The government should reduce its ownership in state-controlled commercial banks to as low as 51% from the minimum holding of 65% presently, giving them more freedom in restructuring themselves, chairman Nghiem Xuan Thanh of Vietcombank, the fourth largest lender in Vietnam by assets, has suggested.
Mr. Thanh made the proposal at a communist party meeting of centrally-run enterprises on Wednesday in the context that the government is striving to revamp the overcrowded and bad debt-plagued banking system after more than a decade of overheated growth.
The Hanoi-based bank’s chief also proposed the government speed up the restructuring process of state-owned enterprises, making them more financially capable and competitive, helping banks tackle spoiled loans and boost lending, the Vietnam Economic Times (VnEconomy.vn) reported.
Mr. Thanh, a former central bank official, went further, suggesting building up the banking industry to form sizable banks and facilitate mergers and acquisitions.
He stressed that Vietcombank, the largest ticker on the Hochiminh Stock Exchange by market capitalization as of October 15, was ready to roll out those proposals.
The government now wholly owns Agribank, the largest lender by assets in the country, 95.28% in Bank for Investment and Development (BIDV), 77.11% in Vietcombank, which stands for Bank for Foreign Trade of Vietnam, and 64.46% in Vietnam Bank for Industry and Trade (VietinBank).
The four banks held a 45.94% share in the mobilization market, a 50.35% share in the loan market, and accounted for 45.75% of total assets of the local banking industry as of August 2015, according to VnEconomy.vn.
Last year, the government issued a decision regulating its ownership in state-owned commercial banks to be at least at 65%.
As the government sees banking as the “vein of the economy”, some industry analysts have commented that the Vietnamese government would not easily give up control of the banking industry. The foreign ownership in local banks remains capped at 30% although the lid on foreign holdings in a number of businesses has been loosened.
The government is considering lifting the foreign ownership limit in the banking system and raising the cap beyond 30% currently in weak banks on a case-by-case basis to lure foreign investors and quicken the banking overhaul.
The State Bank of Vietnam has planned to reduce the number of commercial banks by a half to 15-17 by 2017 via consolidation or mergers. Since the start of this year, it has approved a series of merger among banks and financial firms after no deals were allowed in 2014.