VietNamNet Bridge - By 2020, Vietnam will have to open the market in at least 70 percent of the banking and financial services to bankers in ASEAN.

 

By 2020, Vietnam will have to open the market in at least 70 percent of the banking and financial services to bankers in ASEAN.

An analyst commented that compared with the trade sector, the integration in financial and banking has been going more slowly. The banks in Singapore, for example, have applied Basel III standards, while Vietnamese now apply Basel II.

Within the framework of TPP, the biggest challenge for Vietnamese banks would be in the competition for services as TPP allows the banks of 12 TPP member countries to provide banking services across the border. This means that the banks in the US can provide remittance and card services to Vietnamese citizens while there is no need to set up their bank branches in Vietnam.

The competition for staff is also believed to be very stiff in the time to come as TPP stipulated that there will be no discrimination in hiring people of different nationalities for high-ranking personnel.

According to Can Van Luc, a banking expert, Vietnam’s financial market openness is now about 30 percent, while the figure would be at least 70 percent in the time to come. 

Vietnam’s financial market openness is now about 30 percent, while the figure would be at least 70 percent in the time to come

Vietnamese commercial banks have launched many new services recently, but to date, there are only 83 retail and 97 wholesale products so far.

The Vietnamese financial market (banking, stock, insurance and bond) is not large, equal to 150 percent of GDP, and just higher than that of Laos, Cambodia and Indonesia. 

The structure of the financial market is in imbalance: the banking system accounts for 75 percent, while the remaining 25 percent is the stock, bond and insurance markets. 

The bank credit reserved for private businesses in Vietnam is 100 percent of GDP, which is not high if noting that the average rate in the world is 125 percent of GDP.

This is attributed to the capital market’s imbalance: the stock market just makes up 32 percent of GDP, much lower than 98 percent of China, 54 percent of Indonesia and 86 percent of India. 

Meanwhile, the bond market is very weak, which just makes up 20 percent of GDP; the goods available there are mostly government bonds.

The total assets of the Vietnamese banking system are much bigger than the banks’ stockholder equities. However, the capital adequacy ratio (CAR) is relatively high at 12 percent (it was 13 percent in 2014), which is higher than the required level of 9 percent.

The ratio of cost on income of the Vietnamese banking system was 62 percent in 2013 and 57-58 percent in 2014, higher than the average rate of 43-45 percent in the world.

The ROE (return on equity) is very low at 5.5 percent because of the low NIM (net interest margin) at 3 percent, the lowest among regional banks. 


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