Foreign banks now can open wholly owned subsidiaries

The guidelines follow decree 22/2006/ND-CP, which was approved in February last year, on the organisation and operations of foreign bank branches, joint-venture banks, 100 per cent foreign-owned subsidiaries and representative offices of foreign credit institutions in Vietnam. The guidelines come two months after the deadline set under Vietnam’s commitments to the WTO on the establishment of 100 per cent foreign-owned subsidiaries.
Kieu Huu Dung, director of the Banks and Non-bank Credit Institutions Department at the central bank, said that once foreign banks established 100 per cent foreign-owned subsidiaries they would rapidly secure up to 30 per cent of the banking market in Vietnam in the next few years.
“Six foreign banks have expressed an interest in establishing locally incorporated banks; they are HSBC, Standard Chartered Bank, ANZ, two Taiwanese banks and one Korean bank,” Dung said.
“Once foreign banks hold 30 per cent of the market, they will have a strong influence on the country’s banking policies,” Dung said.
The applications must include a business proposal for the first three years of operation, annual audited financial reports of the parent bank for the latest three years, staff proposals, structure and proposed safe ratios for the first three years.
The central bank expects to issue a locally incorporated bank licence six months after it receives an application from a foreign bank, as it will need to assess the application and receive approval from the relevant ministries and agencies.
“There is no legal concern and I will be disappointed if we don’t have any 100 per cent foreign-owned subsidiaries by the end of this year,” said Ashok Sud, chief executive of Standard Chartered Bank for Vietnam, Laos and Cambodia. Standard Chartered Bank’s subsidiary in Vietnam is expected to offer both consumer and corporate banking services.
Sud said the most difficult condition was the need for an agreement on information exchanges and cooperation in supervision and inspection between the State Bank and the applicant’s home authority, but claimed his bank would be able to meet this requirement quickly. However, the State Bank does not plan to sign such an agreement with its UK counterpart this year.
“It is very important to have that agreement between the two authorities, and we hope to settle this very quickly.” Sud said.