VIETNAM Trends and Developments Contributed by: Justin Gisz, Minh Duong and Phong Nguyen, Asia Counsel Vietnam Law Company Limited
New Decree on foreign investment in Vietnamese credit institutions Vietnam’s banking sector has undergone a significant regulatory update with Decree No 69/2024/ND-CP (“Decree 69”), which provides detailed guidance on foreign investment in Vietnam-domiciled credit insti - tutions. Decree 69 refines definitions, foreign owner - ship rules, and acquisition procedures, reflecting the Vietnamese Government’s efforts to modernise the financial regulatory framework and strengthen stabil - ity in the banking sector. Key developments • Clarified investor definitions: Decree 69 defines foreign individuals as persons holding foreign nationality and foreign organisations as entities established under foreign law. It also clarifies that foreign-invested economic organisations (FIEs), entities with majority foreign ownership, are considered to constitute “foreign investors” when investing in Vietnamese credit institutions, closing an important interpretive gap under the previous Decree No 01/2014/ND-CP. • “Weak credit institutions” classification: Decree 69 formally defines “weak institutions” as those under special control, subject to mandatory transfer, or rated “weak” by the State Bank of Vietnam (the SBV). This creates a clearer basis for intervention, restructuring, and potential acquisition by stronger banks.
• Restrictions on treasury share purchases: Foreign investors may only purchase treasury shares which were repurchased before 1 January 2021, aligning with the 2019 Law on Securities. Post-2021 treas - ury share transactions are limited to narrow excep - tions such as trading error corrections or odd-lot buybacks. • Adjusted foreign ownership limits (“FOL”): The general FOL in commercial banks remains 30%, but Decree 69 introduces an exception for acquir - ing banks taking over weak institutions. Where the State holds less than 50% of the acquiring bank’s capital, the Prime Minister may approve a tempo - rary FOL increase up to 49% under a compulsory transfer plan. This is intended to attract foreign strategic investors to support system-wide restruc - turing. • Compliance and divestment obligations: If the foreign ownership cap is exceeded due to capital increases or rights offerings, the relevant foreign investors and their affiliates must reduce their holdings within six months. Until compliance is restored, foreign investors are prohibited from acquiring additional shares in the affected credit institution. • Takeaway: Decree 69 signals a more structured and transparent approach to foreign participation in the banking sector, balancing openness with prudential safeguards. It is expected to facilitate targeted recapitalisation of distressed institutions while maintaining overall sector.
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