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Fiercer competition in banking system kicks-off   2008-09-10 - Tien phong

The fact that two 100% foreign-owned banks, HSBC and Standard Chartered Bank, have been licenced to operate in Vietnam is considered an indication of the beginning of the age of fiercer competition in Vietnam’s banking system.

 

The fact that two 100% foreign-owned banks, HSBC and Standard Chartered Bank, have been licenced to operate in Vietnam is considered an indication of the beginning of the age of fiercer competition in Vietnam’s banking system.

At 6.15 pm on September 9, a licence to establish a 100% foreign-owned bank was officially handed over to HSBC Vietnam General Director Thomas Tobin. Another such licence was also officially granted to Standard Chartered Bank with visiting British Prince Andrew in attendance.

 

The two banks, HSBC Vietnam, which has the chartered capital of VND3tril, and Standard Chartered Vietnam, chartered capital of VND1tril, will have the operation duration of 99 years. They have the right to provide a lot of services, including capital mobilisation, credit providing, payment and vault services.

 

In fact, the event is not a surprise to Vietnamese people at all as they were warned that Vietnam would have to open its financial market under the WTO commitments.

 

Nguyen Thanh Toai, General Director of Asia Commercial Bank (ACB), of which Standard Chartered is a shareholder, said that the event will not in any way influence ACB’s operations.

 

“We have chosen them (Standard Chartered) as a partner because we want to learn their banking technology, while they want to penetrate the domestic market. Their appearance in Vietnam in a wholly self-owned bank does not worry us,” Toai said, adding that it is quite normal to see foreign banks operating in the domestic market.

 

However, the event has, to some extent, raised worries among bankers that the age of fierce competition in Vietnam’s market has begun.

 

The general director of a joint-stock bank, who has 10 years experience working for a foreign bank branch in Vietnam, said that Vietnamese bankers should not underestimate foreign bankers.

 

According to Kieu Huu Dung, former Head of the Banks and Non-bank Credit Institutions Department under the State Bank of Vietnam, the licencing means that local bankers have no more time to prepare for the competition, they have to face the competition right now.

 

When asked about Vietnamese banks’ capability, Dung said that the banks have made a big leap in their development; however, they need to become better.

 

Dung said that there will not be big changes in the market share status in the immediate time, while foreign bankers will gradually grab more shares with the high quality of their services.

 

An official from the State Bank of Vietnam said that HSBC and Standard Chartered both have advantages in retail banking and technologies.

 

Statistics show that in 2007, foreign bank branches and credit institutions in Vietnam gained the pre-tax profit of VND2,400bil ($150mil), up by VND1,700bil compared to 2006. Of this amount, foreign bank branches got VND1,900bil in profit, or $118.7mil.

 

In 2007, the total assets of foreign bank branches and credit institutions in Vietnam reached VND215tril, or $13.4mil, up by 7.5% over 2006 and 60% over 2005. The assets were equal to 18% of total assets of Vietnamese commercial banks and credit institutions.



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