Vietnam’s strict FDI rules prevent bank rescues

Author: Brian Yap | Published: 12 May 2017

Vietnam has put overhauling its debt-ridden banking sector top at the top of its economic agenda, but a series of foreign ownership thresholds and a largely state-run banking sector render foreign investment unattractive.

In January 2014 the Vietnamese government issued the decree on foreign acquisition of Vietnamese banks. This includes the possibility of the government allowing local banks to sell a majority stake to foreign investors on a case-by-case basis.

Despite amendments to FDI laws, Vietnam has struggled to attract the investment a number of its banks need

But, with the banking sector being dominated by local banks in which the government still holds a majority stake, counsel argue that the risk of and the reward from investing in Vietnamese banks do not completely align.

They point to many foreign investors taking a leap of faith based on prevailing valuations and the quality of management, but without having any formal...