Vietnamese banks, mostly financially weak, will face fiercer competition from foreign rivals when Vietnam joins the World Trade Organization (WTO), local newspaper Saigon Liberation reported Wednesday.

A state-owned commercial bank, on average, has its own equity of only 200-250 million U.S. dollars, and joint stock banks 200- 300 billion Vietnamese dong (VND) (nearly 12.6-18-9 million dollars).

Now, total chartered capital of all state-owned commercial banks stands at over 21 trillion VND (more than 1.3 billion dollars), while their combined outstanding credit represents roughly 55 percent of Vietnam's gross domestic product (GDP), much lower than the regional level of over 80 percent, the newspaper said.

After joining the WTO, hopefully by late this year, Vietnam will have to open up its banking service to foreign banks which are very strong in providing various services. Local banks currently engage mainly in credit activities.

Under a deal on concluding bilateral negotiations between Vietnam and the United States on the former's entry to the WTO, as of April 2007, U.S banks will be able to establish 100-percent foreign-invested subsidiaries, and take unlimited local currency deposits from legal entities.

As of the date of Vietnam's accession to the WTO, foreign securities companies will be able to set up joint ventures with up to 49 percent foreign ownership. After five years, foreigners will be able to own 100 percent of securities firms.

Now, Vietnam limits foreign banks to a minority shareholding position of 49 percent, but allows bank branches. Vietnam only allows foreign securities companies to open representative offices.

To cope with the competition, both state-owned and joint stock commercial banks in Vietnam should increase their chartered capital, the newspaper said. Joint stock banks can list their shares in the local stock market.

The State Bank of Vietnam, the country's central bank, plans to merge small and poorly-performing commercial banks, while developing some large banks into economic groups which operate in various fields like banking, insurance, asset management and securities brokerage, the newspaper said.

By April, Vietnam had four major state-owned commercial banks, which hold the majority of the market share, 30 joint stock and four joint venture banks, and 30 foreign bank branches.

Source: Xinhua