Vietnam to limit number of foreign banks in the market

PUBLISHED : Wednesday, 09 November, 1994, 12:00am
UPDATED : Wednesday, 09 November, 1994, 12:00am

VIETNAM plans to limit the number of foreign banks operating within its primitive but expanding monetary system to about 20.

Cao Sy Kiem, governor of the State Bank of Vietnam, said that time would soon be running out for top-shelf banks to approach the country.

'We think 20 will be about enough,' Mr Kiem said, denying that the bank was coming under pressure from Vietnamese institutions fearful of the foreign invasion.

'We will open more [foreign] affiliates from the countries that have high standards in the banking industry and good and friendly relations with Vietnam, such as France, America, Germany, Britain and countries in the region.

'The Japanese have been slow but they have already made contact and we have reserved them a place.' While the Japanese have been cautious, other banks - including Hongkong Bank and Standard Chartered - have moved in swiftly, despite similar worries about the strength of the market.

Bankers consider immediate profitability a near impossibility with foreign banks facing a mixed bag of taxes on turnover amounting to 40 per cent, while the State Bank requires US$15 million be kept in each branch as reserves.

Adding to the unease of bankers is a domestic market in which lending of any sort to Vietnamese is some years away, with no commercial code, lax accounting standards and little clear collateral.

Both foreign and Vietnamese banks must also battle to overcome a traditional mistrust of banks, where only an estimated seven per cent of savings flow within the banking system.

Estimates of the gold and dollars hoarded in private homes - being spent far from any institution - range from $1 billion to $3 billion.