The fact that some famous banks, including Standard Chartered and HSBC, have bought stocks in Vietnamese banks to enter the local market is posing a question about the impacts on the development of Vietnamese commercial joint stock banks.
Under international integration commitments, right in 2006, Vietnam has to gradually remove constraints on the stake held by foreign financial institutions. In 2008, Vietnam will have to remove all the regulations on constraining capital contribution and transaction value of foreign banks under the ASEAN Frame Agreement on Services (AFAS).
Benefits for selling, buying banks and State Bank of Vietnam
According to statistics, 80 per cent of the local market’s share is held by State-owned commercial banks, 17 per cent is held by 30 commercial joint stock banks, and only three per cent is held by foreign banks. However, foreign banks have up to 30 branches, let alone 45 representative offices of financial organisations. Therefore, to gradually enter the Vietnamese financial market, many foreign banks and funds have decided to buy shares of local banks.
Talking about the move, many experts said that banking activities would be shared but in compensation, they would develop widely and in-depth with the participation of foreign investors. The increase of stake held by foreign investors in the banking system is a normal story during the international integration process and some Vietnamese banks have prepared for the development. In particular, with their dynamism, owners of some banks have accepted co-operation with foreign investors to take advantage of technology and management experience to continue to stand firm in the financial market.
Ly Xuan Hai, general director of the Asian Commercial Joint stock Bank (ACB), said that if local banks did not sell their stocks, it would be difficult for them to attract high technology and experience from foreign strategic partners. Also, after selling their stocks to foreign investors, value of stocks of banks will see a strong increase, even some folds against original price. Le Duc Thuy, governor of the State Bank of Vietnam, affirmed that it would be of no concern that an increasing number of foreign partners had bought stocks of local commercial joint stock banks. This would benefit Vietnamese banks, which can sell their stocks at high prices and attract foreign strategic investors; foreign partners, who have opportunities to further enter the local financial market; and the State Bank of Vietnam, as Vietnam will have a healthier banking market.
Challenges to hold stakes
However, the selling of stocks is not the entire story. According to experts, the best policy banks should implement is to establish an allied link and co-operation on a basis of suitable interests to set up strong banks to maintain their stake.
The financial market will develop if Vietnam develops a strong banking system with strong commercial joint stock banks with high-end services, forming financial institutions, such as financial leasing companies, securities companies and fund management companies. In fact, several years ago, Vietnam had joint stock banks with capital of between tens and hundreds billion. The local banking system now has banks with capital reaching VND 2,000 billion.
Also, the Vietnamese banking system has to reorganise its management apparatus and increase charter capital, diversify products and services, and set up safety regulations in accordance with the international standard. To be able to compete in the home market with many foreign opponents, joint stock banks should promote their co-operation and alliance. Vietnamese banks have advantage in developing retail banking services and products, such as Internet banking, ATM, credit car and home banking.
Following are ideas of experts about this issue:
Vietnamese banks can have advantages, Tran Phuong Binh, general director of the East Asia Commercial Joint stock Bank
Despite limited capital sources, and low quality services, the Vietnamese banking system has advantages in business culture and dynamic staff members with a network of branches and agents nationwide. Meanwhile, it will take foreign banks a longer time to gain the advantage in developing and implementing their business strategies. Importantly, local banks should take the advantage fully when developing post-WTO strategies. For example, given that only three million people in Ho Chi Minh City use banking services and their incomes and transactions are implemented via bank accounts, a huge amount of capital will be created, meeting the city’s development demand and generating huge capital and service value during the international integration.
Banking services should be covered, Dang Van Thanh, president of the executive board of the Saigon Commercial Joint stock Bank (Sacombank)
To stand firm, in the coming time, banks should not consider deposit mobilisation growth as a measure for their development. Instead, they should change their operations, from providing credit to providing services, mainly payment. Banks should cover their services like television cover their signal, so as to facilitate people’s use of services, just like watching television. The adjustment in their operation would help banks to get further involved in the people’s daily life, meeting their demand on consumption, accumulation and investment. Banks will be able to mobilise capital at cheap prices to serve the development of production and business activities, and maintain their role in the financial and monetary market, expected to witness fiercer competition in the coming time.
Mai Anh
Vietnamese
