Vietnam steps up efforts to boost weakened banking sector

The government aims to have up to five banks listed on foreign bourses.

The Vietnamese government is stepping up efforts to revamp its local banking sector under its master development plan until 2025 with the goal of having three to five banks listed on foreign stock exchange markets within seven years, reports Viet Nam News.

Plagued by a wide range of legacy problems including weak regulatory frameworks, crony capitalism, corruption and state-directed pricing, Vietnam’s banking sector is set to undergo a massive restructuring system in the 2018-20 period to enhance the competitiveness of local banks.

Vietnam also targets to have at least two or three local lenders within Asia’s top 100 largest banks by assets by 2025 and keep headline nonperforming loan ratio under 3%.

To help state banks achieve equity capital requirements in compliance with Basel II norms, the Prime Minister has tapped on the central bank and ministries of Finance and Planning and Investment to submit government plans.

The new strategy also includes a improving the central bank’s independence, activeness and accountability for directing monetary policy, controlling inflation, supporting macro-economic stability and fuelling sustainable economic growth.

However, Vietnam's efforts to boost its local banks may come at the expense of foreign banks amidst reports that the administration is aiming to limit or even halt the issuance of new foreign bank licenses in a bid to encourage the weakened local banks through consolidation.

“Soon, Vietnam will strictly limit, or may stop issuing new licenses for 100-percent foreign owned banks in the country,” Deputy Prime Minister Vuong Dinh Hue said in a statement.

Also read: Can foreign lenders break Vietnamese banks' legacy problem?

Foreign lenders are hampered by a series of problems impeding their expansion plans including the rule prescribing a 30% cap on foreign ownership in Vietnamese banks, making managerial control doubly difficult.