Saturday, October 06, 2007

Vietnam not to restrict establishment of new banks

VietNamNet Bridge – While some experts express their concerns about the establishment of a massive number of new banks, others say that the government should licence more banks.


The State Bank of Vietnam began receiving applications for setting up new banks on July 20, 2007. No licence has been granted yet, however, as some experts warned that the massive establishment of banks might damage the national economy.

Meanwhile, other experts said that legally, the central bank couldn’t prohibit big industrial corporations from setting up banks. It would be better if the central bank set a so called ‘filtration system’, which would weed out incapable banks and encourage good banks.

Nguyen Van Giau, Governor of the State Bank of Vietnam:

The growing national economy requires the compatible growth of financial services. No one can say for sure how many banks would be enough for the national economy, and whether the current number of commercial banks is enough to provide services.

No decision has been made so far on limiting the establishment of new banks. Therefore, the State Bank of Vietnam will licence all the banks that can meet the requirements stipulated in the newly enacted document on licencing banks. However, the state bank will consider the opinions and worries about the establishment of a great number of banks when programming the banking development strategy.

Chaly Madam, Director General of Citibank Vietnam:

Vietnam now has some 40 operational banks. Banking proves to be the sector with great potentials if considering the high economic growth rate and the foreign investment boom, which will bring about more foreign clients.

Of course, the first choice for foreign clients would be foreign banks. However, domestic owned banks will also be able to find their clients. Therefore, in general, the government should licence more banks. However, in order to create a healthy business environment, the government should think of promulgating a set of required standards and conditions to be applied for banks.

Besides, the central bank should be very cautious when licencing banks, so as to provide the market with more banks that have good management technology.

I personally think that Vietnam’s banking system is performing well.

I know that some experts are worried about the fact that many corporations and groups want to jump into the banking sector. However, I think that instead of trying to hinder their plans to set up banks, it would be better to heighten their awareness about how to bank. The measure I have said has been applied in many other countries and it has shown good effects.

Ayumi Konishi, Director of ADB:

The current banking system seems to not meet the requirements yet. The problem lies in the fact that big cities gather too many banks, while banks provide the same products and services and they do not regularly launch new products. The expansion of bank’s network does not come in parallel with the product development.

The appearance of more banks on the market is inevitable and comes in line with economic laws, which makes it understandable why enterprises jump into the banking sector.

Regarding the set of requirements, the central bank’s requirements seem to be very good at first glance; however, the central bank should still pay appropriate attention to post-licencing operations. The participation of groups and corporations in the banking sector will require more care from the central bank, but it is not a reason to prevent the establishment of new banks.