A study of the current competitiveness of commercial banks in Vietnam | |
| Author | Phan, Huong Lan |
| Subject(s) | Banks and banking--Vietnam Competitions |
| Note | A project submitted in partial fulfillment of the requirements for the degree of Master of Engineering (Professional) in Finance, Banking and Information Management (VN), School of Management |
| Publisher | Asian Institute of Technology |
| Abstract | The integration to the global economy has brought a lot of achievements and good opportunities to Vietnamese banking industry. There have been huge foreign capital flows injected to this sector under various types like foreign entities, partnerships and sponsorships. This has helped to speed up the banking reform and modernization process in Vietnam over the past five years. However, foreign participation has also placed a heavy pressure and brought out threats to local banking players in terms of a more sensitive to all economic changes of the world and a fiercer competitive environment. In response to this concern, this study researches about the critical factors of competitiveness gap between Vietnamese commercial banks and foreign banks in Vietnam. Research methodology used is a mixed quantitative and qualitative analysis. Data are collected from economic outlook reports, banks’ annual reports, financial statements and other internet base reports. The researcher also conducted an interview with five senior bankers who are branch directors with more than 15-year experiences working in domestic and foreign banks in Vietnam. From both secondary data and primary data sources, the research finds out that the competitiveness gap between local and foreign players are wide. The two rooted reasons for the lower competitiveness of Vietnamese banks are the State Bank of Vietnam’s inexperience system governance and the banks’ poor corporate governance. Though Vietnamese banks’ market share is still dominant, their competitiveness is very weak due to their fragile financial capability. Many domestic banks are facing with unprecedented surge of non-performing loans, deteriorating asset quality, low capital adequacy, high lending ratio over capital sources, liquidity problem, etc. All of these issues could lead the entire banking system to domino effects of insolvency risks if the SBV does not take immediate actions. Meanwhile, the study showed that though foreign banks have a minimum market share, they have had rapid growth over years in accordance with the gradual ease of regulations under Vietnam’s commitments to open the domestic financial and banking industry. However, despite full national treatment effective in 2011 which allows foreign bank branches to operate all banking business like Vietnamese banks, the “real” level playing field have yet been exist. This change comes along with many other restrictions in terms of operation network, lending limit and foreign ownership limit in Vietnamese banks. With such technical barriers, it will be very difficult for foreign banks to acquire leading position in the local banking market. However, with its strong capital potential, product innovation capability, global standardized service quality, extensive global network and supply chain relationships, it still creates danger to domestic banks of losing a large proportion of market share, especially medium and upper customer portfolio which is the target market of foreign banks during this time. The last part of the study proposed some recommendations to both Vietnamese banks and the State Bank of Vietnam to improve the competitiveness of local banks and create a safe and sound development to the whole banking system. |
| Year | 2013 |
| Type | Project |
| School | School of Management (SOM) |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Yusra Anas; |
| Examination Committee(s) | Amrit N. Bart;Nguyen, Joseph; |
| Scholarship Donor(s) | Citi Bank, Vietnam; |