Foreign banks withdraw capital from Vietnam: No cause for concern

10:50 | 22/08/2017 Finance - Banking

(VEN) - Some large foreign banks operating in Vietnam have recently scaled down their business or withdrawn capital from Vietnamese banks. However experts say there is no cause for concern.

no cause for concern

The movement began a few weeks ago, when Techcombank issued a notice to shareholders consulting them about a plan to take back 19.41 percent of Techcombank shares that HSBC had been holding for 12 years.

The Vietnam International Bank (VIB) then announced it would take over the operation of the Ho Chi Minh City branch of the Commonwealth Bank of Australia (CBA). VIB plans to open a new transaction office at the head office of the newly acquired foreign credit institution. Such a deal in which a local bank takes over the operation of a foreign one, which is also a strategic shareholder, is unprecedented in Vietnam.

The capital withdrawal by foreign banks is raising concern over the investment environment in Vietnam. It appears to reflect that diminishing attractiveness of Vietnam’s banking business activities, as described in the second quarter macroeconomic report of the Vietnam Institute for Economic and Policy Research (VEPR).

Nonetheless, banking expert Can Van Luc says capital withdrawals by foreign banks is not worrisome. He analyzes that it is important to recognize the fact that Vietnam’s banking system is in better shape than it was a few years ago. He also points to the surging prices of bank shares and the liberalization of the banking legal framework.

Economist Huynh Buu Son sees the capital withdrawal as part of a restructuring process. He rejects suggestions that it is being prompted by bad debts.

In 2016, the State Bank of Vietnam for the first time allowed a joint venture bank (VID Public Bank) between Vietnam’s Bank for Investment and Development and Malaysia’s Public Bank Berhad to convert to a 100 percent foreign-owned company. Following the conversion, it was renamed the Public Bank of Vietnam, and received a license in March, 2016. In addition, the government granted a license to CIMB Bank (Vietnam) and Woori Bank in 2016 to join the five fully foreign-owned banks in Vietnam, namely HSBC, ANZ, Standard Chartered, Shinhan and Hong Leong, bringing the total to eight fully-owned foreign banks currently operating in Vietnam.

Quang Loc