At the end-of-year meeting between the representatives from the State Bank of Vietnam, and international monetary institutions and foreign banks several days ago, General Director of Standard Chartered in Vietnam, Ashok Sud, said that in 2008, the banking system experienced two opposite types of weather, freezing cold and scorching. The monetary policies were quickly tightened during the first nine months of the year, and then have been loosened, at the same speed, during the last three months of the year. 

In 2008, the non-performing loan ratio of foreign banks in Vietnam increased in comparison with the end of 2007, though the increase is not big. Some foreign bank branches and financial companies have reported loss. The total pre-tax profit of the foreign bank sector is reportedly at VND 1,418 billion, which proves to not be a big figure, even when comparing with some joint-stock banks of Vietnam. 

Consumer credit, one of the big advantages of foreign banks, has not been developed over the last year This may be one of the reasons why, at the Vietnam Business Forum, held in early December on the threshold of the Consultative Group Meeting, foreign bankers unanimously called for the State Bank of Vietnam to remove the ceiling interest rate scheme. 

However, foreign banks have gained certain achievements in the last one year. The official setting of foreign banks in Vietnam (ANZ, Standard Chartered and HSBC have been licensed to form up to 100% foreign-owned banking entities in Vietnam) is considered the biggest achievement of foreign banks in 2008. The 100% foreign-owned entities can now receive the same treatment as domestic banks. 

Statistics showed that by the end of October 2008, the foreign credit institutions’ mobilized capital had reached VND 22,957 billion, an increase of 46% over the end of 2007. This shows a very high growth rate, if noting that the average growth rate of the banking system is just 16.61%. Meanwhile, the total outstanding loans had reached VND 152,952 billion. 

Governor of the State Bank of Vietnam, Nguyen Van Giau, said that the appearance of three foreign banking entities in Vietnam has given the signal for the fierce competition in the finance and banking sector. 

The three licensed banks are all big banks that have presented in many countries in the world, which aim to conquer the market in the long-term. Therefore, the difficulties in 2008 may not be a big problem for them. 

A survey conducted in 2007, when no foreign bank entity was licensed, showed that 50% of clients said that they will use the banking products by foreign banks. This is a big concern for domestic banks.