Vietnam PM says may allow bigger foreign stakes in banks

Vietnam could raise its cap on foreign ownership in domestic banks to above 30 percent and keep the exchange rate stable to help boost foreign investment

An employee counts U.S. dollar bills at a bank in Ho Chi Minh City.

Vietnam could raise its cap on foreign ownership in domestic banks to above 30 percent and keep the exchange rate stable to help boost foreign investment, state television quoted the prime minister telling investors on Thursday.

"The prime minister may allow foreign investors to own more than 30 percent of the registered capital in banks," Vietnam Television cited Nguyen Xuan Phuc as telling representatives of 16 investment funds in Hong Kong.

Phuc's remarks about creating more space for foreigners in the banking sector come after Moody's Investors Service started a review towards upgrading credit ratings of seven Vietnamese banks.

Moody's said this month improvements in their credit profiles, asset quality, profitability and stability in funding and liquidity were expected.

Vietnam will not devalue its currency, the dong, to stabilise the economy and stimulate investors to pour funds in the country, Phuc was quoted as saying.

Vietnam's crowded banking sector has been shaken up in recent years, with stricter lending and debt classification, forced takeovers, and numerous bankers jailed for fraud.

A state-run asset management firm has helped whittle down non-performing loans to 2.58 percent of total loans in June 2016 from 3.25 percent in 2014, the central bank has said, having reached as high as 17 percent in 2012.

It was not the first time Vietnam has talked of raising the 30 percent cap. Phuc's predecessor, Nguyen Tan Dung, said in April 2015 that a decree was being prepared to allow that. However, it did not materialise.

Vietnam now limits foreign ownership in a domestic bank at 30 percent, with a 15-percent limit for a non-strategic investor. A strategic partner could own up to 20 percent

Foreign ownership has reached the 20-percent ceiling in five Vietnamese banks, none of which is listed.

Another five foreign banks already own stakes in five domestic lenders, including Vietcombank, VietinBank and Eximbank.

Foreign direct investment inflows into Vietnam reached an estimated $9.8 billion in the first eight months of this year, up 8.9 percent from a year ago, based on government data, following a record high $14.5 billion in 2015. 

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