VietNamNet Bridge - Many banks were established after investors injected money into the banking sector which was believed to be the most lucrative business field. However, only a few of them remain in good health.

Embryonic signs of the ‘bank rush’ were seen in 2005, while the movement sped up after the news about Vietnam’s process of joining the World Trade Organization (WTO).

A source said that after the regulation on bank establishment and organization was released in June 2007, the applications for establishment of 25 banks with chartered capital of between VND1 trillion and VND3 trillion were made to the State Bank.

With the regulation, the State Bank officially resumed the licensing of new commercial banks after a decade of interruption.

Investors then rushed to queue up for the licenses for setting up banks. They included state-owned economic groups and general corporations, ministries which have no relations with business fields, and even provincial authorities.

Applications for bank establishment were not approved, but bank shares were hunted in the market. 

On August 8, 2008, the government instructed to halt the licensing of new banks until the State Bank could set stricter requirements. Counting foreign invested banks, the number of applications for bank establishment was over 50, of which 15 received approval in principle.

However, 11 out of 15 banks never turned up before the public. The plan on establishing Hong Viet Bank failed because PetroVietnam, a big shareholder, was requested to withdraw investments from non-core business fields.

The other four were established, and have been maintaining their operation since then, including VietBank which was set up in 2007, and Bao Viet, Lien Viet and Tien Phong in 2008.

In the Vietnamese banking history, 2006-2008 was marked as the period for restructuring of rural banks. 

The State Bank offered two options to the bankers: increase chartered capital to become urban banks, or merge with other banks. 

The policy on allowing rural banks to become urban banks then gave golden opportunities to investors: they once again could invest money in banks, though the State Bank stated it had halted granting new licenses.

Raising chartered capital to become urban banks was the choice of all the rural banks. 

Meanwhile, state-owned economic groups and general corporations rushed to pour money into the rural banks to set up urban banks. 

Later, when analyzing the movement, experts pointed out that the bank boom in that period caused serious consequences: state-owned corporations lost capital because of ineffective investments in business fields in which they were inexperienced.

VNE