This essay describes Vietnam's banking system and provides an overview of its macroeconomic environment. Vietnam is one of the fastest growing countries in the world.
In 1986, Vietnam shifted from a centrally planned to a market economy. This transformed Vietnam from one of the poorest into a lower middle-income country (World Bank, 2019). Today, it is the world’s ninth fastest growing economy with commitment to sustainable growth, strong foreign direct investment (FID) inflows and a strong manufacturing sector. Vietnam’s GDP growth projection for 2019 is 6.6 % (Focus Economics, 2019).
Table of Contents
1. Introduction
2. Macroeconomic assessment
3. Banking and financial system
4. Concentration trends
5. Conclusion
6. Bibliography
Objectives and Topics
This report provides a comprehensive analysis of the Vietnamese macroeconomic environment and the structural development of its banking and financial system since the country's shift to a market-oriented economy.
- The evolution of Vietnam's GDP and macroeconomic indicators.
- Structural characteristics and challenges of the banking sector.
- The regulatory role and monetary policy of the State Bank of Vietnam (SBV).
- Market concentration trends and the impact of foreign bank participation.
Excerpt from the Book
3. Banking and financial system
Vietnam’s banking system is dominated by state-owned banks (Leung, 2009). By market capitalization, the largest banks are VietinBank, Agribank and Vietcombank, nearly all wholly owned by the state.
Over the past 10 years, the number of commercial banks in Vietnam halved (Figure 7). One reason is the temporal adoption of Basel II standards from 2006-2013 (Tran-Thi & Vu-Thanh, n.d.). Another is the domestic banking crisis in 2012, which emerged as bad debts rose, scandals were uncovered and heavy fines levied (Wilson, 2018).
Consequently, foreign banks had an advantage in establishing branches (Figure 8). Moreover, they have invested in Vietnam’s retail banking, because only 30% of Vietnamese have a bank account and even fewer use credit cards or mobile services (Tam, 2019). The government intervenes by developing a law restricting foreign investment into Vietnamese banks to 30% (Vu, 2018). In 2013, the inflow of foreign capital accelerated the growth of domestic credits by 280%, which also increased the amount of non-performing loans (NPL) as interest rates increased (Asian Development Bank, 2013). Consequently, liquidity and credit risks increased, which can endanger systemic stability (Crouhy, Galai & Mark, 2005).
Chapter Summary
1. Introduction: This chapter introduces Vietnam’s economic transition to a market economy since 1986 and highlights its rapid growth and favorable investment climate.
2. Macroeconomic assessment: This section evaluates Vietnam’s economic performance, focusing on GDP growth, manufacturing-led development, labor market statistics, and the rising middle class.
3. Banking and financial system: This chapter analyzes the structure of the banking sector, the impact of Basel II implementation, and the role of the State Bank of Vietnam in monetary policy.
4. Concentration trends: This chapter examines the shifting market share of the five largest banks and the regulatory efforts to increase competition and accountability within the banking industry.
5. Conclusion: This chapter summarizes the findings, noting that despite government dependency, the retail banking sector in Vietnam offers significant growth potential for international investors.
6. Bibliography: This section provides a comprehensive list of academic and official sources used for the compilation of this report.
Keywords
Vietnam, Macroeconomics, Banking System, Foreign Direct Investment, GDP Growth, State Bank of Vietnam, Retail Banking, Basel II, Monetary Policy, Market Concentration, Financial Stability, Emerging Markets, Economic Transition, Credit Risk, Manufacturing Sector.
Frequently Asked Questions
What is the core subject of this report?
The report focuses on an analysis of the macroeconomic environment and the development of the banking and financial system in Vietnam.
What are the primary thematic fields covered?
The main themes include GDP growth trends, the structure of the banking industry, regulatory monetary policies, and market concentration among major financial institutions.
What is the central research objective?
The objective is to provide a country report that assesses how Vietnam transitioned into a market economy and how its banking sector is evolving amidst international competition and government intervention.
Which scientific method is utilized?
The paper utilizes a descriptive analysis method, synthesizing macroeconomic data, industry reports, and financial statistics to evaluate the state of the Vietnamese economy.
What aspects are discussed in the main body?
The main body covers macroeconomic indicators, the historical evolution and current structure of the banking system, monetary policy, and concentration trends in banking assets.
Which keywords characterize this work?
The work is characterized by terms such as Vietnam, banking system, macroeconomics, FDI, and market concentration.
How has the banking landscape in Vietnam changed over the last decade?
The number of commercial banks has decreased significantly, partly due to the adoption of Basel II standards and the fallout from the domestic banking crisis in 2012.
What role does the State Bank of Vietnam play in managing the economy?
The State Bank of Vietnam is responsible for all banking regulations, balancing inflation control, stable economic growth, and exchange rate stability through base rate adjustments.
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- Vivien Barth (Autor:in), 2019, Banking system Vietnam. A macroeconomic overview, München, GRIN Verlag, https://www.grin.com/document/513251
