Vietnam’s banking sector has shown significant improvement which results from stable inflation and interested rate, favorable environment for foreign direct investment and a shift from deficit to surplus of the country’s current account. This sector plays a crucial role in Vietnam’s economic development in recent years.
2.Banking system
There are two tiers in banking sector in Vietnam. The first one is State Bank of Vietnam (SBV) which is responsible for monetary policy and supervision/regulation of the banking system in Vietnam. The second one consists of commercial banks, financial companies, credit co-operatives, people’s credit funds, and insurance companies. The main activity driving banking system is commercial bank which includes 5 state-owned commercial banks, 33 joint stock commercial banks, 5 joint venture commercial banks and 5 wholly-owned foreign owned bank.
State owned commercial banks (SOCB) account for more than 40% of market share. The largest bank in terms of total assets, network and still 100% state owned share is Agribank. And four other SOCB areVietcom bank, Viettin Bank, BIDV and MHB.
Joint stock commercial banks (JSCB) have small capital/deposit base and more diversified shareholding structured compared to state owned commercial banks. There are currently 33 JSCB, which the leading ones are SaiGon Joint Stock Commercial Bank (SCB), Military Joint Stock Commercial Bank (MBB), Vietnam Export Import Commercial Joint Stock Bank (EIB), Asia Commercial Bank (ACB) and SaiGonThuong Tin Commercial Joint Stock Bank (STB)
Also SBV had granted 5 licences to permit HSBC, Standard Charter Bank, ANZ Bank, Shinhan Bank and Hong Leong Bank to establish as wholly-owned foreign banks
3.Potential opportunities for foreign investment
There are solid evidences to prove that Vietnam’s banking sector has such a huge potential for foreign investment
Government effort of reforming banking system
SBV suggested that merge and acquisition of loss making and incompetent bank would be necessary to improve efficiency within the industry. For example, in 2015, SBV forced merge of loss making Vietnam Construction Bank to Vietcom bank with purchasing share price for 0 VND. By forcing merge and acquisition of incompetent banks, SBV has increased exploitation of economies of scale and the reduced burden on regulators
Trade agreements facilitate foreign ownership and investment
Have taken part in variety of trade agreement such as Trans Pacific Strategic Economic Partnership (TTP), Association of Southeast Asian Nations (ASEAN) and Free Trade Agreement with different countries, Vietnam has made restructuring move to standardize banking system which will be compatible and accessible to other countries. Vietnam is required to have bilateral arrangement which eliminate the challenges of foreign establishment of banking services.
The government also encourages foreign investors to hold shares for five year period and partnering with the local bank to enhance management, capacity or new development. With the 30% limit of oversea ownership to domestic banks, the strategic foreign investors are allowed to acquire up to 15% of share in a bank, and up to 20% with Prime Ministerial approval. HSBChas also invested in a leading local bank, possessing a 20% stake in the Vietnam Technological and Commercial Joint Stock Bank—Techcombank. It is also the sole foreign strategic partner of theBaoViet Finance-Insurance Group, Vietnam’s largest insurance company. In a vote of confidence in the insurer,HSBCincreased its stake to 18% in October 2009.
Vietnam- a destination of foreign investment in South East Asian market
There is a huge untapped market in Vietnam. According to SBV, only 20% of more than 90 million citizens in Vietnam hold bank accounts and 3% of the population have credit cards. With 87% of the population under the age of 54, there is a great opportunity for retail banking activity development in Vietnam.
Also it is agreed that SME and rural areas have had challenges to access bank investment and loan. The data of Asian Development Bank shows that “lack the capacity to assess the risk of investment into SMEs and find bankable projects” and lack of knowledge about loan and lending systems for rural citizens are the main reasons leading to currentunder-banked circ*mstances.
The stable economic with GDP growth of around 6% to 7%; low wage costs; a large population with a high savings rate and lack of innovative approach to the market are advantages for foreign investors to accelerate financial and industrial development in Vietnam market.
Set-Up Company in Hanoi
Set-up Joint Stock Company in Vietnam
Benefits of Setting Up Company in Ho Chi Minh City
As of January 28, 2024, there are 49 banks operating in Vietnam, of which 31 are joint-stock commercial banks. These banks can be divided into two categories: urban joint-stock commercial banks and rural joint-stock commercial banks. On July 29, 2008, the Vietnamese Government issued Official Letter No.
In 2023, Vietnam's financial, banking and insurance sector accounted for 4.9 percent of the country's total GDP, equivalent to around 501.3 trillion Vietnamese dong. In that year, Vietnam's GDP totaled approximately 10.2 thousand trillion Vietnamese dong.
The State Bank of Vietnam aims for a 15% credit growth in 2024, though the first quarter saw a modest 0.26% rise. With robust system liquidity and early signs of export and import recovery, the sector anticipates a more robust economic rebound and subsequent credit growth in the latter half of 2024.
Vietnam's Banking market is projected to reach a Net Interest Income of US$16.69bn in 2024. Traditional Banks dominate the market with a projected market volume of US$15.63bn in the same year.
There are five U.S. banks and financial institutions operating in Vietnam. Citibank and Far East National Bank have branches, Wells Fargo and Visa International have representative offices, and JP Morgan Chase has both a branch and a representative office.
Vietcombank (32.3) continues to be the best bank in Vietnam, according to Decision Lab Best Bank Rankings 2024. MB (28.2) and BIDV (24.6) also secured their runner-up and third spots, respectively.
As of March 2023, Vietcombank, also known as the Joint Stock Commercial Bank for Foreign Trade of Vietnam, was the leading company in Vietnam based on market capitalization, with a market capitalization of around 536.5 trillion Vietnamese dong.
MoMo (M_Service): A leading super app and one of the fastest-growing fintech companies in Vietnam established in 2007. MoMo claimed over 31 million users, more than 50,000 domestic partners, as well as 140,000 payment acceptance points nationwide in partnership with 70 banks and international cards as of June 2022.
Vietnam's financial markets consist of three subsectors: banking, securities, and insurance. As shown in Figure 1, the securities sector cur- rently accounts for 32% of total financial assets, credit institutions 67%, and insurance premi- ums approximately 1%, indicating that Vietnam is still a bank-based economy.
While traditional sectors like textiles and footwear remain strong, there's a growing focus on high-tech industries like electronics and telecommunications. This diversification ensures Vietnam's long-term competitiveness in the global market.
Vietnam Fintech is predominantly driven by payments and mobile wallets. By the end of 2023, Vietnam Fintech had 32.77 million active e-wallets. Additionally, the average number of payment transactions via Internet and mobile channels grew annually by 52% and 103.3%, respectively, between 2021 and 2023.
The State Bank of Vietnam (SBV) and the Ministry of Finance (MOF) are the regulators responsible for the authorization and supervision of banks, insurers and other financial institutions in Vietnam.
The official currency in Vietnam is the Vietnam đồng, symbolised by ₫ or VND. Vietnamese notes are a mix of small paper bills (no coins are used), and larger polymer bills, in values from 10,000 VND to 500,000 VND. If you're confused by all the zeros, mentally remove three zeros to get a simpler number.
Any foreigner with a valid passport and visa may open a bank account in Vietnam. All kinds of visas are suitable for these purposes. Opening a personal bank account takes about 1 hour.
Bank of America has decided to shut its Hanoi branch and will wind down its Vietnam operations by the end of next month, a member of its staff said Tuesday. The staff member said the bank's U.S.-based head office had decided to end operations in Vietnam to reduce costs.
Most Vietnamese locals primarily use cash, but card payments are becoming increasingly more popular. If you're going to be travelling to well-known tourist areas, you'll be able to pay for almost everything by card. However, there are still certain situations when you might need cash.
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