In a significant development for Vietnam's banking sector, the opportunity to establish 100% foreign-owned banks is becoming increasingly rare. For the past eight years, no new foreign banks have been granted licenses, with the last such approval going to United Overseas Bank (UOB) in 2017. This has raised concerns among potential investors about the future landscape of banking in the country.
The State Bank of Vietnam (SBV) has not issued any new licenses for foreign bank branches since 2021, when Kasikorn Bank received its approval. Currently, there are nine fully foreign-owned banks and 50 foreign bank branches operating within Vietnam. The most recent domestic joint-stock commercial bank to receive a license was BAOVIET Bank in 2018.
According to Mr. Ngo Hoang Long, Director of VPBanks Analysis Center, the likelihood of new foreign banks receiving licenses in the near future is slim. The existing regulations allow for a maximum foreign ownership of 30% in domestic banks, as stipulated in the Law on Credit Institutions 2024. However, new generation digital banks, which are set up as one-member limited liability companies, are not subject to this ownership cap, allowing foreign investors to potentially acquire 100% of their shares without requiring regulatory changes.
The transformation of several weak banks into digital banks presents a unique opportunity for foreign investors in Vietnam's financial market. As Mr. Long notes, there appears to be an "implicit commitment" from the SBV not to issue further licenses for purely digital banks in the near future, thereby preserving the value of existing digital banking entities.
Lawyer Truong Thanh Duc, Director of ANVI Law Company, emphasizes that a one-member limited liability bank can be fully owned by a single investor, which is advantageous for foreign capital inflow. This situation has sparked significant interest from foreign investors, who are eager to tap into Vietnam's growing banking sector.
Historically, Vietnam has experienced various waves of foreign banking investment. The first wave occurred before 2012 when Basel regulations on minority investments were not as stringent, allowing numerous smaller banks to attract strategic foreign investors. The second wave began in 2012, featuring significant investments from major Japanese and Korean banks targeting larger institutions like Vietcombank, VietinBank, and BIDV.
Despite the interest, foreign investors remain cautious about the 30% foreign ownership limit. Mr. Do Minh, Country Director of Warburg Pincus, argues that this ceiling is considerably lower than in other regional markets, such as India and Indonesia. He suggests that increasing the foreign ownership limit to 50% could catalyze substantial foreign investment in the Vietnamese banking sector.
As of March 13, 2025, statistics from VDSC indicate that 13 banks have foreign ownership ratios exceeding 15%, with some nearing full capacity. This limited room for new strategic foreign investors poses challenges for the growth of Vietnam's banking system.
Looking ahead, the trend of mergers and acquisitions (M&A) in the banking sector may become more active, especially regarding new generation digital banks that have emerged following compulsory transfers. Additionally, the recent amendment of Decree 69/2025/ND-CP, which modifies regulations on foreign investors purchasing shares in Vietnamese credit institutions, could provide more avenues for foreign participation.
In parallel, the Vietnamese government is preparing to launch a substantial credit package aimed at bolstering infrastructure and technology investments, worth approximately 500 trillion VND. This initiative is expected to attract further foreign investment and support economic growth amid increasing global economic uncertainties.
As Vietnam navigates these changes, the banking sector's future will depend significantly on regulatory adjustments and the willingness of foreign investors to engage in the market. The evolving landscape presents both challenges and opportunities, making it a focal point for financial analysts and investors alike.
In conclusion, while the door for establishing 100% foreign-owned banks in Vietnam is narrowing, the emergence of digital banks and potential regulatory reforms may create new pathways for foreign investment in the country's banking landscape.
