“Local banks had better look at themselves at once” was the very urgent warning to the Vietnamese banking sector after the release of the latest United Nations Development Programme survey, undertaken in conjunction with the Ministry of Planning and Investment. The survey showed that up to 42% businesses and 50% of individuals believed that when Vietnam’s financial market opens to foreign investors, they will take loans from foreign creditors or banks rather than domestic banks.
In addition, 50% of businesses and 62% of Vietnamese citizens said that they would choose to deposit their savings in foreign banks.
“It’s too surprising, and a big concern,” said Le Xuan Nghia, head of the State Bank of Vietnam’s banking development strategy department upon hearing the news.
The situation spells a disadvantage for domestic banks, while competition keeps getting tougher as the domestic financial market opens. Simply put, those banks that attract more deposits will hold the top positions in the market.
Businesses surveyed said that the shift of favour toward foreign banks is a sign that foreign banks are usually more professional, have more simple credit procedures, better banking services and especially higher confidence rates than local banks.
“With the above figures and causes, it’s obvious that domestic banks ought to look at themselves at once and even watch out with massive arrivals of foreign banks in case it might be too late,” Nghia warned.
Although the statistics are the result of a select survey, they are sign enough of a slowly rising danger to Vietnam’s commercial banks.
Nghia said that the State Bank of Vietnam would continue to conduct similar surveys of banking customers to draw a common conclusion on banking operations in Vietnam in order to devise a competition strategy for domestic banks.