Although Vietnam’s financial market is a late comer and still has many limitations, financial institutions have been diversifying forms and structures of ownership. Financial services have been growing more varied. As a result, Vietnam’s finance supervisory system must improve its effectiveness to ensure transparency and stability for the entire financial sector.
Numerous gaps
Research has shown lots of limitations in Vietnam’s financial supervisory system, such as: inadequate, non-integrated legal framework, incomprehensiveness, deficiency of supervisory institutions; lack of integrated communications in supervisory system. Especially each supervisory institution implements only its tasks without cooperating with the others, which consequently makes supervision difficult. Moreover, practical application of international standards in monitoring financial markets is still inadequate, it does not focus on macro safety; cross border supervision of foreign capital financial institutions is still weak.
In fact, Vietnam’s financial supervisory system has a dispersed structure; that means each part of financial market is supervised by a specific institution. Accordingly, the banking system is monitored by the Banking Inspection and Supervision Department (directly under State Bank of Vietnam), securities market is supervised by the State Securities Commission (directly under Ministry of Finance) and insurance market is supervised by the Insurance Supervisory Authority (directly under Ministry of Finance).
The advantage of this model is to strictly monitor the financial intermediary institutions; however, it also leaves gaps in supervisory activities. Because of these gaps, Vietnam financial supervisory system is ineffective in discovery, treatment and prevention of violations and market regulations, which causes instability in financial markets, as well as Vietnam’s entire financial system.
Furthermore, regulations of Vietnam's financial supervision are defined in various documents, such as: Law of State Bank of Vietnam, Inspection Law, and Securities Law. This situation will not only lead to conflicts and overlap among regulations, but also can not ensure the consistency and continuity of financial supervision, as well as hardly investigate the responsibility of each institution which does not fulfil their tasks.
Solutions
In the "Workshop of Vietnam Finance Exhibition in 2011” themed “Restructuring Vietnam financial system: Challenges in policy and trend of integrated relation” held at the end of September, most experts assumed that the current situation of national financial supervision must be thoroughly examined. According to Dr Ha Huy Tuan, Chairman Deputy of National Financial Supervisory Commission, the basic issue is to separate functions of financial supervision from state institutions managing the financial market. Accordingly, financial supervisory authorities will become more proactive in performing their supervisory tasks, reducing administrative interference in market operation process to the minimum level. In this way, financial supervisory activities will surely be independent and active.
Currently, there is a more visible trend of merging institutions of financial management and supervision into a unified supervisory agency. However it is practically proved that there isn’t any specific model that can suit every country. Therefore, each country needs to clarify its differences and other relevant factors affecting the development of financial markets in its country, and then apply the most appropriate model. Dr Tuan agreed with this view, but he added that it was necessary to plan and build a specific strategy. In the example of Organisation for Economic Cooperation and Development countries (OECD), the merger of financial supervision institutions will take a long time: three years for Canada and more than two years for Australia and Norway.
In the near future, while maintaining the dispersed supervision model, the government soon has to issue effective solutions to consolidate and strengthen capacities of financial market supervision. These solutions must be provided legal status, authorities, human resources, and budget for training personnel, because these are problems that the National Financial Supervisory Commission has not thoroughly solved, said Dr Ha Huy Tuan.
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