With the launch of the "Doi Moi" policy in the year 1986, the economy of Vietnam showed marked improvement. The shift was more towards an economy, which was market oriented. The economic reforms were important because they would influence the policies and the developments that would take place in future. Improvement was also seen in the banking sector. This indicates that financial liberalization and reform in economy are closely related, mutually benefiting each other.
The economy of Vietnam was backed by the system of "one bank" with the State Bank of Vietnam at its center in the year 1998. By improving upon latest technical know how, capital, expertise of experienced management, the banking sector in Vietnam can move ahead. By doing so, the country would be in a position to compete globally. International integration instills a need for banking sector reform in Vietnam. By implementing banking sector reform in Vietnam, the quality of services offered by the banks can be improved to a large extent. Banking sector reform in Vietnam ought to aim at programs, which would promote modernization as well as industrialization.
Reasons for banking sector reform in Vietnam:
Several challenges have to be faced by the banking system in Vietnam, which explains why banking sector reform in Vietnam is obligatory. Along with the many commercial banks, the State Bank of Vietnam is not spared. Challenges are more pronounced pertaining to international integration.
Challenges faced by banks in Vietnam:
The domestic financial market is more volatile as compared to the international financial market. To curb this volatility measures have been taken by liberalizing the rates of interest and the exchange rates.
With globalisation in the financial sector the domestic banks have entered into tough competition with the foreign banks which has in turn improved their efficiency.
In case the banking system in Vietnam is characterized by poor quality, low efficiency, poor financial resources, lack of well versed banking professionals, banking sector reform in Vietnam need to be implemented.
Banking sector reforms in Vietnam are also needed when domestic banking operations are not compatible with the international banking operations. Also important to note is when the domestic banks in Vietnam fail to comply to norms governing safety of the banking operations.
With introduction of banking sector reform in Vietnam, banking network can be worked up for the better. However, initially, the banks may have to bear losses as compared to the profits they would earn but to stay put in the international market, first reforms within the country have to be ensured.
The nightmare for Cyprus started in March 2013. The country’s banking sector faced a sudden squeeze. The two biggest players – Bank of Cyprus and Marfin Laiki Bank – were in danger of a collapse which would have sparked a huge negative shock for the island’s economy.
Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago. IMF’s Chief Economist from September 2003 to January 2007. Inaugural recipient of the Fischer Black Prize.
CEO and co-CIO of PIMCO. Served as President and CEO of the Harvard Management Company for 2 years, while also working at the IMF for 15 years. In 2008, his book "When Markets Collide", won the Financial Times award for Business Book of The Year in addition to being named as the one of the best business books of all time by The Independent.
Mario I. Blejer is a former governor of the Central Bank of Argentina and former Director of the Center for Central Banking Studies at the Bank of England. Eduardo Levy Yeyati is Professor of Economics at Universidad Torcuato Di Tella and Senior Fellow at The Brookings Institution.
QFINANCE is a unique collaboration of more than 300 of the world’s leading practitioners and visionaries in finance and financial management, covering key aspects of finance including risk and cash-flow management, operations, macro issues, regulation, auditing, and raising capital.