Citi's Vietnam head gives his views on the country's outlook

What's your view on the development of Vietnam's banking sector?
One policy measure that has attracted a lot of attention and concern in banking circles is the move to raise minimum capital requirements. The initial hurdle of Vnd3 trillion (approximately $154 million) has been implemented and makes sense to avoid overly small and weak institutions. However, other policy tools will likely be more effective in spurring needed structural changes to the industry in the future, rather than further hikes in minimum capital levels. We think that it is important to promote a banking sector that has healthy institutions of all sizes, ranging from the largest global banks down to more specialised niche players serving only certain products or areas. Vietnam should avoid a “one size fits all” solution based on ever higher capital requirements given the relatively early stages of Vietnam’s market development.

The industry is still in growth mode with an expected compound annual growth rate of 15% or more during the next five years. Considering that less than 10 million people in the country (out of a population of 90 million) actively use a bank account, and more people own a scooter or a motorbike than a chequing account, there certainly is room for further growth. Still, I think the government has been prudent in how it has gone about growing the financial services sector to date and will work hard to ensure a strong banking sector that promotes healthy and constructive competition that benefits all stakeholders.