Foreign banks flock to Vietnam

Foreign banks flock to Vietnam
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The fast-growing economy, booming financial and stock markets and the issuance of a number of government policies designed to open up the market are regarded as an ideal context for foreign banks to compete in Vietnam´s market.

HSBC and the Standard Chartered Bank are the two leading foreign banks providing retail banking services including asset management, cash transaction management for small and medium sized enterprises and individual customers.

The two banks are planning to introduce other products such as consumer loans, credit cards, and loans with secured assets to foreign individual customers who are living in Vietnam and Vietnamese high-earners.

The government raising the cap on foreign holdings in a commercial bank from 10% to 15% and possibly 20% if the prime minister approves is another good reason for foreign banks to be more excited about a new field of competition. Still, HSBC is the pioneer, boosting its stake holding in Vietnam´s Techcombank to 15%, bringing HSBC´s total holding value in the domestic bank to US$33.7 million.

"After receiving the approval of the State Bank of Vietnam to increase the holding rate, HSBC will ask for the government´s permission to boost its share holdings in Techcombank to 20% with the aim of expanding its operation in one of the fast-growing economies in Asia," said Vincent Cheng HSBC president.

Along with this move, under Vietnam´s WTO commitments in the banking industry, Vietnam allowed foreign banks to set up 100% foreign-owned subsidiary banks in Vietnam from April 1, 2007. This is also the new motivation for foreign banks to facilitate business plans in Vietnam. There are currently a number of foreign banks that have expressed their interest in establishing 100% foreign-owned banks in Vietnam, of which HSBC is one and promoted this plan earliest.

According to Kieu Huu Dung, head of the SBV´s credit institution and bank department, once operating under the form of 100% foreign banks, these banks will be regarded as Vietnamese entities. With prominent advantages in terms of technology, capital and administration, foreign banks will be able to provide services with higher quality and better risk management. These strengths of foreign banks will also create challenges for domestic banks.

Immediately after April 1, 2007, many local banks prepared for new competition by campaigning for the expansion of the branch network, an increase in chartered capital, renewal of technology and cooperation with strategic partners. A series of domestic banks such as Sacombank, VIBank, HDBank and Agribank have promoted the expansion of branches to take advantage of their customer network nationwide instead of just focusing on urban centres.

The central bank also is developing some state-run banks in line with the model of multifunctional financial group including of banking services, insurance, investment, securities brokering, asset management to improve competitiveness while still meeting all development requirements of the economy.