|
Commercial bank ownership and survival
Foreign competition will put a strong pressure on domestic banks, but this pressure will motivate Vietnamese banks to try harder and do better.
Now, in the beginning of 2009, there are five foreign banks (100 percent foreign capital) here in Vietnam. They are: Standard Chartered Bank, Hong Kong and Shanghai Banking Corporation (HSBC), ANZ Bank, Shinhan and Hong Leong Bank.
Five is not ’a lot’ but this could very well be just the beginning as foreign banks walk through an ever widening door, pushed open by World Trade Organization membership.
Cornering the retail banking market
Foreign banks want to enter Vietnam because they see the potential that is here. While foreign banks could form joint ventures or buy stock in Vietnamese banks, they seem to prefer full ownership and full control over their banking activities. Most of the bigger foreign banks have decades of experience in many countries and they have a clear plan to move in and provide better and more secure services for Vietnamese businesses and individuals. The retail banking market is waiting to be tapped and domestic banks have been slow to realize that the time to change is now.
ANZ Bank Vietnam just started offering a new service, it calls Mobile Banking at its Hanoi and Ho Chi Minh City branches. This is something that makes banking easier to carry out in terms of time and place, and it’s free. In the future ANZ is expected to offer new credit card services and make banking possible through the Internet.
Both ANZ and HSBC allow dual currency deposits to encourage commercial banks and businesses to use derivative operations. Dual currency deposits limit risk to commercial banks and minimize the risk of currency exchange fluctuation for customers. Standard Chartered expects to offer retail banking services to individuals and small to medium-sized enterprises and it now offers property management services and multi-currency savings.
DBS Bank (Singapore) now has a representative office in Hanoi and Commonwealth Bank (Australia) opened a branch in Ho Chi Minh City after having a representative office in Hanoi for 14 years. Even though foreign banks including ING (Netherlands), Barclays (UK), Sumitomo Mitsui Financial Group (Japan), Deutsche Bank (Germany), Societe Generale (France) and Maybank (Malaysia) have not yet begun operations to take market share of the local market, this is exactly what they intend and they do have long-range goals and targets that include consistent growth.
The pressure’s on domestic banks
Domestic banks realize that the competition has begun to arrive but they seem to be a bit dazed. They fear loosing market share when foreign banks make use of the most modern banking techniques and equipment, they have access to massive amounts of information and they have decades of experience. In Vietnam there are now 37 foreign banks branches but they are not yet able to operate without constraints.
When 100% foreign-owned banks are allowed to be fully functional, Vietnamese people and businesses will take notice and it will be up to Vietnamese banks to convince everyone that it is they, the Vietnamese banks, who provide better services and security. At the moment, domestic banks are relying on people choosing a Vietnamese bank by virtue of it’s being Vietnamese, as in buy Vietnamese and help your country.
Duong Thu Huong, the secretary general of the Vietnam Bank Association, said that foreign competition will put a strong pressure on domestic banks, but this pressure will motivate Vietnamese banks to try harder and do better. Huong stated that Vietnamese commercial banks have not been sitting back but have rather been enhancing their competitive advantages. They have been taking opportunities when they can find them and they been becoming more professional and effective in their operations.
Financially, domestic banks have gotten stronger, although it cannot yet be said that they are strong. Vietnamese banks have added new services, although they are rather simple.
Technologically they’ve made some improvements, but they’re not yet near the level of the foreign banks. For Vietnamese banks to successfully compete in the new environment, and it is one in which protections for domestic banks will be removed and the banking sector will be fully opened according to international agreement, they’re going to have to make some drastic changes.
Facing growing pressure from foreign banks, attention has been given to increasing chartered capital, improving human resource and management capability and modernizing technology. These are all clear needs.
A phrase commonly used to imply a possible remedy to foreign competition in all fields is joining forces. This is oftentimes proposed as a solution that can be implemented. The exact meaning of joining forces is vague in that it’s oftentimes used to mean a consolidation of Vietnamese business strength to counter foreign business strength.
In the banking industry, it seems that the term is being used differently. In this field, its meaning is for Vietnamese banks to be purchased, through share sales, by foreign banks. This, it’s being said, will benefit the foreign financial groups that wish to expand their operations into Vietnam.
It is being suggested that they do it not by shouldering aside existing Vietnamese businesses but rather by subsuming them. If foreign companies were to do so, they could make use of an existing network, the existing technology and facilities, and the employees that are now working. In addition, they’d have the existing customers of the domestic banks.
This would allow Vietnamese commercial banks to continue to exist and even, under the new arrangement, strengthen their financial standing, modernize their systems, improve managerial and employee skills and even expand their businesses - a Vietnamese business - around the world.
VietNamNet/VEN
|
