|
No more opportunities for small banks?
The competition in the banking sector has become fiercer than ever, as banks have been rushing to increase their chartered capital. Does it mean that there will be no more room for small banks?
While many Vietnamese banks had not been able to increase their chartered capital to three trillion dong by the end of 2010 as requested by the State Bank, foreign banks in Vietnam have increased their chartered capital to the levels higher by 4-5 times than their legal capital. Especially, one foreign bank reportedly has the chartered capital eight times higher.
Biggest pieces of the market cake in the hands of big banks
Experts have warned that domestic banks have been losing their advantage on the home market, while foreign banks have been successfully expanding their business in Vietnam.
Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council, said that foreign banks have the advantage in providing loans to foreign enterprises and they have been making a big leap on the way to become retail banks.
Sharing the same view, Pham Quyet Thang, General Director of GP Bank, also said that domestic banks are, step by step, losing their market shares to the foreign banks. “In the past, foreign banks only served as wholesale banks and only provided big loans. But now they are trying to attract all clients, including the ones who demand small loans,” Thang said.
“In order to prepare for the competition with domestic banks, foreign banks have sharply increased their chartered capital. With stronger financial capability and technology, foreign banks have been gradually narrowing the gap with the domestic banks,” he added.
Also according to Thang, two years ago, the posts of branch director or division heads were all assigned to foreigners. However, the key posts now are held by Vietnamese. With the plan of localizing staff, foreign banks hope they can successfully compete with domestic banks which have the advantage of understanding Vietnamese customers well.
small banks which still have not been able to raise their chartered capital to three trillion dong as requested have been warned that they will have a difficult period ahead. “It is highly possible that the State Bank will not allow the banks to expand their network and launch more products until the banks can increase their capital,” Thang said
Niche markets will be reserved for small banks
It is clear that small banks will be less competitive than biggest banks. However, experts believe that small banks will still be able to develop.
From January 1, 2011, foreign bank branches have been allowed to mobilize capital in Vietnam dong. However, this does not challenge domestic banks in the immediate time. Firstly, foreign bank branches cannot provide the loans which are higher than 15 percent of the branches’ equity capital. Secondly, domestic banks still have advantages in mobilizing capital thanks to their large networks and the flexible interest rate policies
Ashok Sud, former General Director of Standard Chartered Vietnam, also said that despite the big advantages held by foreign banks, domestic banks will still dominate the market in the next 10-15 years.
vietnamnet, vneconomy
|
