7.

1 Recommendations for the Legal and Policy Framework

Improvement of the legal framework that governs services within the Vietnamese banking system is
the primary issue, and should be undertaken first and as soon as possible in order to create a legal
avenue for asserting international practices, while ensuring that services remain suited to Viet Nam.
This will essentially facilitate Viet Nam’s integration into the world economy, establishing a level-
playing field for all credit institutions, and a system of prudential regulations for the safe operation of
institutions and the system. The State Bank of Viet Nam should coordinate with the Ministry of
Finance and relevant ministries to consider the following recommendations:

Legal framework

The State Bank of Viet Nam should carry out a comprehensive review of current legislation and
regulations and their compatibility with obligations/requirements in international agreements. This task
should be undertaken as soon as possible to identify bottlenecks, disparities and loopholes.

Based on that, the Government, Ministry of Finance and the State Bank of Viet Nam should
immediately revise and amend the current legal framework to ensure that the banking sector is
operating in a consistent environment. Such revisions should also take into account the interaction
and compliance with other international practices such as regulations on CAR, risk prevention and
solving, and required reserves.

The development of new mechanisms, policies and regulations must be in accordance with the
implementation roadmap of international commitments in the monetary and banking fields, primarily
focusing on implementation of the Viet Nam – US BTA and AFAS, as well as commitments under the
WTO. Such a process should also address emerging issues of market development and consumption
demand, such as: regulations on operation and safety assurance in e-banking activities, regulations
on guidance and management of derivatives, and regulations on modes of banking service provision
including cross-border, consumption abroad and presence of natural persons. There also needs to be
the promulgation of provisions facilitating the establishment of subsidiaries of foreign banks in Viet
Nam as soon as possible.

The State Bank of Viet Nam and the Ministry of Finance (State Securities Commission) should
develop mechanisms and policies on transparency and on the disclosure of credit institution
information to develop a favorable mechanism for banks to participate in the stock exchange market.
On the one hand, the stock market can be a great channel of funding for Vietnamese banks, on the
other hand, banks that are listed must perform effectively and transparently.

Awareness of financial service integration and international commitments in banking services should
be immediately and widely communicated to, and perceived by bankers and bank staff. An
understanding of such impacts currently varies among people working in the banking industry.
Therefore, all relevant agencies and stakeholders should be informed in a timely and precise manner,
the impacts of liberalization on all Vietnamese banks and credit institutions.

Strengthening local banks:

The State Bank of Viet Nam and the Ministry of Finance should consider the early eliminate of any
regulatory documents, norms and procedures that create protection and discrimination between
different domestic banking institutions (particularly between SOCB and JSBs). This should be carried
out before the application of further liberalization measures towards foreign banking institutions. This
will develop the competitiveness of the whole banking sector of Viet Nam against competition from
foreign banks.

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