Leading financial experts have warned domestic banks that they could suffer market losses this year as Vietnam’s commitments with the World Trade Organization (WTO) on the operation of foreign banks came into effect.
Foreign banks, which have become stronger in recent years, will now be operating on a level playing field with domestic banks.
In addition to traditional advantages like modern technology and years of experience in retail banking services, the foreign banks continue to improve their capital potential as well as human resources.
As a result, while many domestic banks have been unable to raise registered capital to the Government’s requirement of a minimum VND3 trillion, foreign banks have already increased their capital 4 or 5 times higher than their chartered capital. Some of them have charter capital 8 times higher than it was initially registered.
Dr. Le Xuan Nghia, vice chairman of the National Financial Supervision Committee, said foreign banks were holding an advantage in lending to foreign enterprises, and, in the future, they would become retail banks via credit cards.
Under Vietnam’s commitments to the WTO, from January 1, foreign bank branches in Vietnam would be treated equally to domestic commercial banks in the areas of credit limit and credit guarantee.
In addition, Vietnam-based foreign banks will be allowed to receive deposits in the dong from Vietnamese individuals.
Pham Quyet Thang, general director of the Global Petroleum JS Commercial Bank (GP Bank), said that domestic banks were in danger of having their market share drop significantly.
“Foreign banks are now paying attention even to customers who need small loans. This is quite different from before,” Thang said.
Vietnam now has 1,190 credit institutions, including 39 partly-privatized and joint stock banks, three state-owned banks, five joint venture banks, five wholly foreign-owned banks, and 49 representative offices of foreign banks.
Foreign banks current hold a combined share of 11% in the Vietnamese market. The ratio could be raised to 15% in the coming years. (VNS)
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