With the advantages of foreign banks, domestic banks are facing many difficulties, even the risk of losing at home if they do catch up.
Foreign banks were stepping up their activities in Vietnam market, making the competitive pressure on the financial and banking market fiercer. In which foreign banks were possessing many advantages. According to experts, that was what predicted early when the economy opened to integration. Besides, this competition brought many benefits to people and businesses.
Expand coverage
Woori Bank Vietnam Limited had just been approved by SBV to open five branches in five provinces and cities at the same time. When five offices mentioned above open, Woori Bank will have up to 14 offices, even though they had only operated in Vietnam for nearly three years.
The foreign bank with the broadest operational network in Vietnam was Shinhan Bankanother Korean bank. With the opening of four more branches and transaction offices in Da Nang, Hanoi, Hai Phong and Binh Duong in late July and early August, Shinhan was then present in both North, Central and South with 36 branches and transaction offices.
To expand the coverage, foreign banks were very interested in improving their financial capacity. For example, recently, Public Bank Vietnam Limited was approved by SBV to increase its chartered capital to 6 trillion dong. According to the statistics of SBV, by the end of April 2019, the total assets of the joint venture and foreign banks were 1.125 quadrillion dong, of which chartered capital was 116.62 trillion dong, rising 2.76 percent compared to the end of 2018.
Strengthened financial capacity was the ground for foreign banks to improve their operations in depth. Having the advantage of cheap capital from the parent bank as well as superior technology, foreign banks were expanding their operations into segments which were inherently strengths of domestic banks, such as lending to small and medium businesses, consumer loans, etc.
Citibank, N.A. Hochiminh City Branch for example had just been added a series of operations: business financial advisory, advisory of purchase, sale, consolidation, merger of enterprises; buying and selling corporate bonds; money brokerage service; electronic wallet; investment in government bond futures contracts, etc.
Businesses benefit
With the advantages of foreign banks, domestic banks are facing many difficulties, even risk losing at home if they do not catch up.
However, competition in a market economy is unavoidable, and this problem had been warned early by experts when Vietnam’s economy was open for integration. According to Lawyer Truong Thanh DucChair of the Members’ Council of BASICO Law Company, because the economy deeply integrated and the international trade became more common than before, the bank would have more opportunities to increase the size, quantity and customers supply service value. However, domestic banks also faced the challenge of competing with foreign banks, including presence and non-presence in Vietnam. With modern technology system and highly qualified human resources, foreign banks had a competitive advantage over local banks.
According to a banking expert, the competition also helped to filter out weak banks, and to some extent, it also put pressure on domestic banks to innovate and improve the quality of customer service. Accordingly, people and businesses would have the opportunity to access new products and services following international standards at affordable prices.
However, it was undeniable that access to credit capital of foreign banks was not easy. Foreign banks often required stringent financial transparency which was the weakness of small domestic businesses. Therefore, the number of local enterprises having access to international banks’ capital was not much, in a banking expert’s opinion.
