Banking in Vietnam
Whether you own a business in Vietnam or you are an expatriate who is working full-time in the country, you must have a bank account. There are many choices of banks and it is getting increasingly effortless to open an account for foreigners. Let us quickly dive into what is the banking sector like generally in Vietnam.
Established in 1961, the State Bank of Vietnam (SBV), serves as the country's central bank, is the main financial regulatory agency. The SBV supervises four majority state-owned commercial banks Vietinbank, Vietcombank, BIDV, and Agribank, 31 joint-stocked (private) banks and 9 wholly-owned foreign banks. It is not an independent body like the U.S. Federal Reserve and continues to operate under government oversight. A few of its main functions are regulating the issuance of banknotes, securing monetary stability, and managing foreign exchange.
Photo by Min An
In the past, Vietnam’s banking sector was plagued by a series of systemic problems, including corruption that had seen many bankers being jailed, weak regulatory controls, and excessive state interventions. To combat these issues and improve efficiency within the industry, the SBV embarked on its first five-year plan mainly sought to clean up a sector awash with bad debt by either taking over or restructuring failing banks, which ended in 2015. For example, Vietnam Construction Bank, which was in the red, was forced to merge with Vietcombank and on the whole, the sector’s Non-Performing Loan (NPL) ratio fell significantly during that period making the plan a success.
In 2018, the Vietnam Government approved a comprehensive development strategy to not only boost the independence and accountability of the SBV but also set out several key objectives to strengthen and increase the transparency of the banking sector. One objective is to have at least 12 to 15 commercial banks to apply the Basel II standards stipulating the minimum-capital and risk-management thresholds by 2020. Another target is to have at least two or three of its commercial banks to be placed among Asia’s top 100 banks by assets before the end of 2025. Encouragingly, seven banks are meeting the Basel II requirements earlier than expected, and the number of Vietnamese banks planning to expand internationally is increasing.
Here we have listed out more details of 3 different banks:
Headquartered in Hanoi, Vietcombank started its operations in 2002. It is one of the seven banks that had been approved by the SBV to apply the Basel II standards. It launched its first international bank last October in Laos and is soon to become the first commercial Vietnamese lender to open a representative office in the United States. Vietcombank had received approval from the U.S. Federal Reserve. The bank already has representative offices in Singapore and Hong Kong, and it also aims to open a branch in Australia during the year.
Saigon-Hanoi Commercial Joint Stock Bank (SHB)
Based out of Ho Chi Minh City, SHB is one of the largest private banks in Vietnam. The bank offers deposits, loans and advances, foreign exchange transactions services, international trade finance services, and discounting of commercial papers, bonds, and other valuable services. Founded in 1993, SHB recently told shareholders of its plan to either establish a subsidiary bank or provide support to existing credit institutions in Ivory Coast.
Incorporated in 1993, VP Bank provides various banking financial products and services to organizations and individuals in Vietnam. The bank is involved in mobilizing short, medium, and long-term capital; providing short, medium and long-term loans; trading foreign exchange; and discounting trade papers and bonds. It is also one of the seven banks that had been approved by the SBV to apply the Basel II standards.
What Lies Ahead
According to Moody’s, the outlook for Vietnam’s banking system is positive due to the country’s strong economic prospects and a positive outlook for most of the rated banks in Vietnam. Stable inflation and interest rate, favorable environment for direct foreign investment, and a shift from deficit to a surplus of the country’s current account have enabled Vietnam’s banking sector to improve substantially. This sector played a critical role in the nation’s economic development in recent years. It will continue to do so in an even larger capacity in the future given the massive number of people who do not hold bank accounts yet. Out of approximately 95 million people, 75 percent of the population use limited banking services, and the remaining 25 percent do not use any banking services.