Chapter 7 - Money and the Canadian Banking System

Foreign banks must have US$10 billion to set up entities in Vietnam

In the article that I found, it talks about Vietnams banking system. The State Bank of Vietnam (SBV) declared on June 5, that Vietnam will allow 100% foreign owned banks. But 100% owned foreign banks will not appear for another six months. If foreign banks want to establish themselves in Vietnam, the central bank of their country must sign agreements with SBV. The banks almost must prove that they have at least US$10 billion in total assets. There are also many strict requirements that the foreign banks must meet. So far, six foreign banks are willing to be established in Vietnam. They are from Hong Kongs’s HSBC, Australia and New Zealand’s ANZ, British Standard Chartered. The other three come from Taiwan and the Republic of Korea. Once the foreign banks have a license to operate in Vietnam, they will be treated like a domestic bank.

The foreign banks that are being introduced into Vietnam are very much like a chartered bank in Canada because the nations central bank allows other thanks the authority to lend money and accept deposits to businesses, government, and households. Canada introduced the Bank Act which gave restrictions to foreign investment from chartered banks. As long as Canada has this act in place, Canadian banks will most likely not open and operate any banks in Vietnam. The Bank Act also has restrictions for foreign owned banks. Since there are restrictions, there are not many foreign banks established in Canada because it will be hard to compete with the big banks. Vietnam on the other hand, will not have restrictions on foreign banks, in the article it states that foreign banks will be treated like a domestic bank. Since many parts of Vietnam are still developing, the new banks will hopefully help generate more money into the circulation. Tourists will feel more secure when in Vietnam because there may be banks they are familiar with from their home country. A disadvantage to allowing foreign owned banks to operate in Vietnam could be that they might try to have branch banks and take over or dominate Vietnam’s banking system. If the foreign banks branch out then the smaller domestic banks may be forced to shut down due to competition because the foreign banks will have lots of money since they are already big and successful in their home country.

I think that the idea of allowing foreign banks to establish themselves in Vietnam is a good idea because it will help the economy. People will have a higher ability to make loans and invest. This will increase spending and add circulation to the supply of money. Although I think that there should be some restrictions such as making sure that not all the money in the banks go to investments outside of Vietnam. That would result in money going outside the circular flow of money.


http://www.vneconomy.com.vn/eng/?param=article&catid=04&id=b007692b32fbd7