Upon assessing potentials of banks, experts said, in the post-crisis time, what is the most important is how to make improvements so that domestic banks would catch up with foreign banks. Experts suggested that domestic banks need to take steps to become strong as these (domestic banks) are weak in all aspects compared to foreign banks in Vietnam.
Nguyen Duc Huong, CEO of Lien Viet Bank pointed out that while Vietnam's economy has experienced a bad phase, the banks had no way but to decline clients because of insufficient liquidity.
However, the foreign banks snapped up this opportunity to attract big clients.
The reason is that domestic banks are now short of US dollars to offer loans with low interest rates to big projects. Meanwhile, foreign banks have large capital in foreign currency and are ready to finance projects that domestic banks cannot.
Credit activities of foreign banks are carried out in not only Vietnam but also in other countries [dual credit], which help foreign banks have better advantages compared to domestic banks.
Huong said that Vietnam's banks are now weak compared to foreign banks regarding four competitive factors, total assets, banking technology, human resource and international-standard management capacity.
In the meantime, foreign banks in Vietnam are worried much as the latest revised draft of credit law has put tough requirements on restricting credit limit and ownership equity of banks.
The new draft regulates that total credit limit for a client is not allowed to exceed 15 percent of ownership equity of a foreign bank or a branch of a foreign bank.
Akihiro Saito, general director of Hanoi branch of Mizuho Corporate Bank (Japan), said at a meeting held in Hanoi on June 29 that if the newly-draft regulation becomes effective, branches of foreign banks will face two options, either to cut total credit balance to clients or to raise ownership equity of branches so that they can maintain current credit balance offered to clients.
In case branches cannot raise their ownership equity, they will have no way but to reduce much total credit balance to clients and it will be very difficult in providing new credit to clients.
On the other hand, the representative from Mizuho analysed that amidst the current unstable global financial context, credit organisations must take cautious steps. Raising ownership equity of branches is big decision that is in fact hardly realised.
"I believe that changing such a statute will lead to negative effects to Vietnam's economy as well as investment activities of businesses," said Saito.
Sharing the same views with Saito, Do Thi Thanh Thuy, representative from Korea Exchange bank- Hanoi branch, said that there are now three Korean banks operating in Vietnam with total legal capital of $60 million. In fact, 15 percent of the above capital is not sufficient to disburse to a client. At present, they have already disbursed up to $20 million to a project in Dung Quat.
What is important to Vietnam's banking system is restructuring the banking sector, tightening licensing activities.
Restructuring the banking system, although having been kicked off from 2001, banks have not been improved so far.
"What is the most important is applying new technologies, forcing banks to change management ways, train human resources and enhance risk management. Only by these ways, banks can become better," said PhD. Le Xuan Nghia.
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