Upon a massive influx of foreign banks, Vietnamese banks are facing the risk of sharing a big part of market share to foreign banks, although the country’s commitments of opening up the banking and finance market to foreign rivals has not yet become effective.
Not having to wait until April 1, 2007 when Vietnam’s integration commitments on banking become effective, foreign banks have already been proving their impact on the Vietnam market.
Publicized performance results of foreign banks in 2006 in Vietnam have made local banks worry. According to Kieu Huu Dung, director of the bank and non-credit institutions department of the central bank, by the end of 2006 foreign banks in Vietnam reported total outstanding loans of some VND60 trillion, accounting for up to 14 per cent of total market share, rising by 5 per cent on year.
Regarding deposits, foreign players recorded a growth of at least 20 per cent. In the near future when foreign banks are allowed to raise deposit in domestic currency, domestic banks will have to share a greater part of total market share to their foreign revivals.
Han Ngoc Vu, former official of Citibank in Vietnam also admitted that the golden age of foreign banks has come, particularly when integration is closely approaching. Advantages in financial capacity, administration experience and technologies of foreign banks will put great pressure on domestic banks.
Namely, Hanoi and Ho Chi Minh City citizens are seeing more and more new automated teller machines (ATMs) of Hong Kong and Shanghai Banking Corp (HSBC) or Australia-New Zealand Banking Corp (ANZ) outside their headquarters. In order to meet consumption demand on Tet holiday, customers can ask for loans from foreign banks easily.
In addition, the central bank has received at least 10 applications for establishing new branches and wholly-foreign owned affiliates. If these applications are approved, the domestic banking system will see big changes in banking market share.
Currently, Vietnam has 35 branches of foreign banks of which two branches, including Mizuho Corporate Bank and Hua Nan Bank, have been approved in 2006. (VnEconomy)
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