Newly-approved decree on organizations and operations of branches of foreign banks, joint venture banks, and wholly owned foreign banks in Vietnam is considered as a barrier for expansion strategies of foreign banks in the country.
According to this decree, in order to obtain licenses of establishing branches, joint venture banks, wholly foreign owned banks, foreign banks are required to not seriously violate regulations on banking operations and other legal rules in their native countries within the three straight years ahead of license application.
Foreign banks must have experiences in international activities and their credit is required to be rated at such levels that are capable of fulfilling financial commitments and normal activities even when economic conditions present unfavorable moves.
In addition, foreign banks must gain the minimum capital adequacy ratio (CAR), safety ratios under international rules.
In order to attain approval for establishment of joint venture banks and wholly foreign invested banks, foreign banks must have a minimum of US$20 billion in assets in the year prior to license application.
In joint venture banks, foreign ownership is mandatory to be capped at 50 per cent of chartered capital. Other special cases will be decided by the Prime Minister.
Regarding 100 per cent foreign owned banks, capital contributors including parent banks have the right to transfer a part or the entire stake of their ownership to other capital contributors or foreign organizations. However it is required to ensure that a foreign bank always holds more than 50 per cent of chartered capital of a wholly foreign invested bank.
In addition to the aforementioned conditions, foreign banks have to abide by other regulations on structures of the executive board, the controlling board of the branch, the bank in Vietnam as well as scopes of operations.
These requirements, especially statutes on financial capacity, are seen as barriers for foreign banks who want to operate in Vietnam. Nevertheless, such barriers will expectedly limit flocks of foreign banks of small scopes and weak capacity and experiences into the country.
So far, there are 80 branches and representative offices of foreign banks in Vietnam.
Banking experts forecasted that this year, foreign banks and international finance organizations will continue to pumping more investment in Vietnamese, primarily by acquiring commercial joint stock banks, opening branches or representative offices, setting up finance companies and diversifying modern banking services.
VnEconomy
Vietnamese
