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Will domestic banks be swallowed by foreign bankers?
After Standard Chartered, HSBC and ANZ, Vietnam’s banking system has seen two newcomers, South Korean Shinhan Bank, with the chartered capital of VND 16,70 billion, and Malaysian Leong Bank Berhard, with VND 1 trillion. Deputy Chairman of the National Assembly’s Economics Committee Vu Viet Ngoan warns about the appearance of foreign banks as a threat to domestic banks.
Many experts said that the appearance of foreign banks in Vietnam is not really a concerning sign at all. What is your opinion?
I have spent more than 25 years working in the banking system and experienced many different posts. And I believe that the appearance of foreign banks is very deserving of interest. Foreign banks prove to be superior to Vietnam’s in terms of financial capability, technologies and experience. If foreign banks can promote their ability as soon as they operate, this will be a concern for domestic bankers, especially small and newly developed banks. Of course, domestic banks have their own advantages, but foreign banks will also have the advantages Vietnamese banks now have.
How much time do you think it will take for foreign banks to obtain the advantages that Vietnamese banks have now, I mean the advantages of well-understanding Vietnamese customers and a wide operation network?
Not much time. Standard Chartered, HSBC and ANZ have had several years of operation in Vietnam, while Shinhan and Hong Leong Bank Berhard have much experience of operating in newly emerged markets. The only problem for the five banks is that they still have good understanding about the habits, traditions and culture of Vietnamese people, and that they still do not have wide networks. But I think that the shortcomings will be settled within only two or three years.
What would you do first when you kick-off operation in a new market, if you were director of one of the five banks?
It would be a mistake to bring labor force and experience from the operation in other countries to Vietnam. Therefore, in a start in a new market, I would use Vietnamese employees to implement our development strategy.
You know, in doing business, there exists the so-called ‘business culture.’ The business culture of Vietnamese people proves to be diversified, which only Vietnamese people can understand. For example, when considering the credit applications, banks not only have to check the profile of the borrowers and assess the feasibility of projects, bank officers, and even bank leaders have to come meet clients ‘face to face.’ If foreign bankers employ local staff, the understanding about Vietnamese customers is not an advantage of domestic banks any more.
Let’s talk about the method of doing business. If foreign banks apply the mother bank-set standards in appraising enterprises, or apply purely international standards to decide whether to provide loans, they will not be able to exist, as Vietnam’s standards are lower than international ones.
However, I do not think that it will take foreign banks much time to realize this.
If you were the general director of a domestic bank, would you be worried about the adaptability of foreign bankers to the Vietnamese business environment?
I would be worried, but not afraid of this, because I have anticipated the things that will occur. The best way to overcome the difficulties is to renovate technologies, improve the corporate governance and human resource management. If domestic banks do not renovate to develop, they will not be able to survive, and the banks, sooner or later, will become a part of foreign banks when the banks’ shares are all purchased by foreign banks.
Let’s talk about what you would do after integrating into the host market in order to expand your market share in the shortest amount of time?
I would do three things at the same time to conquer Vietnam’s market: setting up branches; making strategic investments in Vietnam’s banks, while striving to become the controlling shareholders when we have the opportunity; and setting up 100% foreign-owned banks. After that, we would merge banks to establish only 100% foreign-owned bank. By doing so, foreign banks will be able to settle the biggest shortcomings now, the narrow operation network, while it would be allowed to access the market more quickly.
The prices of bank shares are now very low, which proves to be a big opportunity for foreign bankers to swallow domestic banks. However, they have not done this. Do you think that it is because foreign banks do not know about this?
I cannot see any reason that prevents foreign banks from doing that. The fact that foreign banks ‘neglect’ the share purchases to become strategic shareholders of domestic banks could be attributed to the difficulties of their parent banks in their home countries. However, when the financial crisis is away, Vietnam’s small banks will become the things foreign bankers target.
When will the day come when domestic banks are taken over?
On September 8, 2008, Standard Chartered and HSBC were licensed to set up foreign banks in Vietnam. Five foreign banks were licensed within only four months, while the global market was still in crisis. The bank massive establishment showed that the world’s leading financial groups find Vietnam a ‘fertile land’ for them to ‘cultivate.’ As far as I know, the world’s leading banks are very interested in newly-emerged economies like Vietnam, and the activities to take over domestic banks will begin soon.
DTCK
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