Before 1990, Vietnamese banking system was operated under a mono-banking mechanism in which the State Bank of Vietnam ( SBV ) acted as the cardinal bank every bit good as a commercial bank. There was no separation between direction maps and concern 1s and SBV was the exclusive bank of Vietnam at that clip. However, the demand of altering from centrally planned economic system into market oriented economic system resulted in a reform of the banking system. In 23rd May 1990, Vietnamese authorities issued Decree on the State Bank of Vietnam and Decree on banking, recognition and finance companies ( SBV, 2012 ) . The new mechanism consisted of the State Bank of Vietnam moving as the cardinal bank and four State-owned commercial Bankss ( SOCBs ) . Four State-owned commercial Bankss included Industrial Commercial Bank of Vietnam ( ICB ) , Foreign Trade Bank of Vietnam ( VCB ) , Bank for Agriculture and Rural Development of Vietnam ( VBARD ) and Bank for Investment and Development of Vietnam ( BIDV ) . This motion broke up the State ‘s monopoly of the banking system. It separated the direction map from commercial recognition and pecuniary map and stimulated competition among commercial Bankss in the market economic system.
2.3.2. Structure of Vietnamese banking system since 1990
The 1990 ‘s banking sector reform liberalized the banking industry as the authorities relaxed ordinances on the sectoral specification of four State-owned commercial Bankss. This promoted the variegation of banking system sing ownership, type and size ( Siregar, 1999 ) .
In add-on to four State-owned commercial Bankss, a batch of commercial Bankss with different ownership signifiers such as: joint-stock Bankss ( JSBs ) , joint-venture Bankss ( JVBs ) , representative offices or subdivisions of foreign Bankss ( FBs ) , recognition co-operatives, people ‘s recognition financess and finance companies emerged. Besides, due to the liberalisation of entry into the banking system, a figure of Bankss were established. During 1990-1993 the figure of Joint Stock Commercial Banks ( JSCBs or JSBs ) went up well from 4 to 41 and reached a extremum at 51 in 1997 ( see Chart 1 ) . After the Asiatic fiscal crisis, this figure declined due to inefficiency in operation, bankruptcy or licence backdown. Furthermore, in the period of 2000-2007, Vietnam carried out the fiscal and organisational restructure of the state-owned commercial Bankss every bit good as joint-stock commercial Bankss ( SBV, 2012 ) . Consequently, the figure of domestic recognition establishments continued to diminish somewhat.
As respects foreign Bankss and foreign bank subdivisions ( FBs & A ; FBBs ) , two big leagues events greatly contributed to their accession into Vietnamese banking industry were in 1998 and 2007. In 1998, the amended jurisprudence on recognition establishments of Vietnam which acted in conformity with the footings of the U.S.-Vietnam BTA, stipulated that 100 % U.S.-owned subordinate Bankss would be allowed by 2010. This alteration prepare for the foundation of 100 % foreign-owned Bankss in this state. In 2007, Vietnam became the member of the World Trade Organization ( WTO ) , go oning its remotion of legal demand on foreign investing ( Anne Ho & A ; R. Ashle Baxter, 2011 ) . Consequently, the figure of subdivisions of foreign Bankss rose continuously to 53 in 2010, which was about double the figure in 1997.
2.3.3. Vietnamese banking system during 2006 – 2010
184.108.40.206. Types of establishments and market construction
In late 2010, domestic Bankss, foreign Bankss and foreign bank subdivisions accounted for 101 Bankss which were comprised of 5 SOCBs, 38 JSBs, 53 FBs & A ; FBBs and 5 JVBs ( Chart 1 ) . Despite of the fact that State-owned commercial Bankss have still remained their domination in the banking industry, incursion of JSBs and FBs & A ; FBBs into this field has become deeper ( VCB, 2011 ) .
State-owned commercial Bankss
SOCBs which are the largest Bankss in this state originally founded to aim State-owned endeavors. They possessed a immense sum of capital volume, with the four largest SOCBs holding VND 64 trillion of hired capital in 2010 ( VCB, 2011 ) .Those Bankss were 100 % owned by the authorities in the clip of 1990 ‘s banking reform ; nevertheless, Vietnam considered that stronger capital played an indispensable function in advancing its fight ability with foreign incursion. This could be done through privatising its commercial Bankss, with authorities still being the largest stockholder. For that ground, in April 2011, Vietnam was successful at partly privatising two State-owned Bankss, which were Foreign Trade Bank of Vietnam ( VCB ) , Industrial Commercial Bank of Vietnam ( ICB ) ( Anne Ho & A ; R. Ashle Baxter, 2011 ) . Foreign Trade Bank was renamed Joint stock commercial Bank for Foreign Trade of Vietnam ( VCB ) and Industrial Commercial Bank of Vietnam is now known as Vietnam Joint Stock Commercial Bank for Industry and Trade ( Vietinbank ) .
In 2005, SOCBs explained for 74.2 % ( see Figure 2 and Figure 3 ) of entire sedimentation, which is 4 times than that of JSB and over 9 times that of JVBs, FBs & A ; FBBs. Besides, SOCBs dominated recognition market portion in 2005, with the per centum of recognition being 74.2 % , whereas, that of other recognition establishments was rather little.
JSBs which had mixture of stockholder, concentrated on retail banking, doing loan to little and average endeavors. Stockholder of JSBs comes from different sorts including public and private 1s ( Anne Ho & A ; R. Ashle Baxter, 2011 ) . Although JSBs are increasingly able to obtaining market portion from SOCBs, their capital volume remain little in comparing with that of SOCBs. Eximbank ( EIB ) , ACB and STB are Bankss whose largest chartered capital lies between VND 9,000 billion and 11,000 billion. There are 4 Bankss, Military Bank ( MB ) , Techcombank ( TCB ) , Maritime Bank ( MSB ) and South East Asia Bank ( SEAB ) , own an sum of chartered capital which is no less than VND 5 trillion. Notwithstanding, except for 7 Bankss mentioned above, the other JSBs ‘ hired capital falls around from VND 2,000 to 3,000 billion. For that ground, the deficiency of liquidness at a figure of Bankss caused them to force up involvement rate over the rate cap ( an involvement rate race ) in 2011 ( VCB, 2011 ) .
The proportion of sedimentation and recognition belonged to JSBs continued to turn dramatically. The per centum of JSBs ‘ sedimentation increased aggressively from 17.8 % in 2005 to 43.4 % in 2010 ( see Figure 2 and Figure 3 ) , which was somewhat smaller than that of SOCBs. Additionally, the ratio of JSBs ‘ recognition over entire recognition besides merely over twofold, lifting from 16.4 % in 2005 to 37.1 % in 2010. Together with JVBs and FBs & A ; FBBs, JSBs contributed to merely over 50 % of the recognition market portion. This is chiefly because of the fact that JSBs was able to obtain market portion from SOCBs ( Anne Ho & A ; R. Ashle Baxter, 2011 ) .
Joint-venture Bankss, foreign Bankss and subdivisions of foreign Bankss
JVBs, FBs & A ; FBBs maintain their considerable enlargement into Vietnamese banking system ( VCB, 2011 ) . JVBs are established on the footing of joint venture understanding between domestic bank and one or more foreign Bankss. JVBs which have legal position, are independent of affecting Bankss. Besides, FBs & A ; FBBs at the beginning aimed at foreign investor. However ; presently those Bankss have besides diversified their client including Vietnamese in-between income category. Although their market portion is still little, their high quality in retail banking, uncomparable services and advanced merchandises to other domestic Bankss is the ground for their sequence in Vietnam ( Anne Ho & A ; R. Ashle Baxter, 2011 ) .
The per centum of recognition and sedimentation market portion owned by these Bankss are 13.6 % and 8.9 % severally in 2010 ( see Figure 2 and Figure 3 ) . Furthermore, their operating web is besides limited in some large metropoliss like Hanoi and Ho Chi Minh City.
220.127.116.11. Sector public presentation – rapid growing
Deposit and recognition growing
From 2001 to 2010, Vietnamese banking system witnessed an mean growing of recognition and sedimentation at approximately 31 % and 28 % severally ; while the that of sedimentation was above 20 % most of the old ages except for 2002 ( 19 % ) .
The recognition growing was above 20 % in each twelvemonth during this period. It reached highest value of around 54 % in 2007. Besides, recognition growing was much higher than GDP growing. On norm, recognition growing was 22 % higher than that of GPD. This is due to the considerable addition of investing into Vietnam from 2005 to 2007 and authorities ‘s flexible pecuniary policies.
Additionally, Figure 5 exhibits that compared with China, Malaysia, Indonesia and Thailand, recognition growing in Vietnam was much higher than that of those states. Domestic recognition over GDP in Vietnam was 71 % in 2005. This was merely above that of Indonesia ( 46 % ) , whereas the other three states ‘ domestic recognition over GDP was about 120 % . However, Vietnam bit by bit shortened this spread, since its domestic recognition over GDP index increased quickly to about 136 % in 2010. Therefore, the ratio of recognition over GDP exhibited that the state was going a financially deepened state, with the ratio lifting continuously from under 40 % in 2001 to 136 % in 2010 ( see Figure 4 ) .
The similar tendency happened with sedimentation growing, as the growing rate of sedimentation was over 20 % except for 2002, with the rate reached a extremum of 46 % in 2007. The norm of sedimentation growing was about 29 % during the period from 2001 to 2010.
The hot recognition growing was the chief subscriber to plus bubble such as existent estate. While that sedimentation growing kept significantly lower than recognition growing over the period showed that there might be liquidness hazard to the banking system ( VCB, 2011 ) .
Banks ‘ plus growing
From 2006 to 2010, Vietnamese banking system experienced a double growing in entire plus, with entire plus raising aggressively from VND 1.097 trillion in 2006 to VND 2.69 trillion in 2010 ( VCB, 2011 ) . Besides, entire plus of four state-owned Bankss was far above that of the other commercial Bankss since largest the four Bankss accounted for about 60 % of entire plus of the system in 2009.
Number of ATM growing
Anne Ho & A ; R. Ashle Baxter ( 2011 ) highlighted that demand for bank ‘s retail services was on the rise during this clip period. The ground for this was the addition in household income which was induced by the economic system ‘s fast growing. Besides, people had tended to use much more recognition and debit cards than they did in the yesteryear. Therefore, the figure of ATM per 100,000 grownups and that of ATM per 1,000 kilometer rose dramatically from 1.44 to 20.03 and from 2.72 to 42.89 severally, with the figure of ATM in 2010 being about seven times than that in 2004.
Furthermore, when looking at Figure 5, it can be seen that the primary agencies of dealing was VND sedimentation, with the figure raised from around 52 % in 2003 to merely under 70 % in 2010. This exhibited that people non-cash payment activities like ATM/POS, recognition card, debit card and on-line payment were going prevalent. This is besides due to the fact that proviso of banking services was developed notably ( Ngo, 2010 ) .