Vietnam’s legislature has approved new regulations that reduce the maximum stake institutional investors, like investment or pension funds, can hold in domestic banks, aiming to mitigate the risk of market manipulation.
The reform, effective from July this year, lowers the equity limit from 15% to 10% for institutional shareholders. This decision, supported by over 90% of National Assembly deputies, comes in the wake of a significant financial fraud case in late 2022 involving real estate tycoon Truong My Lan, accused of embezzling $12.5 billion from Saigon Joint Stock Commercial Bank (SCB).
The legislation is seen as a preventive measure, but critics argue that existing caps have not effectively prevented fraud, and the new rules may deter investments in banks amid rising bad loans and risks from a property sector crisis.
Despite calls from foreign investors to lift the 30% cap on total foreign ownership of banks, this cap remains unchanged. The reform grants additional powers to Vietnam’s central bank to intervene swiftly in cases of large cash withdrawals or signs of distress in banks, a response to the SCB scandal that resulted in a bank run and forced the central bank to take over.
