The opening of the market under the WTO commitments is a golden opportunity for foreign banks to obtain a bigger market share in Vietnam dong capital mobilization. However, analysts say in this business it will not be easy for foreign banks to get the upper hand over Vietnamese banks.
The interest rates applied as of January 12, 2011 by the Hong Kong and Shanghai Banking Corporation (HSBC) prove to be very attractive. The highest interest rate of 13.7 percent is being offered for Vietnam dong deposits for a term of 3-12. It is clear that the foreign bank is trying to offer fairly attractive interest rates in order to compete with domestic banks in mobilizing Vietnam dong capital.
HSBC is one of the first 100 percent foreign owned banks licensed in Vietnam (the other four include Standard Chartered, ANZ, Shinhan and Hong Leong). There are five 100 percent foreign owned banks and 40 foreign bank branches operational in Vietnam.
Analysts say it would be not a surprise at all if more and more foreign bank and foreign bank branches announce such attractive interest rates for Vietnam dong deposits. 2011 is a really important year for foreign banks.
The doors are opening
Before Vietnam joined WTO, the country set many technical barriers for foreign banks in Vietnam. In terms of capital mobilization, foreign banks were not allowed to accept savings from the public in any form. They were only allowed to accept demand deposits in Vietnam dong from legal entities and individuals who did not have credit relations with the banks, while the deposits could not be higher than 25 percent of the capital of the parent banking groups. In addition, they were allowed to accept fixed term deposits from the institutions that did not have credit relations with the banks, and the deposits could not be higher than 50 percent of the chartered capital.
However, under the process of opening the bank market in Vietnam, foreign banks have gradually obtained more rights to provide services that they were not allowed to provide in the past. Now they have the right to provide most banking services, such as lending, accepting deposits, financial leasing and trading foreign currencies, providing asset management, payment service, consultancy services and financial information.
Especially, in terms of capital mobilization, big changes will occur in 2011. Foreign bank branches have been allowed to accept deposits in Vietnam dong with no limitations from legal entities. The process of mobilizing deposits from Vietnamese individuals is loosening over a 5-year period that commenced on January 1, 2007. The banks will be allowed to mobilize capital equal to 650 percent of the legal capital of the banks, while the full national treatment will occur by 2011.
Therefore, analysts have predicted that the Vietnam dong capital mobilization market will become more active with the appearance of foreign banks.
It’ll be not easy for foreign banks to re-arrange the market share
Analysts all say that they do not see any evidence showing that big changes in the Vietnam dong capital mobilization market will occur in 2011.
It is will be really difficult for foreign banks to expand their business in Vietnam dong capital mobilization because many barriers still. An outstanding case, HSBC proved to be very quick in developing its network. By 2010, the bank had had 12 transaction points instead of only two branches as seen the year before. However, the network is very small if compared with domestic banks’.
Meanwhile, the barrier for foreign bank branches is that they are not allowed to set up transaction points besides the branches’ headquarters. (However, the bank branches are allowed to install and run ATMs and issue credit cards based on full national treatment since Vietnam joined WTO).
At a press conference in 2010, Ashok Sud, General Director of Standard Chartered Vietnam said that 90 percent of the market share is now being held by domestic banks, and the situation is not likely to change in the next 10-15 years.
Statistics showed that in the last four years, the share of the Vietnam dong capital mobilization market held by foreign invested banks (joint venture banks with foreign partners, 100 percent foreign owned banks and foreign bank branches) never exceeded six percent.
Source: Thoi bao Kinh te Vietnam
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