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Stricter requirements for new banks proposed
The State Bank of Vietnam (SBV) wants to set stricter requirements on the establishment of new banks. Banks would have to have the minimum chartered capital of VND3tril instead of VND1tril as currently required.
SBV is going to submit to the government a draft decree on new conditions for bank establishment. It is expected the decree will replace the currently applied Decree 49. The proposed regulations are based on WTO and OECD standards.
Experts say that the decree would help stop the race to establish banks which has been taking place for the past two years, causing uncertainties in the banking system.
According to Le Xuan Nghia, Director of the Banking Development Strategy under SBV, under the draft decree, a new bank would have to have the minimum chartered capital of VND3tril, while founding shareholders’ own capital would have to be at least VND500bil.
Nghia said that the requirement of VD3tril proves to be a very strict condition, if noting that Vietnamese banks only have to have VND1tril in chartered capital by the end of the year in accordance with the currently applied regulations. VND500bil alone is the total capital of small-scale banks at present.
Vietnam now has 50 banks which have the capital of between VND500bil and several thousand billion VND, including 30 joint-stock banks. Economists say that the volumes of capital prove to be too small and that there are too many banks relative to Vietnam’s modest GDP of $70bil/year.
He went on to say that the new regulations will put big difficulties on domestic investors, while they will not be big obstacles for foreign banks, which have huge sums of capital. Therefore, it is expected that foreign banks will have an increased presence in Vietnam in ten years, making competition in the financial market fiercer.
While agreeing to the necessity of the proposal, he added that the most important thing for banks is effective operation, not big scale. He said that there are thousands of banks in the US which only have the chartered capital of $20mil, but the banks which have collapsed recently are all big ones, like Lehman Brothers, not small ones.
VNN
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