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Central bank hints at curbing outlets   2010-03-05 - Viet Nam News

The State Bank of Viet Nam has hinted it may tighten approval conditions for banks that want to open new transaction departments or branches, citing safety concerns.

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Under the draft guidelines, applicants would be required to prove profitability, a bad debt ratio of less than 3 per cent of total outstanding loans, and application fees would be capped at VND15 million (US$789).

 
Applicant's risk provision funds, loan structures and internal audit systems would also be required to meet minimum standards set by the bank.

The number of branches a given bank would be permitted to open would be calculated according to the following formula: VND200 billion x N1 + VND100 billion x N2 + C1 + C2 < C, with N1 being the total existing and proposed branches to be opened in Ha Noi and HCM City, N2 the total existing and proposed branches to be opened in other provinces and cities, C1 the capital contribution, C2 the capital provided for the unit, and C the charter capital in Vietnamese dong.

Banks would also be required to run a standardised online connection system between their headquarters, transaction departments and branches.

If passed, the new regulation would cover state owned banks, joint-stock banks, joint-venture banks, wholly foreign-invested banks, and other individuals and institutions involved in banking management.

Network expansion remains a controversial topic among regulators and commercial banks.

Some bankers argued that with stiff competition from foreign banks, the central bank should encourage local banks to expand their networks.

In response, some market watchdogs countered that banks were seeking branch expansion out of financial interest without considering how it would affect the system as a whole.



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