Vietnam allows foreign owned banks wider role
HANOI - Communist-ruled Vietnam said it will allow foreign-owned banks to offer a full range of services in the country beginning next Friday as it moves to open the financial sector.
Hanoi has committed to providing a level playing field to all credit institutions as Vietnam seeks to join the World Trade Organisation, a step that is expected later this year.
Five state-run banks control nearly 70 percent of lending, and the government has until now only allowed foreign banks to set up branches or a limited number of joint ventures with domestic banks.
Lending in the country of 83 million people has expanded by 25 percent a year in recent years and the government is targeting annual economic growth of between 7.5 percent and 8 percent until 2010.
Prime Minister Phan Van Khai said in a decree seen on Friday that foreign banks would be allowed to conduct all types of business done by a commercial, development or investment bank.
"In future there will be no differences between foreign banks and domestic banks, between state-run and joint stock commercial banks," Phung Khac Ke, deputy governor of the central bank, said in a state-run Voice of Vietnam radio broadcast.
Advantages of Vietnamese banks include awareness of culture and long-term relations with key customers in the country, Nguyen Hoa Binh, chairman of state-run Bank for Foreign Trade of Vietnam's management board, told an investment forum on Thursday.
But they are financially weak so the government should allow them to form groups to gather strength for competition from outside after the country gains WTO entry, Binh said at the forum.
Foreign banks have set up nearly 30 branches in Vietnam, including ANZ (ANX.AX: Quote, Profile, Research) , HSBC Holdings (HSBA.L: Quote, Profile, Research) (0005.HK: Quote, Profile, Research) , Standard Chartered (STAN.L: Quote, Profile, Research) (2888.HK: Quote, Profile, Research) and Citigroup (C.N: Quote, Profile, Research) . Foreign banks operate four joint venture banks and have 47 representative offices.
Vietnam also has more than 30 semi-private banks but none of them is listed.
Since March 2005 three of them, Sacombank, ACB and Techcombank, have each sold a 10-percent stake to ANZ, StanChart and HSBC respectively, to prepare for competition.
Sacombank and ACB also planned to list on the country's stock market. The central bank has approved Sacombank to list and is looking at a similar application by ACB.
Another three semi-private banks have been talking, or planned to raise funds by offering shares to foreign banks.
The government rules specify that qualifying banks must show that a single foreign bank owns more than 50 percent of registered capital. Foreign banks also must have assets of at least $10 billion in the year before they file an application to operate in Vietnam.
The government said the central bank would grant or reject licence applications from foreign banks within 90 days.
By Ho Binh Minh - Reuters - March 17, 2006.
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