On January 3 2014, the Government of Vietnam issued the much
anticipated Decree 01/2014/ND-CP (Decree 1) relating to the
purchase by foreign investors of shares in Vietnamese credit
institutions. Decree 1 replaces Decree 69/2007/ND-CP of the
Government of Vietnam, dated April 20 2007, on the purchase of
shares by foreign investors in Vietnamese commercial banks
(Decree 69). In addition to banks, the new Decree governs
finance companies and finance-leasing companies, providing more
opportunities for foreign investment.
|Phung Thi Thanh
Increased foreign ownership ceiling in
One feature of Decree 1 is the increased ceiling on foreign
shareholding permissible for different categories of foreign
investors investing in a credit institution in Vietnam. In
particular, while a foreign individual investor's shareholding
remains limited to a maximum of 5% of the charter capital of a
Vietnamese credit institution, an individual foreign
organisation may now hold up to 15% shareholding (previously
10%), and a foreign strategic investor may hold up to 20%
The total shareholding level for foreign investors remains
unchanged at 30% investment in a credit institution.
We note that in special cases, in order to implement the
restructuring of a weak credit institution, the Prime Minister
has the discretion to determine an appropriate shareholding
percentage, which may exceed the stated ceilings.
Conditions for purchasing shareholding
Under Decree 1, there are now separate sets of conditions
applicable to two distinct groups of investors. For foreign
organisations proposing to become foreign strategic investors,
they will need at least $20 billion in total assets, and at
least five years international work experience in the banking
and finance sector, as well as a written commitment and plan on
a binding, long-term relationship for the benefit of Vietnamese
credit institutions, which includes technology transfer,
product and service development, and administrative and
financial capacity improvements.
For foreign investors proposing to purchase 10% or more of a
Vietnamese credit institution, they must have total assets of
$10 billion and must be rated by international credit rating
agencies at a level equivalent to at least stable.
Moreover, in order for a Vietnamese credit institution to
qualify to sell shares to a foreign investor, it must have an
equitisation or transformation plan which includes the
intention to sell shares to foreign investors, which has been
approved by the State Bank of Vietnam and the Prime
Decree 1 came into effect on February 20 2014.
Phung Thi Thanh Thao