Hanoi (VNS/VNA) - Struggling to attract domestic funds, banks are rushing to seekforeign capital ahead of the central bank’s tightened policy on medium- andlong-term lending early next year.

According to the State Bank of Vietnam (SBV) regulations, short-term funds formedium- and long-term loans at banks will be reduced from the current 45 percent to 40 percent from January 1, 2019.

Banks will also need more capital to meet a capital adequacy ratio (CAR) of 8percent in 2020 as per the SBV’s Basel II norms.

To prepare for the regulations, besides increasing interest rates for long-termdeposits to attract depositors, banks also have to find capital from foreignpartners.

Saigon Hanoi Commercial Joint Stock Bank (SHB) recently took a 20 million USD loan for a term of five years from Russia’s International Investment Bank and a20 million EUR loan under a credit agreement framework with RussianInternational Bank for Economic Cooperation.

According to SHB, the loans will help the bank supplement its medium- andlong-term capital funding for Vietnam’s infrastructure projects, and projectsinvolved small and medium enterprises and green energy. The loans will alsohelp SHB perform international payment transactions, trade finance,import-export transactions between IBEC member countries, foreign exchangeactivities and capital mobilisation.

Earlier, Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) alsoreceived a loan worth 50 million USD from JPMorgan Chase for a term of threeyears. This loan will help the bank supplement its medium- and long-termforeign capital source and meet the needs for foreign loans of domesticbusinesses.

Tien Phong Commercial Joint Stock Bank (TPBank) also signed a long-term loancontract worth up to 100 million USD with the International Finance Corporation(IFC). Along with financing, IFC will act as an advisor for TPBank in bankinggovernance, risk management and development capacity building.

Orient Commercial Joint Stock Bank (OCB) is also expected to soon borrowforeign capital, as there is information that IFC is considering granting aloan of up to 100 million USD to the bank.

Besides foreign capital loans, banks also expect the Government to increase theforeign ownership ratio to meet their dire need of capital.  

Under current regulations, the ownership ratio of a foreign investor in aVietnamese bank can’t exceed 20 per cent of the bank’s charter capital and thetotal shareholding ratio of all foreign investors in the bank can’t exceed 30percent.

According to banks, this is the biggest obstacle in attracting foreign capitaland some banks have used up this limit. Therefore, many banks have asked theGovernment to increase the ratio to 49 percent to help them increase capital.

Experts have agreed with the proposal, saying banks need capital to operatemore healthily and better serve society and the economy.

Financial expert Nguyen Tri Hieu said the Government and SBV should considerthe banks’ proposal as the domestic capital market is very limited.

Due to the difficulties of the banking sector, domestic investors are no longerwilling to invest capital, Hieu said, proposing the SBV allow foreign investorsto invest in Vietnamese banks at a maximum level of 49 percent.

According to Hieu, the Government should not be concerned that foreigninvestors may manipulate the financial market because no country has seen aloss of control of the market due to foreign capital flow.

Agreeing, experts from Bao Viet Securities Company (BVSC) said that theincrease of foreign ownership limit to 49 per cent is needed to help banks meetrequirements in the country’s integration and be able to compete withinternational peers.

With the ratio increase, the State would still hold a dominant stake of 51percent at banks and can also control banks through the Law of CreditInstitutions and other legal regulations, BVSC experts said, adding the risewould not only help Vietnam meet commitments in joining the internationaleconomic integration but also attract large capital of foreign investors tolocal banks. – VNS/VNA