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More power for State Bank recommended
Experts have called on the government to issue suitable policies to help commercial banks raise their competitiveness in the new period of the banking system’s development. They have also called for it to give more power to the State Bank of Vietnam.
Central bank needs to be more powerful
Under its WTO commitments, Vietnam has to allow foreign banks to set up 100% foreign-owned banks as of April 1, 2007. To date, the State Bank of Vietnam (SBV) has licenced two foreign-owned banks, HSBC and Standard Chartered.
According to Dr Nguyen Thi Thanh, Deputy Director of the Monetary Policy Department, SBV has been facing great challenges in the last two years, since Vietnam joined the WTO. The scale of transactions has become bigger and bigger, the volume of money remittance has been increasingly high, capital inflow and outflow have been liberalised, all of which have been putting pressure on monetary policies. Meanwhile, the central bank cannot be independent in setting up goals for its operation.
Thanh said that it is necessary to amend the State Bank Law and other laws which have provisions hindering the renovation of the banking system. For example, the Civil Code stipulates that the lending interest rates are negotiated by involved parties, but the rates must not be higher than 150% of the basic interest rate announced by the State Bank. Thanh said that with such a provision, the interbank interest rate has been constrained, while it is an important tool for the State Bank to use to learn about capital supply and demand and to define suitable policies.
Cao Sy Kiem, the former Governor of the State Bank of Vietnam, also said that the central bank needs to be given more power to make it more dynamic in its operation. As the central bank has great responsibility in regulating monetary policies, it needs more authority to fulfill its task.
The wise move for local bankers
According to Le Dac Son, General Director of VP Bank, Vietnamese banks will have to accept fierce competition with foreign banks. He said that the wise move by local bankers would be to take full advantage of their knowledge about local customers’ tastes, to retain loyal clients, use foreign technologies and experience to make up for shortcomings in their capability.
Son has suggested that the government delay allowing foreign bankers to provide modern technologies so as to allow Vietnamese banks to have more time to prepare for the competition with foreign banks.
Nguyen Van Du, Deputy General Director of Vietinbank, said that it is necessary to have suitable policies to help banks more easily merge with each other to become more powerful.
Ashok Sud, General Director of Standard Chartered Vietnam, in an interview with Thoi bao Kinh te Vietnam, said that the market share to be held by foreign banks in the immediate future will remain small. The experiences of countries which once passed the same development stage as Vietnam currently show that local state-owned and joint-stock banks, with large networks of several hundred branches, will still dominate the domestic market.
When asked about Standard Chartered’s plan after it gets a licence to set up a 100% foreign-owned bank, Mr Ashok Sud said that with the same rights and responsibilities as local bankers, Standard Chartered will expand its network throughout the country. It plans to open 20-30 branches in Vietnam in 3-4 years and install 250 ATMs by the end of 2010.
VNN
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