their holdings were more often closer to the current maximum.

Foreign investors have repeatedly called for the caps on ownership to be raised, and they are often cited as a reason why Vietnam is still classified.