The Vietnamese government has extended the possibility of ownership of shares in its credit institutions to a wider variety of high-net-worth foreign investors.

The Vietnamese government has extended the possibility of ownership of shares in its credit institutions to a wider variety of foreign investors. It issued Decree No 01/2014/ND-CP on 3rd January to lay out the provisos and procedures for share purchase, maximum shareholding levels for foreign investors, the maximum shareholding percentage for a foreign investor in a Vietnamese credit institution; and the conditions under which a Vietnamese credit institution can sell shares to foreign investors. The decree applies not only to banks but also to finance companies and finance leasing companies. An inrush of capital from wealthy investors and institutions from abroad seems to be on the cards.

"Shareholding percentage of a foreign individual and organisation shall not exceed 5% and 15% respectively of charter capital of a Vietnamese credit institution. Meanwhile, the shareholding percentage of a foreign strategic investor shall not exceed 20% of charter capital of a Vietnamese credit institution," the Ministry of Justice says on its website.

"In case of share purchase that leads the shareholding level to be 10% or more of charter capital; share purchase and becoming foreign strategic investor of a Vietnamese credit institution, the Vietnamese credit institution or foreign organisation shall make a dossier and send directly or via post, electronic network to the State bank of Vietnam for acceptance before performing transactions. Within 40 days after receiving full and valid dossier, the State Bank of Vietnam shall consider and decide on acceptance or refusal in writing for foreign organizations' share purchase," it continues.

Couched though it may be in language reminiscent of Borat, this declaration obscures evidence of a great liberalisation in Vietnam's ownership rules. Very soon, the central bank will no longer insist on approving deals unless 5% or more of the shares are being acquired, or have been acquired and there is to be another acquisition; or at least 10% of the shares are held by a foreign non-strategic investor; or if a foreign strategic investor who already holds between 10% and 20% of the shares is trying to acquire more. In this last case, a strategic acquisition of between 15% and 20% will no longer require the approval of the Vietnamese  premier, as it does today. "Foreign strategic investor," according to Article 3, means a foreign organisation which "has financial capacity and has a written commitment of competent person to bind its long-term benefit with Vietnamese credit institutions and support Vietnamese credit institutions in transferring modern technologies; developing banking products and services, raising the administration and financial capacity."

At present, Vietnam's interpretation of the phrase "foreign investor" covers entirely foreign persons and entities, i.e. organisations which are set up and operate under foreign law. When the decree takes effect, however, that will change to include branches of such foreign organisations in Vietnam, and indeed branches in foreign countries as well. It will also include closed funds, member funds, companies of securities investment which are set up and operating in Vietnam with a percentage of more than 49% of capital contributed by foreign parties.