Vietnam to convert small banks into bigger ones

All rural banks in Vietnam will have to become urban banks or merge with others by 2010 in preparation for global integration, local newspaper Vietnam Investment Review reported Monday.

Under a new rule of the State Bank of Vietnam, the country's central bank, all seven rural joint stock commercial banks should either merge with other banks or become urban banks to operate nationwide, instead of being limited to small rural markets as currently.

The reason behind the new restructuring rule is the narrow operational scope and small capital of the rural banks, whose competitiveness and ability to survive in the new context of fiercer domestic and international competition are in dire need of improvement, the newspaper said. The smallest of the seven banks has chartered capital of only 5 billion Vietnamese dong (314,500 U. S. dollars).

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

Now, Vietnam limits foreign banks to a minority shareholding position of 49 percent, but allows bank branches.

By early this year, 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