VietNamNet Bridge – There are numerous bank branches and transaction offices in big cities, while more and more “banking streets” have risen. However, the situation will no longer exist, since the State Bank has vowed to tighten the control over banks’ network development.

SBV tries to “disbranch”

The Circular No. 21 of the State Bank of Vietnam on commercial banks’ networks stipulates that banks have to meet a series of requirements to be able to open domestic branches. They must have the minimum operation duration of 12 months, make profit during the operation, strictly follow the current regulations on debt classification and provisioning against risks.

Especially, the non-performing loan (NPL) ratio of the banks must not be higher than 3 percent of their outstanding loans.

Bank branches can only set up transaction offices when their NPL is no higher than 3 percent of their outstanding loans. The transaction points must not provide the loans worth more than VND2 billion to a client, unless the loans are guaranteed by the money, saving cards and valuable papers issued by the banks themselves.

From October 23, 2013, the day when the new circular takes effects, a new bank branch can be established only if it has the capital of VND300 billion, much higher than the currently applied regulations which require the minimum capital of VND100 billion.

The regulation which has most caught the special attention from the public is that commercial banks can set up no more than 10 branches in the inner cities of Hanoi and HCM City.

No more savings banks, transaction points

The decision by the State Bank to remove savings banks and transaction points has been applauded by experts.

Explaining the mushrooming of savings banks recently, a banker said this is the way that helps banks dodge the central bank’s regulations on banks’ networks.

He went on to say that the central bank has very strict regulations on the locations and the number of transaction offices banks can open in a locality. Meanwhile, there is no strict regulation for savings banks.

In other words, banks set up savings banks because they have to follow less complicated procedures to do this. In fact, the savings banks have been operating like a transaction office.

In principle, savings banks are not allowed to provide credit. However, in fact, they still have been granting loans to clients, provided that the directors of the bank branches that manage the savings banks sign the documents.

The officers of savings banks are also requested the same tasks as the officers of transaction offices, from the ones on capital mobilization, card issuance to outstanding loans.

The same problems have also been existing with transaction points. In principle, the transaction points just serve to do the marketing and introduce banks’ services, while they do not have stamps. However, they have been operating exactly like transaction offices or savings banks.

The director of a joint stock bank said the bank itself has restructured its network over the last year in the context of the economic crisis. The bank strives to become a retail bank, which means that it needs to expand the network to increase its presence in the market. However, the banker said some unprofitable branches and transaction offices have been closed.

“A branch gobbles up a lot of money, and it would be a big waste to run it if it does not bring the desired effects,” he said.

Thanh Ngoc