Opening the marker door under World Trade Organisation (WTO) commitments is a new condition for foreign banks to re-sketch the dong mobilisation market share from 2011.
According to a new table applied from January 12, the dong deposit rates of HSBC Bank (Vietnam) Ltd are very attractive with the highest rate of 13.7 percent a year on terms of 3 to 12 months, a fair competition with native lenders.
HSBC is one of five wholly-foreign invested banks licensed in Vietnam, together with Standard Chartered, ANZ, Shinhan and Hong Leong. Its presence and operation network have been developed via transforming its branches into 100 percent-invested subsidiaries. Interest rate competition is one of key targets the bank is tapping.
In 2011, it will not be surprising if the market welcomes such an attractive dong deposit rate table from foreign banks because it is an important year.
Before implementing WTO commitments, there were many technical restrictions for foreign banks operating in Vietnam.
Regarding capital mobilisation, foreign banks were disallowed to receive deposits or savings in any form, but under the State Bank of Vietnam’s regulations, they were only allowed to receive demand deposits in dong from the entities and individuals who had not credit relations of 25 percent at maximum of their chartered capital. They may receive term deposits from the institutions who had credit relation of less than 50 percent of their registered capital.
But according to WTO commitment roadmap, foreign banks in Vietnam are allowed to provide most banking services such as lending, receiving deposits, leasing finance, foreign currency trading, monetary instruments, derivative instruments, monetary brokerage, asset management, payment service, financial consultancy and information.
Especially, in terms of deposits, 2011 sees a big change. Foreign bank branches may get deposits in dong without limitation from entities. Deposit raising roadmap of those banks will be relaxed within 5 years as from January 1, 2007 with a maximum of 650 percent of banks’ legal charter.
Along five 100 percent foreign-invested banks, the number of foreign bank arms in Vietnam reaches 40, many of them en masse completed their capital increases by late 2010. The roadmap of opening market door comes, 2011 is expected to see a new competitive factor in capital mobilisation in the whole banking system.
Hard to re-draw market share picture
In the analysis reports of some investment institutions or in assessment of insiders, the new competitive factor is “in precaution” for domestic lenders from this year. However, a big change in Vietnam’s banking market share will be hard to happen immediately. Foreign banks will difficultly occupy the dong mobilisation segment that remains having many restrictions and barriers.
At a press meeting in 2010, Ashok Sud, general director of Standard Chartered Vietnam also remarked he was not pleasured as heard questions on competition between domestic and foreign banks. He only said, 90 percent of market share now belongs to local lenders and the position will be hard to change in 10-15 years.
During the past four years, the market share of dong mobilisation (counting joint venture banks, 100 percent foreign invested banks, foreign branches) never exceeded 6 percent of total structure in the system, even between late 2007 and Q1 of 2010, the piece was narrowed to 4.3 percent from 5.5 percent, according to statistics.