Vietnam has planned to restrict issuance of new bank licenses for foreign lenders and encourage them to acquire weaker domestic banks.
The initiative, announced by Vietnam deputy prime minister Vuong Dinh Hue, aims to bolster the financial system of the country, reported Reuters.
In this regard, the agency quoted a statement posted in the government website by Hue that said: “Soon, Vietnam will strictly limit, or may stop issuing new licenses for 100-percent foreign owned banks in the country.”
It added that the step will encourage mergers and acquisitions in the banking sector and convert smaller units into larger lenders.
According to the State Bank of Vietnam, the country’s central banking institution, ten wholly-foreign-owned banks have received operating licenses including HSBC Vietnam and Standard Chartered Vietnam.
The government also added that it would divest the stakes of various banks it had bought, as part of this restructuring process.
In 2015, State Bank of Vietnam acquired three private-owned lenders namely Dai Tin Joint Stock Bank, Ocean Commercial Joint Stock Bank and Global Petro Commercial Joint Stock Bank due to poor performance.
All these three banks were bought at zero cost in order to prevent them from collapsing due to high levels of non-performing loans.
In May this year, Fitch ratings agency also raised concerns about the Vietnamese banking sector owing to under-reported non-performing loans, reported Reuters.