A new bank would be required to hold VND5 trillion (US$316 million) for its establishment, higher than the chartered capital of any commercial joint stock banks, according to a draft decree of the central bank, which, some bankers said, in a bid to restrict the establishment of new banks in Vietnam.
This rule is defined in the fifth draft decree on organizing and managing commercial banks which the central bank is asking opinions on from state agencies and miniseries.
According to Kieu Huu Dung, director of the central bank’s Bank and Non-Bank Financial Institution Department, there are now two different opinions on establishing new banks.
Some say that Vietnam should allow the establishment of more banks, saying, the country in the near future would have to permit foreign banks to set up subsidiaries in Vietnam under integration commitments.
Others asserted that the country should be cautious in allowing new banks to set up because existing banks are undergoing reforms to promote their competitiveness capacity. In addition, over the last time, that banks have massively expanded their networks leading to tough competitions against each others in the market. Establishing new banks would make competitions even tougher, particularly competition in interest rates and loosening conditions to clients. Accordingly, local banks would be likely to have to accept to engage in venture trading activities and risks.
However more importantly, Dung was worried about management capacity when opening more rooms for domestic banks.
Many bankers also agreed with such an opinion on restricting the establishment of new banks.
In fact, restricting the establishment of new banks has been long mentioned. Many bankers as well as experts have ever frankly said that Vietnam is both short of and abundant with banks. Saying “abundance” is referred to the number of banks. However Vietnamese banks lack diversified services, utilities to serve residents and businesses.
Additionally, the state management body itself, that is the State Bank of Vietnam, is undergoing reforms in organization and skills.
Even the central bank is encouraging banks to make merger in order to scale up operations, a relatively popular trend in Asia.
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