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CỔNG THÔNG TIN KINH TẾ VIỆT NAM

How foreign banks in Vietnam operate?

06/08/2010 - 116 Lượt xem

There have been 33 foreign bank branches in Vietnam so far, mostly from Japan, South Korea, the US, Australia, France, and Taiwan. They are often affiliate to the world’s big financial institutions, for example Citibank Vietnam is subsidiary to Citigroup. 18 bank branches are based in Hanoi, 18 in Ho Chi Minh City, and 1 in the Chu Lai open economic zone.
Vietnam’s trades with other countries have increased recently but are still at low level. Excluding countries like Singapore, Taiwan, Hong Kong, South Korea, etc which have large trade turnover with Vietnam, the others have modest investment and trade value with Vietnam. In the eye of international banks, Vietnam is a small market, not one for several common financial services in the world like debt trading in subsidiary markets. There are still many weaknesses in the banking system of Vietnam. Those are small capital, high overdue debt rate, no financial report disclosure and international auditing, and high rate of policy loans at State-owned commercial banks. Therefore, operation of foreign banks in Vietnam has still limited so far. Most of international bank branches in Vietnam now are doing business in market access, corporate investment and credit relations; banking letter of credit and payment with local commercial banks; consultancy and training, etc.

They focus in providing services to 100% foreign capital enterprises, joint ventures, and a number of State-owned firms which operate in the fields that match their strategy in Vietnam. Many of them have launched guarantee and undertaking services for tendering, contracting and insurance for projects in Vietnam and overseas. Expatriates and Vietnamese high-incomers are also target of foreign banks though number of these clients remains small.
Experts say there are still many limitations in the legal infrastructure of Vietnam, especially in terms of accounting, financial report transparency, rights of credit issuing agencies, etc.
International banks pay much attention to local banks of Vietnam for their account system to facilitate international payment. Recently, many foreign banks have cooperated with local partners to develop services. For example, Citibank cooperates with a number of State-owned commercial banks and Sacombank to establish the Speedcollect system.

One of the regular activities of foreign banks is to provide their clients and holding banks with consultancy and information about economic development in Vietnam, business chances and partners, etc.

Pushed-up equitization process, quick growth of commercial banks and open door to foreign banks will lead to changes in competition in the banking system of Vietnam. Before, local banks were afraid that foreign competitors will take their shares in the retail market. However, such a thing has not happened so far. As expected, by 2010, foreign banks in Vietnam will still operate mostly in the wholesales market. If they join the retail market, they might choose to be shareholders of local commercial banks, both State-owned and equitized or emerge or take over local banks.

Source: Thời báo Kinh tế Việt Nam, 1/3/2006