VietNamNet Bridge – At the Vietnam Enterprise Forum (VEF) held in Hanoi Monday, Ashok Sud, chief of the VEF’s Banking working group, said Vietnam has too many banks compared to its market scale.

Vietnam is in the top list of economies using cash in the region.

According to Ashok Sud, who is also the General Director of Standard Chartered in Vietnam, over 80 banks are operating in Vietnam and 20 of them control almost all banking business activities. Around 25% of banks are facing difficulties and most of them lack capital and cannot stand firmly.

The Banking working group suggested that Vietnam should encourage merging in the banking system to ensure more stable development for banks and reduce the number of banks in the market. Vietnam does not have a roadmap or legal regulations to achieve this requirement.

The group’s representative, Vice Governor of the State Bank of Vietnam Nguyen Van Binh, emphasized the control in term of operation quality of banks to avoid collapse, which can harm the banking system.

According to Binh, the government would approve new regulations on merging, unification and re-purchasing of banks to create a legal corridor for managing banks.

According to Ashok Sud, as the spine of the economy, the financial sector needs to be healthy and active to be able to stand steadily before the pressures from the global financial crisis and to positively support the interests of businesses.

He pointed out four challenges facing the Vietnamese financial sector at present: less than 10% of the population having banking accounts, which brings the country to the top list of economies using cash in the region. He said that Vietnam needs to decrease the dollarization of the economy to make its monetary policy more effective and to abolish rules on ceiling interest rates.

Foreign companies continued to show their worries about the rate of shares in domestic banks that foreign investors can hold, which is set to not exceed 30% by Decree 69. In this restriction, the maximal rate that a foreign bank can own as a “strategic partner” is 15% and it can be 20% if having the Prime Minister’s approval.

According to Ashok Sud, it is necessary to have a clear roadmap in terms of time and quantity for the next increase of the rate of stocks that strategic foreign investors can hold in local banks to help both the strategic partners and local banks to take initiative in building their plans.

Xuan Linh