VietNamNet Bridge - The increased demand for capital and bank services has attracted more foreign banks to Vietnam, which is putting pressure on domestic bankers.

The State Bank of Vietnam on October 31 officially granted an operation license to Woori Vietnam, a 100 percent South Korean-invested bank.

Woori Bank is the eighth foreign bank set up in Vietnam. Meanwhile, ANZ, Standard Chartered and HSBC have been present in Vietnam for a long time.

Exactly one month before, CIMB Bank from Malaysia also received a license to set up a subsidiary in Vietnam.

Sri Zafrul Aziz, CEO of CIMB Group, said Vietnam’s switching to a more open economy with market orientation would have positive impact on the region and allow CIMB to improve its position in ASEAN markets.

Meanwhile, the US-based Citibank and Singaporean UOB have announced their intention to establish banks in Vietnam to increase their competitiveness and expand the market. 

There are also tens of bank branches and representative offices of foreign banks present in Vietnam.

An SBV report showed that total assets of joint ventures and foreign banks in Vietnam have been increasing for years to VND826 trillion, while stockholder equities went up to VND127 trillion and charter capital VND103 trillion.

The increased demand for capital and bank services has attracted more foreign banks to Vietnam, which is putting pressure on domestic bankers.

Vietnamese banks still hold the largest market share, especially in lending. This is partially because domestic banks still outnumber foreign banks, while foreign banks have limitations in lending proportions.

However, foreign banks have great advantages – prestige, experience, operation scale and financial health.

A report shows that the CAR (capital adequacy ratio) of joint venture and foreign banks in Vietnam is 33.36 percent, while the figures are 9.48 percent and 12.1 percent, respectively, for Vietnamese state-owned and joint stock banks. 

The foreign banks’ high CAR is explained by the fact that foreign banks don’t use short-term capital for long-term lending.

The other advantage lies in the high quality of services provided by foreign bankers. 

While many clients have showed concern about the security of domestic banks after phishing attacks, Citi has announced it is using voice biometrics security technology.

However, domestic bankers have been told there is no need to worry about the ‘power’ of foreign banks in Vietnam. 

Nguyen Tri Hieu, a renowned banking expert, said competing directly with Vietnamese banks is not the major goal that foreign banks strive for when arriving in Vietnam. 

They come to Vietnam to follow the steps of their major clients. Moreover, the market share held by foreign banks in Vietnam remains modest and they do not focus on credit operations.

A representative from OCB said on Dien Dan Doanh Nghiep in mid-2016 that foreign banks now hold 5 percent of market share in capital mobilization and 15 percent in lending.


Mai Thanh