Vietnamese banks are facing tough competition once Vietnam implements its commitments for its accession to the World Trade Organisation (WTO) in 2007. State Bank of Vietnam Governor Le Duc Thuy had an interview with the press on the issues.
Can you tell something about activities of Vietnamese commercial banks in 2006?
In 2006, the Vietnamese banking system saw a change for the better with diversified credit products, higher profits and higher prices of stocks of banks. Banking became one of the most attractive industries for investors. It is not accidental foreign investors and organisations have poured much money in the local banking system.
Apart from good changes, there are things the Vietnamese banking system still needs to perfect. Concretely, the equitisation of Vietnamese State-owned commercial banks should be boosted as the process of the Bank for Foreign Trade of Vietnam (VCB) and Mekong Delta Housing Bank (MHB) remains slow. Also, in the coming years, local banks will face two toughest challenges of human resources and governance.
In 2006, foreign banks promoted their buying of shares of local banks. What do you think about the tendency in 2007?
There are now norms to identify in 2006 foreign banks promoted the buying of local banks’ shares or not. Foreign partners are seeking potential banks in Vietnam and Vietnamese banks, in turn, are selecting strategic partners. They are negotiating and banks have yet to announce their secrete negotiations and contacts. It is, however, possible to say that foreign banks will continue to buy shares of Vietnamese banks in 2007.
How will new banks be formed in 2007?
The Government has issued regulations on the establishment of banks with many conditions. In terms of financial conditions, a new bank will have its charter capital of at least VND 1,000 billion. There are also conditions about governance, operation, human resources, information and relatives of the bank’s founders.
The State Bank of Vietnam, accordingly, will not ban the establishment of new banks but will impose concrete and transparent conditions, which will prevent the establishment of a new bank and increase its share prices before selling to foreign partners. Investors should be careful as stipulated founder shareholders will be able to sell their shares after at least five years.
From April 1, 2007, affiliates to foreign banks will be allowed to establish 100 per cent owned banks in Vietnam under Vietnam’s commitments to the World Trade Organisation (WTO).
What do you think about it? Have foreign banks applied for establishing their affiliates in Vietnam?
Under Vietnam’s commitment to WTO, to establish a branch in Vietnam, banks will have only US$15 million while to establish an affiliate in Vietnam they will have a charter capital of US$70 million. Furthermore, they have total assets valued minimally US$10 billion. These are technical barriers stipulated by Vietnam. At the same time, there is a condition that there should be co-operation agreements between banking management agencies of Vietnam and foreign countries, which have banks wanting to establish affiliates in Vietnam.
The State Bank of Vietnam has received documents from some foreign banks, applying for the opening of their affiliates, but they fail to meet the conditions. An American bank, for example, has total assets of around US$8 billion and applied for the opening of an affiliate. They have asked to organise briefings of their activities but we denied as they fail to meet the conditions. Some organisations, such as General Electric, have applied to establish a bank, but they are not banks or cannot prove they are banks, and we have denied.
There have been ten documents applying for the establishment of both affiliates and branches. We are considering and settling according to the regulations.
Lan Anh
Vietnamese
