Socialist Republic of Vietnam

Vietnam New Agency - March 31, 2004

Ha Noi, Mar. 31 (VNA) - The State Bank of Viet Nam (SBV) recent decision to allow foreign bank branches and joint venture banks to freely open accounts at overseas banks aims to boost their operation in Viet Nam, said an SBV official.

Kieu Huu Dung, Acting Director of the SBV's Department for Banks and Non-bank Credit Organisations, said the move was part of the bank's on-going efforts to create a level playing field for all financial institutions in Viet Nam.

The move also showed the SBV's increased capacity in dealing with foreign banks as a market regulator that no longer takes administrative action to intervene in the market, Dung said.

On reforming policies for foreign financial institutions in Viet Nam, Dung said the SBV is revising Decree No. 13 on the organisation and operation of foreign banks in Viet Nam.

The revised decree, expected to be issued by the end of this year, will allow foreign banks to establish wholly-foreign-owned banks in Viet Nam with legal status similar to Vietnamese banks.

The revisions will focus on reducing restrictions on foreign banks' operation in line with the Viet Nam - US Bilateral Trade Agreement and the Government's commitments made during negotiations on the country's access to the World Trade Organisation. Noteworthy, the restriction on capital mobilisation in VND by foreign individuals and legal entities will be gradually removed towards a common legal framework for all financial institutions.

The capital in Vietnamese dong that foreign branches in Viet Nam are currently allowed to mobilise is limited at a maximum rate of 50 percent of their registered capital. For US banks, the figure is 500 percent.

The SBV also plans to issue regulations to encourage foreign banks to invest in Viet Nam's financial market, such as to increase the 10 percent limit on share ownership by foreign banks in joint stocks bank in Viet Nam.

Dung also spoke about the satisfactory results of the operation of foreign-invested finance establishments in Viet Nam over the past few years. In 2003, 27 branches of foreign banks, four joint venture banks, three finance leasing companies and 42 rep. offices of foreign credit organisations in Viet Nam continue operating fruitfully. The total property of almost all branches of these banks and joint ventures increased, with high increase in outstanding debts, improved service quality, drops in the rate of overdue debts. All joint venture banks operated profitably. Their profit increased by 23 percent last year.

Rep. offices of foreign credit organisations also operated effectively, becoming a reliable bridge between foreign investors and Viet Nam. Through these rep. offices, a number of lending projects and credit agreements have been signed between foreign credit organisations and Vietnamese economic establishments. Rep. offices actively support parent bank to broaden agent relationship with banks in Viet Nam, and help Viet Nam's banking system in personnel training.