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Banking System in Vietnam

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Banking System in Vietnam Member: Nguyen Viet Nhan Nguyen Thi Thu Huyen Nguyen Thi Tuong Van Nguyen Thi Thuy Contents Vietnam Economics Overview Introduction banking ... – PowerPoint PPT presentation

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Title: Banking System in Vietnam


1
Banking System in Vietnam
  • Member
  • Nguyen Viet Nhan
  • Nguyen Thi Thu Huyen
  • Nguyen Thi Tuong Van
  • Nguyen Thi Thuy

2
Contents
  • Vietnam Economics Overview
  • Introduction banking system in Vietnam
  • Structure
  • Regulations
  • Vietnam Banking Sector
  • Banking asset
  • Banking deposit
  • Banking loan
  • Credit market
  • Capital market
  • Financial market
  • Opportunities and threats
  • Risks
  • Recommendations for banking system in the future

3
Vietnam Economics Overview
  • Annual GDP
  • Income and Consumer Price index
  • Inflation rate
  • Interest rate
  • FDI
  • Import, export and Exchange Rate

4
Vietnam Economics Overview
5
Vietnam Economics Overview
  • Annual GDP

6
Vietnam Economics Overview
  • Income and Consumer Price index

7
Vietnam Economics Overview
  • Inflation rate
  • High rate due to
  • Government of Vietnam aim to control inflation
    rate which impact to its economy growth Rate
  • Appreciation the local currency
  • Unsuccessful

8
Vietnam Economics Overview
  • Interest rate
  • Sharp rise in VNIBOR in late 2006 reflected a
    slowdown in a local liquidity growth (including
    increased borrowing in domestic market and end of
    the year tax payments)
  • SBV set the ceiling interest rate not over 12
    for now
  • (VNIBOR Viet Nam Interbank Offered Rates Lai
    suat lien ngan hang VN)

9
Vietnam Economics Overview
  • FDI
  • Major goal of Vietnam's FDI policy is to attract
    capital, advanced technology, and management
    skills in order to effectively explore the
    country's potential, increase savings, improve
    people's living standard and realize the cause of
    modernization and industrialization
  • By 2010, the government aims to achieve the
    increase investment relative to GDP to 40, of
    which domestic capital accounting for 65 and
    external for 35

10
Vietnam Economics Overview
  • Import, export and Exchange Rate
  • Despite reduction of import tariff, strong FDI,
    Vietnam still face with trade deficit due to
    increase in domestic consumption, higher import
    prices
  • The decision of the State Bank of Vietnam to
    tighten monetary policy (raised the base rate to
    8.75 percent from 8.25 percent, refinancing rate
    to 7.5 percent from 6.5 percent, and discount
    rate to 6 percent from 4.5 percent. )
  • ? Given the rise in inflation, widening of the
    trade deficit and increasing interest rate

11
Equitisation Schedule
12
Introduction Vietnam Banking System
  • The State Bank of Vietnam
  • Being a Government agency and the Central
    Bank of the Socialist Republic of Vietnam
    performing state management on monetary issues
    and banking activities being the money issuer,
    the bank for credit institutions and doing
    banking services for the Government, the SBV
    works to aim at stabilizing the currency value,
    contributing to ensure the safety of the banking
    and financial system promoting socio-economic
    development.
  • The SBV consists
  • SBV headquarter (based in Hanoi)
  • SBV branch offices in provinces and cities
  • Representative offices overseas

13
Introduction Vietnam Banking System
  • Commercial bank system in Vietnam consists
  • 5 State-owned Commercial Banks (SOCBs)
  • Bank for Foreign Trade of Vietnam (VIETCOMBANK)
  • Industrial and Commercial Bank of Vietnam (ICB)
  • Bank for Investment and Development of Vietnam
    (BIDV)
  • Vietnam Bank for Agriculture and Rural
    Development (VBARD)
  • Mekong Housing Bank (MHB)
  • 34 joint-stock commercial banks
  • Eximbank ACB Sacombank VPbank - SBIT
  • 4 joint-venture banks,
  • Indovinabank VID public bank Vina Siam bank
  • 35 branch offices of foreign banks and
    representative offices
  • 6 Financial companies
  • 10 Finance-leasing Companies
  • Foreign Banks
  • HSBC - ANZ

14
Introduction Vietnam Banking System
  • Market share
  • 5 SOCBs Vietcombank Incombank BIDV
    Agribank MH Bank

15
Introduction Vietnam Banking System
  • Legal status
  • Vietnamese banks, branches of foreign banks,
    financial institutions as well as credit funds
    are operating under the Vietnamese law and are
    equally treated by the law.
  • Commercial banks have the right to control over
    their own financial matters, bear
    responsibilities for their own business results.
  • Deposits by the public are insured..

16
Vietnam Banking Sector
  • The 2007
  • Deposits at banks grow 55 - over VND442.5
    trillion
  • Outstanding loans up 51 to almost VND347
    trillion.
  • Joint-stock banks
  • A market share of 46.3 in deposits and 46.8 in
    lending terms,
  • The State-owned lenders
  • Shares of 35.3 in deposits and 30.8 in lending
    terms
  • The central Bank expects for 2008
  • Deposit at banks grows 35-37
  • Outstanding loans grows 32-34
  • Profits grows 35-40

17
Vietnam Banking Sector - Assets
  • Banking asset
  • Domestic banks must have a registered capital of
    1 trillion dong to be qualified to sell shares to
    foreign banks. Vietnam caps foreign ownership of
    a domestic bank at 30 with a 15 limit for a
    strategic investor.
  • A foreign bank can own 10 and a non-bank
    investor that is not a strategic investor can own
    5. In exceptional cases, the government could
    allow a foreign strategic investor to own 20 of
    a Vietnamese bank .
  • 10 of Vietnam's 85 million people have bank
    accounts
  • There are 4,000 bank branches, half of them
    belonging to Agribank, Vietnam's largest
    enterprise.
  • The central bank has given initial approval for
    nine banks to start operations.
  • Oil and Gas Bank
  • Lien Viet Bank
  • Bao Viet Bank
  • FPT Bank
  • Energy Bank
  • Asia Foreign Trade Bank
  • Vietnam Star Bank
  • Dong Duong Thuong Tin Bank
  • Bao Tin Bank
  • Lien Viet Bank, or the United Vietnamese Bank,
    which has aregistered capital of 3.3 trillion
    dong and has Agribank, Vietnam's largest bank, as
    one of its co-founders, had said it would start
    operations in late April.

18
Vietnam Banking Sector - Deposit
  • Deposit is increasing
  • Racing interest rate among banks to attractive
    capital

19
Vietnam Banking Sector - Loans
  • Loans for real estates and securities
  • SVB warnings to stop loans for real estates and
    securities
  • Weak liquidity of mortageable stocks in security
    market
  • Consequences
  • Loans for import activities and commodity demand
    are prioritized
  • Loans for consumption is continued to apply in
    big-scale banks
  • Outstanding loans continues in decline
  • Deflation purpose of SVB
  • Effective investment will be focused by debtors
    due to high interest rate and too difficult for
    any long-term loans.
  • No signal of recovery in real estates and
    security market in 2008
  • End April 2008 outstanding loans increasing by
    14.73 vs end year 2007 while targeted level is
    35-37 for full year 2008.
  • April 2008 outstanding loans increasing only
    1,66 vs March.

20
Vietnam Banking Sector Credit Market
  • In the first quarter of 2008
  • Banks' mobilized capital VND518.5tril
  • Total outstanding loans VND460tril
  • ?the loaned sums accounted for 88 of mobilized
    capital, a very high proportion.

21
Vietnam Banking Sector Capital Market
  • There are 2 exchanges
  • Ho Chi Minh City Security Trading Center (HOSTC)
    began operations in 2000
  • 30 list firms in 2005 110 in early 2007
  • The value US4bn by the end 2005 US13.4bn at
    the end of 2006 close to US17.6bn as of April
    2007
  • An over-the-counter exchange in Hanoi (HSTC)
    started in 2005
  • 77 firms by the end of 2006
  • Total exchange value US677m
  • In value and daily turnover
  • Foreign participation 25
  • Ownership
  • Foreigner 49
  • Banks 30

22
Vietnam Banking Sector
  • Joint Stock Banks
  • ACB and Sacombank are very strong in service
    offering
  • For most banks, interest income accounts for more
    than 50 of total income
  • Increases in non-interest income are caused by
    expansion of non lending activities

23
Vietnam Banking Sector
  • Foreign Banks with their market share
  • HSBC acquired 15 share in Techcombank
  • ANZ acquired 10 share of Sacombank is 10
  • Standard Chartered acquired 15 share of ACB

24
Vietnam Banking Sector - Opportunities
  • High potential market increasing demand on
    banking service and capital (10mil. Bank account,
    5 mil. ATM cards)
  • Barrier is gradually removed for equitization and
    privatization process.

25
Vietnam Banking Sector - Threats
  • Economic risk
  • Inflation increasing
  • Interest rate rise
  • Economic overheating threatening sustained
    economic growth over the medium term (Credit
    growth has risen to about 50 percent,
    contributing to a rise in inflation, which
    exceeded 14 percent in January 2008)

26
Vietnam Banking Sector - Threats
  • Weakness of Banking system
  • Poor performance for Vietnamese banks
  • Low competitiveness
  • Weak finance resources
  • Small scale
  • Low quality and efficiency
  • Low professional management skills
  • Low technology
  • Poor risk management
  • Problem of bad loans
  • Poor credit appraisal skill of staff and loan
    monitor system

27
Vietnam Banking Sector - Threats
  • Financial risk
  • Current account deficit Sharp widening of the
    trade deficit (external current account deficit
    is about 10 percent of GDP in 2007 and that its
    financing shifted toward capital flows other than
    foreign direct investment and aid flows)

28
Vietnam Banking Sector - Threats
  • Financial risk
  • Liquidity risk
  • Current policy regime from SBV credit limit of
    30 ? Cash shortage
  • Impact from real estate market

29
Vietnam Banking Sector - Threats
  • Threats from joining WTO
  • High credit risk, small scale in asset and
    equity, less competitiveness, weak management?
    Bankruptcy
  • Challenging from maintaining market share and
    expand internationally
  • Inadequate and inefficient law system
  • Growing competitive pressure in domestic market
    for banking

30
Recommendations
  • Completing legal framework for banking (include
    law on state bank and credit institution to be in
    line with the socio-economic development,
    strategy for banking system development, develop
    and effectively operate the money market)
  • Building a safe and efficient banking system in
    Vietnam
  • Financial restructuring more chartered capital
    required for commercial banks
  • Banking supervision and inspection restructuring
  • Expansion plan, technology modernization,
    competitiveness improving
  • Following international standards in risk
    management, asset and liability management,
    capital management, modern credit system and
    credit manual based on international standard

31
Thank you for your attention!
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