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Banks face hurdles in WTO era
A conference yesterday in Ha Noi assessing the local banking sector found that one year after WTO accession, strides have been made, but local bankers are still facing many challenges from integration.
The conference entitled "Local Banking Sector and WTO Committments" was hosted by the State Bank of Viet Nam’s Strategy Department and the Bank for Investment and Development of Viet Nam. It was part of efforts to ensure the stability of Viet Nam’s money market and to help the banking sector be competitive with foreign rivals.
As a market regulator, the State Bank of Viet Nam has managed to stabilise the money market through flexible intervention.
Due to the increasing competition with foreign rivals in the WTO era, commercial banks have joined forces to set up common bank card networks such as Smartlink and Banknetvn and to establish industrial and energy investment funds.
Operation networks are being greatly expanded to cover the domestic market with more useful services like gold trading on abroad bank accounts, online banking, option contract services for coffee trading, and remittance transferring.
The cap for foreign strategic ownership has also been increased from 10 per cent to 15 per cent to meet the demand for foreign investment.
However, inadequate technology, risk administration and lack of experience are creating barriers for Viet Nam’s banks to remain in the domestic market while experienced foreign banks are increasingly entering the market.
Local bankers agreed that domestic banking services are limited, most of them consist only of credit, payment, money transferring and bank cards. Other non-traditional banking services like asset and investment management and derivatives have not been developed yet.
Capital adequacy ratios of most banks are higher than 8 per cent, however, average equity of commercial banks is only US$500 million. Some joint stock banks are desperate for enough capital to cover daily business. Risk management falls short of expectation and does not comply with the international standards of Basels.
Exchange rate risks and interest rates out and in the market are also threatening local banks. Regulations on capital mobility, credit lending, foreign payment, and auditing are required to be gradually tightened.
Some bankers have submitted proposals in which they asked authorities to give the central bank independent rights to decide monetary policy.
Local banks asked the central bank to tighten criteria for establishing new banks. The consensus is that there should be stricter monitoring and inspection of the banking business to ensure a healthy banking system and to avoid any banking crisis in the future.
VNN
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