Viet Nam - A Guide for Business and Investment - asean-korea centre

eign-owned banks, branches of foreign banks, creditcooperatives, finance leasing companies and financecompanies. Currently, there are 6 state-owned banks(5 commercial banks and 1 policy bank - the Bank forSocial Policy), 37 joint-stock banks, 5 joint-venturebanks, 31 licensed foreign banks operating 38 foreignbank branches, 6 finance companies and 10 financeleasing companies. Under the WTO commitments, Vietnamcommitted to permit the establishment of 100%foreign owned banks from 1 April 2007. The scopeof operations of foreign bank branches, joint venturebanks and 100% foreign-owned banks are also graduallyexpanded to comply with Vietnam’s commitmentsunder WTO and other bilateral/multilateral internationalagreements. After 5 years from the date of accessionto WTO, Vietnam has to lift all restrictions to the right ofa foreign bank branch to accept deposits in VietnameseDong from Vietnamese natural persons with whichthe bank does not have a credit relationship.Currently, foreign credit institutions are allowed to holdup to 30% of the charter capital of a joint stock bank,in which the maximum shares held by one foreign institutionis 10%. The Government is drafting a newregulation to expand the limit of shares held by a foreigncredit institution being a strategic shareholder ofa joint stock bank to 20% of the charter capital of suchjoint stock bank.The Law on Credit Institutions, which came into forceon 1 October 1998, as amended in 2004, providesTransaction coner of Viet Nam bank for Foreign Tradea wide range of products and services which a bankmay offer, from traditional financial products to fundsmanagement and insurance services. The regulationson the securities market also permit domestic banksto establish securities companies to participate in thesecurities market. This is the legal basis for the convergenceof the financial industry sectors (banking, capitalmarkets, insurance and funds management) in the futurewith the development of the stock market.Since 1998, with support from multilateral donor institutions,the Government has outlined a comprehensivereform and restructuring program to improvethe efficiency of the commercial banking system. Theprogram includes four components: (i) restructuringjoint-stock banks through mergers and closure to reducethe number of joint stock banks by half; (ii) transformingstate-owned commercial banks into independentbusinesses; (iii) improving and strengthening thesupervision and inspection of commercial banks andcreating a “level playing field”; and (iv) establishing assetsmanagement corporations as a tool for resolvingnon-performing loans. As part of the restructuring program,since 2005, two State-owned commercial banks(Bank for Foreign Trade of Vietnam - Vietcombank andMekong Housing Bank) have been in the process of equitisationon a pilot basis. It is planned that after the pilotimplementation, all other State-owned commercialbanks will be equitised in the coming years.New monetary instruments have been introduced,such as repurchasing agreements (“Repos”), discount-Viet Nam - A Guide for Business and Investment 41PART III. BUSINESS AND FOREIGN INVESTMENT ENVIRONMENT