Media Center

News Release

Email this   printer friendly format

Viet Nam's Financial Sector to Benefit from ADB Loan and Technical Assistance

Further reform in Viet Nam's financial sector is scheduled under the Financial Sector Program, approved today by the Asian Development Bank. Under the program, Viet Nam will receive a loan equivalent to about US$90 million, as well as a technical assistance grant of US$850,000.

The objectives of the Financial Sector Program are to strengthen the capacity of the financial system in Viet Nam to mobilize savings and to utilize such savings more efficiently. To achieve these objectives, the program has four components: establish the essential market infrastructure to facilitate private sector participation; commercialize and modernize domestic banking operations; promote competition; and initiate the development of a capital market.

To enhance the countryþs financial market infrastructure, the program calls for strengthening the legal and regulatory framework, establishing uniform accounting and audit systems in conformity with international standards, meeting full disclosure requirements for financial statements and publicly listed securities, and adopting measures to protect investors.

To encourage competition, joint-venture banks will be provided the same access to the domestic market as other domestic banks. Joint-venture banks are held 50% by a state-owned commercial bank and the balance by foreign financial institutions. There are four joint-venture banks, the foreign interest held by Indonesian, Korean, Malaysian and Thai institutions. Under the program, support is also being extended to prepare a legal and regulatory framework to cover the operations of nonbank financial institutions, such as investment banks, securities firms, leading companies, mutual funds and venture capital companies.

To develop the capital market, a regulatory agency will be set up and securities legislation developed. The Government will subsequently initiate the setting up of an organized market in securities.

Anticipated reforms within the financial sector include reorganization of the state-operated commercial banks along commercial lines to provide greater operational autonomy. Risk management will be improved by developing a credit information system to be administered by the State Bank of Viet Nam. Furthermore, the Bank for Investment and Development of Viet Nam (BIDV) has been selected to receive the Bank's technical assistance grant, which will be used to prepare BIDV for market-based operations and to introduce and demonstrate to other domestic institutions the benefits of adopting modern systems and techniques in a market-oriented environment.

The interest-free loan will be provided from the ADBþs concessional Asian Development Fund resources. It will be amortized over 40 years, including a grace period of 10 years. A service fee of one percent per annum will be charged on the loan. The Government may utilize the proceeds of the loan to finance costs of a wide- range of policy reform measures in the financial sector.

Contacts