Foreign banks begin third wave of investment in Vietnam

photo source:thesaigontimes.vn

Vietnam licensed the first wholly owned foreign bank in 2008 and the most recent one in 2015 – Public Bank Berhard (PBB) – a bank from Malaysia.

The State Bank of Vietnam has agreed with PBB’s proposal to take over the Vietnamese partner’s capital contribution in a joint venture bank between BIDV and PBB to become a 100% Malaysian owned bank.

Having two out of six foreign banks, Malaysia seems to have great interest in the Vietnamese market. Its Maybank has a bank branch in Vietnam and contributes capital to the Vietnamese An Binh Bank.

Meanwhile, CIMB showed its intention to join the Vietnamese market in mid-2014.

However, Malaysia is not the only country eyeing the Vietnamese market.

Three waves

In early 1990s, Vietnamese state-owned banks joined hands with foreign banks to set up joint-venture banks in Vietnam, including. Taiwanese, Malaysian, Thai and Russian invested banks.

Bankers from developed economies such as the US, Germany, the UK and France also arrived in Vietnam to set up bank branches.

However, the first landing campaign only officially began in 1999. A report from VPB Securities shows that 25 foreign bank branches were set up just within two years, including big names like Deutsche Bank, Sumitomo Mitsui and Tokyo- Mitsubishi UFJ.

The second wave began when Vietnam opened its financial market doors more widely to foreign finance institutions, in the 2000s.

This was an important period in the Vietnamese financial market development history with the Vietnam-US Bilateral Trade Agreement signed in 2001 and Vietnam’s admission to the World Trade Organization in 2007.

Since then, Vietnam has allowed foreign investors to establish 100% foreign-owned banks in the country and buy Vietnamese bank shares.

The signs of the third investment wave appeared in 2014. PBB, the 100% Malaysian owned bank, has been set up. A series of foreign bank branches have received operating licenses.

Kasikornbank from Thailand, after signing a multisided cooperation agreement with VietinBank in 2011, opened two bank branches in Hanoi and HCM City in March 2015.

The State Bank of Vietnam (SBV) last November approved the Republic of Korea's Hana Bank’s establishment of a bank branch in Vietnam.

The outstanding characteristic of the third wave, according to analysts, is the appearance of more bankers from the East than from the West.

Dr. Nguyen Tri Hieu, a renowned economist, also noted that Asian banks seem to operate more effectively in Vietnam than western banks.