Limitations and causes of weakness of the current Vietnamese banking system from

2006 to 2021
In the period 2006 - 2021, the process of globalization and regionalization is taking
place rapidly and complicatedly, although the banking industry has actively and actively
expanded international cooperation and integration activities in the banking sector. The
banking sector, along with other sectors, entered the process of general economic
integration. However, along with this process, Vietnam's banking industry is increasingly
facing more and more difficult requirements, both objectively and subjectively, in the
process of opening up and liberalizing the economy.
1.1.Objective reasons.
Vietnam's banking service activities have a low starting point in terms of market
development, weak capital potential, outdated banking technology and organization, and
lower management level than many countries in the region as well as in the world.
-Legal environment for business activities in general in Vietnam and in particular, the
operation of commercial banks has not yet been completed (according to the announcement
of WEF in 2006, Vietnam's institutional index was ranked 74th; in 2009, when the economic
crisis spread around the world)
-Technological and technical infrastructure is still limited, especially the national
information technology and telecommunications system has had a significant impact on the
operational efficiency of the banking system in Vietnam.
-In the period 2006-2010, the activities of Vietnamese banks were in the context of a
developed economy from a centralized mechanism to a market mechanism with incomplete
and synchronous mechanisms and policies. inconsistent and inconsistent with international
regulations and standards; developed markets are still in their infancy such as stock market,
labor market, real estate market....Vietnam ranks 75th in terms of competitiveness; by 2015,
our country has improved 19 places, ranked 56th).
-The covid 19 pandemic has made the operation of the banking system difficult: Linking the
business chain of commercial banks' products was interrupted, temporarily disrupted
operations, significantly reducing the amount of money needed. Old and new customers,
interest rates, gold prices and strong foreign currencies in the international market fluctuate
unpredictably, creating disadvantages for the foreign exchange market,...
-The legal framework in banking operations in general and banking payment activities in
particular is not appropriate and synchronous, many regulations and policies in the banking
sector are not consistent with market principles.
Therefore, in the current context of globalization and the world economy with many
fluctuations, the risks of businesses have increased and the Vietnamese commercial banking
system is not out of this context. This means that the risk of commercial banks is doubled
due to the instability and unpredictable nature of the market and the spread of risks of the
information technology era.
1.2. Subjective causes:
The weak factor of the Vietnamese banking system's budget also comes from
weaknesses arising in the operation of the commercial banking system such as: weak capital
capacity, outdated banking technology and organization, process management. low level of
management... the following section will fully evaluate the current poor factors that
commercial banks in Vietnam face.
-Organizational apparatus has many shortcomings: The current organizational model of
most Vietnamese commercial banks is organized in the traditional way, which is based on
the type of business to delineate the functions of the departments. While in advanced banks,
their customer-oriented activities are classified according to the criteria of customers -
products in order to better meet customer requirements and improve customer service quality
row.
When the bank grows larger and larger in scale, with an ever-expanding number of
branches, increasing volume and nature of work, and complexity, the above model will
reveal unreasonable points.
-Management and administration capacity is still limited compared to the requirements of
modern commercial banks: The information system, debt monitoring, and risk management
are not timely and accurate, leading to a lack of transparency in financial activities. bank
itself. Vietnamese commercial banks mainly still consider collateral as the basis for loan
security, even for short-term credit. Banks also underestimate the guarantee under the
project, while the handling of collateral for debt recovery is a difficult problem due to legal
problems, so it is difficult to recover the loan. The payment ability of Vietnamese
commercial banks is very low.
The management tools and methods of Vietnamese commercial banks have not kept up
with the requirements of modern commercial banks. The business strategy of Vietnamese
commercial banks currently focuses mainly on investment in breadth, not in quality
according to international standards.
-Charter capital, own capital and low capital adequacy ratio: Charter capital is an indicator
reflecting financial potential, ensuring safety in financial activities of commercial banks and
creating trust with the public. However, at present, the charter capital of Vietnamese
commercial banks is still small, including commercial banks government.
Example: At the end of April 2019, the average CAR (capital adequacy ratio) of the whole
banking system according to Basel I standards was 12.19%. However, the CAR of
commercial banks with state capital (Agribank, Vietinbank, Vietcombank, BIDV) was the
lowest, averaging only 9.61%. In which, the CAR of Vietcombank is approximately 10%,
BIDV is 9.1%, the remaining two banks are lower. Particularly, Vietinbank has the slowest
progress in increasing charter capital. This bank's CAR is now close to the minimum
threshold prescribed by the State Bank.
-The qualifications of bank staff do not meet the requirements of the market mechanism:
many bank staff do not have foreign language skills or the ability to use information
technology. Many bankers have not yet imagined that advanced banking services in the
world are introduced through newspapers and radio. The number of people who have a clear
understanding of international law and the general regulations of the world organization is
not much.
 The recruitment of new officers and employees still follows the old tradition, with limited
qualifications in all aspects, increasing operating costs and affecting the operational
efficiency of the Vietnamese commercial banking system. High potential for credit risk is a
proof of incompetence in credit operations.
Example: In 2019, according to Mr. Tran Anh Tuan, Deputy Director of the Institute for
International Economic Training and Research, Director of the Human Resource Forecasting
Program, said that the vast majority of students after graduating from work only meet the
requirements of 20-25 % at banks are still "poor" in terms of skills (working attitude, skills
to work with people, English proficiency, communication ability) and knowledge
(knowledge of financial field). Therefore, most banks have to spend time retraining to be
able to meet job requirements. Some specialized fields lack a lot of human resources and
banks have to spend a lot of money to hire foreign experts to advise and implement.
-Banking machinery and technology are still backward: Machines and technology are the
basic operating system attributes of the "production force" of banking activities. based on
and technical communication system, the utility budget is still poor. The type of ATM that
allows to receive money automatically, transactions like an automatic bank have been
developed for a long time in countries around the world, only to be present in some banks in
Vietnam, most of which are commercial banks foreign bank branches located in Vietnam.
-Management mechanisms and institutions are still limited: the Law on the State Bank and
the Law on Credit Institutions still contains many shortcomings with the development trend
of banking activities - especially the content on the position of the State bank. The
organization and administration are still overlapping, cumbersome, there are many confusing
phenomena between law and order, between business activities and policy activities, non-
banking credit institutions or many banking activities. informality continues to exist outside
the control of the industry. Although the structure of the banking system has grown strongly
in terms of breadth (both in the management area and in the business area), the efficiency
and quality of operations are poor.