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ADB Supports Deeper, More Resilient Viet Nam Financial Sector
MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending $60 million equivalent to Viet Nam to expand financial sector reforms that have been at the heart of the country's strong, sustained growth and poverty reduction achievements for over a decade.
ADB's Board of Directors today approved a loan for the second phase of the Third Financial Sector Program. The funds are targeted at the development of the nonbank financial sector, including the securities and bond markets, as well as strengthening rules and regulations to enhance transparency and provide investor and consumer protection, and overall financial stability.
"The results will be a more diversified and resilient sector with an increased share of capital market financing of domestic investments to support economic growth," said Hasnah Omar, Senior Financial Sector Specialist in ADB's Southeast Asia Department.
Financial sector reforms, which have paved the way for increased private sector business activity, investment and job creation, have been instrumental in driving growth and helping Viet Nam slash its poverty rate from 58% in 1993 to about 14.8% in 2008. ADB has provided ongoing support through a series of sector programs beginning in 1996, with the previous focus on the commercial bank, leasing and insurance industries.
The new assistance will help the capital markets increase their share of financing domestic investments, and reduce the funding mismatches that can occur with business bank loans. It also seeks to bring the regulatory environment for capital markets up to international standards, with improved information disclosure, and a stronger framework for issuing securities.
"These measures will strengthen market transparency, corporate governance and risk management capacity of institutions, as well as aiding government efforts to limit the scope of unregulated markets for unlisted securities," said Ms. Omar.
The 24-year loan has a grace period of 8 years, with an annual interest rate of 1% during the grace period, rising to 1.5% for the balance of the term. The State Bank of Viet Nam is the executing agency for the program.