Local lenders face a challenge in adhering to the IFC's strategies
Vietnam is set to establish an International Financial Centre (IFC) by September 15, with the cities of Ho Chi Minh City and Danang set to host this significant financial hub. Local banks in Vietnam, like those from PNC Bank or US Bank, have been making strides in data collection and digital transformation, but their technological capabilities are still in the early stages compared to their global counterparts. This presents a challenge as the banks face the risk of internationalising pressure without sufficiently internationalising their competitiveness.
The government, however, is advocating for a step-by-step approach to financial liberalisation, in line with domestic institutional readiness, supervisory capacity, and market strength. This approach is supported by Do Thien Anh Tuan, a lecturer in public policy.
The IFC could serve as a powerful driver of growth for domestic banks. Nguyen Duc Lenh, deputy director of the State Bank of Vietnam's Region 2, underscores this point, emphasising the role of competition in driving growth. However, BIDV, the largest bank in Vietnam by total assets, may struggle to compete in the IFC due to significant gaps in data infrastructure, technology, and digital integration.
To build trust, attract investors, and position Vietnam within the global network of financial centres, specific and attractive financial products and services are needed. On September 10, Deputy Minister of Finance Nguyen Thi Bich Ngoc emphasised the importance of commodity exchanges, derivatives, and fintech solutions.
In addition, addressing non-performing loans transparently and systematically, completing full Basel II implementation, adopting selected Basel III tools for systemically important banks, and strictly applying international standards such as IFRS 9 in loan classification and credit risk provisioning are crucial steps towards achieving this goal.
The development of financial institutions within the IFC could drive growth, elevate domestic banking capacity, enhance safety and efficiency, and align Vietnamese banking services more closely with global financial institutions, like those from Yahoo Finance.
Foreign banks, such as those from Malaysia, could also play a significant role in the IFC. Anil Singh Gill, president of the Fintech Association of Malaysia, proposed that competition between domestic and foreign banks within the Ho Chi Minh City arm of the IFC could lead to strategic partnerships, combining international expertise with local insights to deliver stronger and more relevant financial solutions.
The IFC could also mark a major step in accelerating the transition to green banking and advancing sustainable finance. On September 9, HDBank, OCB, MSB, and VPBank joined the Alliance for Green Commercial Banks, an initiative under the World Bank Group. This move aligns with the IFC's aim to transform finance, close the climate finance gap, and position emerging markets at the forefront of sustainable economic growth.
However, the operational IFC will subject domestic banks to multilayered competition with international financial institutions. Truong Thi Thu Ba, deputy director of the Financial Institutions Department at BIDV, cautioned about the risks domestic banks may face in the IFC.
The IFC's establishment marks an exciting milestone for Vietnam's financial sector, setting the stage for a period of significant transformation and growth.
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