The figure will treble to VND3 trillion after December 31, 2008 as stipulated by a recently issued Government regulation.

The new rule also prohibits all borrowings for the needed start-up investment.

A minimal number of shareholders as well as a transparent asset value and chartered capital list of its founding shareholders and a prerequisite that if a founding shareholder is a commercial bank, a bad debt balance sheet must be submitted.

The State Bank of Viet Nam said the regulation will rein in the mushrooming number of newly-opened banks amidst fears of saturation points being reached on the marketplace.

Former State Bank of Viet Nam (SBV) Governor Le Duc Thuy said “As people rush to set up new banks, it shows signs of great interest from investors in the industry. However, it may also cause poor calculations and prompt unsustainable red-hot stocks of banks on the country’s bourses.

SBV has established a panel to check the issuance of licenses for banks to ensure a strict and transparent process was met.

Currently, foreign investors are permitted to buy a maximum of a 30 percent stake in local joint-stock banks which have been operating for a minimum of two years.

However, foreign investors have been buoyed by the ability to set up wholly foreign invested banking branches through the Government’s commitments to the World Trade Organization.

Kieu Huu Dung, Head of the Department on Banks and Creditors under the State Bank of Viet Nam, remarked that with the appearance of a number of new banks, State-owned financial institutions which enjoy a 70 percent market share will face stiffer competition.

“However, it is an unavoidable trend and enterprises have to accept this fact,” emphasized the senior expert.

Despite the increased competition, domestic firms have been salivating over the Government’s policy that pundits expect will open the financial and banking market to all comers.

As a result, the SBV has been inundated with new applications, including 13 proposals from local investors such as the Bao Viet Group, the Financing and Promoting Technology (FPT) Company and the Post and Telecommunication Group.

Interested foreign investors include the Hong Kong-Shanghai based HSBC Bank, the ANZ Bank and the Standard Chartered Bank which have submitted applications for establishing wholly foreign-invested banks.

Four other Asia-based banks are also reportedly in the process of submitting licensing applications.

At present the country’s banking market is divided up between five State-owned, 35 joint-stock and six joint-venture banks.

Source:  SGGP.