1 Appendix 1 – Summary of the Development and Reform Process of Viet

Nam Banking Sector

1.1 Banking sector prior to 1989

Prior to 1945, monetary, banking and financial systems in Viet Nam were set up and
administered by the French colonial authorities, via the Indochina Bank. This bank played the
dual role of the central bank and commercial bank for the entire Indochina region (Viet Nam,
Laos, and Cambodia).

The Viet Nam National Bank was established in 1951, and was later renamed the State Bank
of Viet Nam. In 1976, the Southern based National Bank was amalgamated into the State
Bank of Viet Nam, which became the single banking operator for the whole country. The
organizational structure of the State Bank consists of its headquarters located in Ha Noi,
branches in provinces and cities, and transaction offices in districts across the country.

The development of the Viet Nam banking system prior to 1990 can be divided into the three
following periods:

„ 1951 – 1954: the National Bank was established and performed a variety of tasks
including issuance of bank notes, financial note recollection, state treasury management,
savings facilitation and spending centralization;

„ 1955 – 1975: the National Bank performed the following tasks: monetary market
consolidation, currency stabilization, pricing control, as well as credit management and
development; and

„ 1975 – 1989: the State Bank of Viet Nam unified currencies throughout the country,
issued the currency of the Socialist Republic of Viet Nam taking the old currencies from
the South and the North out of circulation. Until the mid 1980s, the State Bank was
essentially operating as a budgeting tool, rather than following market principles
conducting monetary business operations. Fundamental changes did not begin until the
end of the decade, when the banking system gradually began to adopt operations that
reflected market principles.

1.2 Reform since 1990 - present

In this period, Viet Nam’s banking sector undertook major changes. A milestone was reached
in 1990 with the establishment of four State-owned commercial banks (SOCBs). Since then,
a two-tier banking system has replaced the singular structure, and the bank’s operation has
been toward commercial orientation. The State Bank of Viet Nam performs all State
management functions and acts as a central bank while second tier groups of commercial
banks perform business functions.

Reforms in 1991 to 1992 led to the consolidation and establishment of new joint stock
commercial banks (JSBs), joint-venture banks (JVBs), branches and representative offices of
foreign banks in Viet Nam. A large number of credit cooperatives were merged and
consolidated to form joint stock commercial banks in urban and rural areas. From 1999 till
now, joint stock commercial banks have undergone a thorough restructuring process.
Several methods have been followed:

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