The State Bank of Vietnam is drafting a circular to tighten control over the expansion of commercial banks’ networks in a move to minimise risks to the banking industry.
According to the draft circular, commercial banks will be permitted to open a maximum of five transaction offices and branches within their first year of operations.
The new transaction offices and branches will also have to observe specific regulations regarding the efficiency of their business activities, operational safety, scale and financial capacity.
Commercial banks must ensure adequate profits in the year before they plan to open up more transaction offices or branches and have bad debts of less than 3 percent. In addition, eligible banks must have effective management systems and a secure information technology infrastructure.
Previously, in 2005, the central bank issued Decision 888 to limit the number of branches and transaction offices opened by commercial banks. However, the outcomes from this have to date experienced many shortcomings.
Industry analysts say that expanding networks helps domestic commercial banks gain an advantage. However, this could reduce the efficiency of their operations and even undermine the entire banking system if any expansion is beyond their capacity in terms of capital and administrative abilities./.
According to the draft circular, commercial banks will be permitted to open a maximum of five transaction offices and branches within their first year of operations.
The new transaction offices and branches will also have to observe specific regulations regarding the efficiency of their business activities, operational safety, scale and financial capacity.
Commercial banks must ensure adequate profits in the year before they plan to open up more transaction offices or branches and have bad debts of less than 3 percent. In addition, eligible banks must have effective management systems and a secure information technology infrastructure.
Previously, in 2005, the central bank issued Decision 888 to limit the number of branches and transaction offices opened by commercial banks. However, the outcomes from this have to date experienced many shortcomings.
Industry analysts say that expanding networks helps domestic commercial banks gain an advantage. However, this could reduce the efficiency of their operations and even undermine the entire banking system if any expansion is beyond their capacity in terms of capital and administrative abilities./.
