(Anova) - Academy of Finance’s Deputy Director Nguyen Thi Mui spoke with Kinh Te&Do Thi (Economic&Urban) newspaper about her suggestions on how domestic banks can develop sustainably in the integration process.

Banks and branches have recently mushroomed around big cities. Does this pose a challenge to the Vietnamese fledgling finance market?

Too many banks in a small fledgling financial market is a challenge for State management, quality of workforce as well as banks’ risk management.

Too many banks in a small fledgling financial market is a challenge for State management, quality of workforce as well as banks’ risk management. Competition among financial institutions to retain staff from ordinary to VIP positions has recently been fiercer than ever.

When the market is shared among too many providers, it is understandable that the competition among them is not based on their service quality, technology or managerial advantages, but rather on their interest rate policy. We witnessed banks participating in races to increase interest rates over the past few months. That pushed the SBV to use direct methods to eliminate the threat of banks using unsuitable tactics.

SBV has stopped granting licences to new banks. What do you think about the decision?

The decision is suitable considering the current context. However, the SBV has to draft legal documents on bank establishment and publicly make the announcements so that every financial agent can implement the policy and supervise its implementation.

If an institution meets all the requirements to operate as a bank, the SBV should provide a roadmap to grant it a licence in the future.

Despite crucial advancements, Viet Nam’s banking system is facing great challenges as the country will completely open its financial market by December 2010 under its WTO commitments. What should domestic banks do to ensure the banking system develop sustainably?

Perfecting the legal system on banking operation to make sure it is comprehensive, consistent and matches our commitment to integration is the foremost task.

Besides creating a backbone legal framework for banking activities, we should steadily apply international standards and regulations to ensure banks operate securely and efficiently.

It’s necessary to restructure commercial banks to minimise quantity, increase financial capability and improve technology and managerial knowledge.

It’s a general rule that the more players you have, the more competitive the market becomes. However, stronger competition in the financial market doesn’t always mean banks operate more efficiently.

That small banks were using high interest rates to lure customers earlier this year has pushed bigger banks to immediately increase their rates, otherwise they would lose old customers and large sums of capital.

Increasing ownership capital and assets is also an urgent task for the banks. It’s important for them to improve their capacities in risk management and supervision.

Last but not least, banks must set up trustworthy information sources. In fact, banks do not always announce all the information they possess, but the more transparent the information they provide, the easier it will be for them to gain customers’ trust.

(Source: Viet Nam News)