The State Bank of Viet Nam should further accelerate and institutionalize the application of

international standards and practices in banking services and into the governance and operations of
the banking system.

Taking into account the weakness and constraints of Viet Nam’s banking system the liberalization
roadmap should start with regulations on credit services as this is the area where Vietnamese banks
are competitive, then extension should be considered for other services.

7.2 Recommendations on a Development Strategy

The State Bank of Viet Nam should have the main responsibility for the formulation and
implementation of the bank development strategy together with other banks. The Government, the
Ministry of Finance and other relevant ministries/agencies should also play an important role in
initiating the direction, coordination and supervision of the strategy.

Revitalization and improvement of financial capacity will help to strengthen the competitiveness of Viet
Nam’s commercial banks. The Government, Ministry of Finance and State Bank of Viet Nam should
coordinate the resolution of SOCBs NPL problems before 2006. At the same time, banks need to
increase equity according to the Government’s plan so that the capital adequacy ratio increase to
more than 6% by 2006 and greater than 8% before 2010.

The restructuring process of SOCBs has been completed in some banks and is continuing in a
number of other banks. These banks should quickly complete restructuring before they equitize.
Restructuring should not be limited to solving past and current problems but must also develop a
system to ensure such problems do not occur in the future. Besides concentrating on financial
restructuring, SOCBs should focus on organizational structure, governance mechanisms and human
resources as well.

The equitization of SOCBs should be accelerated. The Government’s plan to equitize all SOCBs by
2010 is a great challenge, especially as the pilot equitization of Vietcombank and Mekong Housing
Bank has taken considerable time. While the State ensures the control of equitized banks by holding
at least 51% of shares, attention must be given to the selection of shareholders who are professional
bankers/bank management institutions so that they can participate in managing banks after
equitization.

Commercial banks should go into strategic long-term partnerships with foreign banks. The deal
between Sacombank and ANZ or ACB and Standard Charter Bank is a good reference. Besides the
primary goal of increasing capital, foreign banks can facilitate Vietnamese banks successful
integration into the world market. Nevertheless, the selection of strategic partners as well as
agreements on the level of foreign bank’s participation in Vietnamese bank’s operation are issues to
be carefully considered, taking into account the sovereignty of Vietnamese bank.

Banks of all scales and types should develop comprehensive development strategies and specific
action plans. When the State’s protection and subsidies are diminishing, banks should be more
initiative in increase autonomy and accountability in their operations. Bank’s strategies should include
decisive steps to ensure that they shift towards operations on wholly market-based principles and
strictly commercial objectives.

The State Bank of Viet Nam should coordinate with join-stock commercial banks to develop a clear
action plan for consolidation and nurturing of JSBs, particularly JSBs in rural areas, which aim to
enhance the financial and managerial capacities of capable banks, and dissolve, merge or sell
inefficient banks. This will help to promote the soundness and increased competitiveness of the whole
banking system.

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