Foreign banks who want licences to operate in Vietnam must have at least 100 trillion VND (4.76 billion USD) worth of assets in total, according to the State Bank of Vietnam (SBV).

Circular 40/2011/TT-NHNN, announced by the central bank last week provides that banks must have profited during the past five consecutive years before applying for operating licence.

Under old regulations, foreign banks were required to have 50 trillion VND (2.38 billion USD) in total assets and profited in the last three consecutive years only.

The new circular also regulates that banks must not be founder shareholders, strategic shareholders or founders of any Vietnamese credit institutions or local banks.

Specifically, regulations on the issue of bad debt under the old circular will be replaced by new requirements in terms of risk management and provision while bank names and headquarters also come under scrutiny.

The central bank said the new circular will help restrain unhealthy competition amongst banks on the domestic market and ensure that foreign banks have sufficient financial capabilities.

The issue of the new circular aimed at satisfying the banking system's administrative reform while enhancing the State role in managing foreign banking operations in Vietnam .

The circular will come into effect at the beginning of February next year. /.