Viet Nam: Third Financial Sector Program - Subprogram II

Sovereign Project | 37577-022

Summary

The TA will provide technical support and facilitate needed capacity building to promote financial sector reforms under subprogram 2 of the Third Financial Sector Program. The TA will contribute to improved efficiency of supervision of the banking system and enhance non-bank financial intermediation through support for a wide range of markets and institutions. It will build on the achievement of the Subprogram I of the third Financial Sector Program Loan (FSPL III) in the development of markets for Government debt and the money market, promote investor protection in equity markets through improved capacity of the security market regulator, strengthen regulatory and supervisory capacity in insurance subsector, facilitate implementation of better auditing and accounting standards and practices, and support other areas of non-bank financial intermediation through a strategic approach and road-map for the development of the financial sector over the medium and long term.

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Project Name Third Financial Sector Program - Subprogram II
Project Number 37577-022
Country Viet Nam
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 7464-VIE: Third Financial Sector Program - Subprogram II
Technical Assistance Special Fund US$ 1.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Finance - Banking systems and nonbank financial institutions - Insurance and contractual savings - Money and capital markets

Gender Equity and Mainstreaming No gender elements
Description

The TA will provide technical support and facilitate needed capacity building to promote financial sector reforms under subprogram 2 of the Third Financial Sector Program. The TA will contribute to improved efficiency of supervision of the banking system and enhance non-bank financial intermediation through support for a wide range of markets and institutions. It will build on the achievement of the Subprogram I of the third Financial Sector Program Loan (FSPL III) in the development of markets for Government debt and the money market, promote investor protection in equity markets through improved capacity of the security market regulator, strengthen regulatory and supervisory capacity in insurance subsector, facilitate implementation of better auditing and accounting standards and practices, and support other areas of non-bank financial intermediation through a strategic approach and road-map for the development of the financial sector over the medium and long term.

Specific outputs under the TA include: i) development of an enhanced legal foundation for a more developed financial sector, ii) a sequenced action plan to develop the primary and secondary government bond markets including a comprehensive legal and regulatory framework needed for the development of debt and money markets, iii) a framework and measures for improving and strengthening public debt management, iv) a sector assessment and action plan for development of money markets, and support for strengthening the legal and regulatory framework and information infrastructure, v) proposals for strengthening insurance industry in the areas of accounting regulations, auditing standards, corporate governance, capital requirements, and supervisory capacity, vi) a detailed assessment and action plan for strengthening capacity for securities market supervision, vii) a detailed assessment and action plan for strengthening capacity for banking supervision, viii) support for strengthening the legal and regulatory framework for anti-money laundering as well as the information infrastructure and related human capacity, ix) a detailed review of accounting standards and the quality of audits in Viet Nam and proposals for the adoption of international accounting and auditing standards, and x) a plan to address inherent systemic and operational risks in the securities clearing, settlement and depository system, and policy recommendations to curb the unofficial market grey market by providing policy incentives to encourage companies to raise long-term capital needs through formal capital market.

Project Rationale and Linkage to Country/Regional Strategy Subprogram 2 of the Third Financial Sector Program is included in the COBP 2009-11 for Viet Nam, with PPTA scheduled in 2009. The Government's growth strategy will result in increased financial intermediation and improved resource allocation and efficiency in the long run. The banking system needs to be complemented by further growth in capital markets, particularly in meeting the long-term capital and financing needs of both public and private sector. The increased role of non-bank financial intermediation in the economy is essential to help a country reach its investment and growth objectives in a sustainable manner. The Government's Socio-Economic Development Plan 2006-2010 emphasizes the objectives of business development, private investment, transition to a market-based system, and integration with the global economy. ADB's Country Strategy and Program 2007-2010 is aligned with the Government's plan and supports business-led pro-poor growth through promoting infrastructure development, business-enabling environment and wider financial intermediation. Financial sector reforms require time and are complex technically and politically. This is particularly so in the case of Viet Nam which is still an economy in transition from a centrally-planned economic system. The PPTA will facilitate the required consensus for difficult reforms through technical support and capacity building and gradually assists the Vietnamese financial system towards greater convergence with international best practices and standards.
Impact The impact of the PPTA will be strengthening of domestic financing through greater role played by more developed capital markets.
Project Outcome
Description of Outcome The PPTA outcome will be a successfully designed and agreed program of financial sector reforms under Subprogram II, FSPL III.
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Legal framework for financial sector.

2. Government bonds market.

3. Public debt management.

4. Money markets.

5. Insurance industry.

6. Securities market supervision.

7. Banking supervision.

8. Anti-money laundering.

9. Accounting and auditing standards.

10. Securities market infrastructure.

11. Consolidated matrix of policy measures and proposals.

12. Follow-up measures on consolidated matrix of policy measures and proposals.

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Viet Nam
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services

A. Banking and Capital Markets Legal Experts

1) International Legal Expert - 1.0 person-month

2) Interantional Legal Expert - 1.0 person-month

3) International Financial Legal Expert - 1.0 person-month

4) National Legal Expert - 3.0 person-months

B. Bond Market Expert

1) Inernational Government Bond Expert - 1.5 person-months

2) International Financial Sector Plan Expert - 1.0 person-months

3) National Expert/Economist - 2.5 person months

C. Money Markets Experts

1) International consultants - 1.5 person months

2) International consultant Legal - 1 person-month

3) National Consultant - 2.5 person-months

D. Central Banking and Monetary Policy Expert - 1.5 person-months

E. International Auditing Expert - 1.5 person-months

F. International Accounting Expert - 1.5 person-months

G. Insurance Expert

1) International Insurance Legal Expert - 1.5 person-months

2) National Insurance Expert - 1.5 person-months

H. Capital Markets and Securities Market Supervision

1) International Capital Market Expert - 1.0 person-month

2) International Capital Markets Legal Expert - 1.0 person-month

3) International Credit Rating Expert - 1.0 person-month

4) National Capital Market Legal Expert - 3.0 person-months

I. AML Expert

1) Internatonal AMLA Expert - 1.0 person-month

2) International Financial IT Expert - 1.0 person-month

3) National Legal Expert - 2.0 person-months

J. Banking Supervision

1) International Bank Supervision Expert - 2.0 person-months

2) National consultant - 2.0 person-months

K. Central Depository, Clearing House, and Exchange Experts

1) International Securities Dealer Expert - 1.0 person-months

2) International Clearing, Settlement and Depository and Risk Management Expert 0- 1.0 person-months

3) National Securities Markets Expert - 2.0 person-months

L. Project Coordinator - Domestic, 6 person-months

M. Project Administration Assistant - Domestic, 6 person-months

Responsible ADB Officer Stephen Schuster
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SERD
Executing Agencies
State Bank of Vietnam Ms Thinh Thi HongInternational Cooperation Department State Bank of Viet Nam 47-49 Ly Tha To Street, Hanoi
Timetable
Concept Clearance -
Fact Finding 24 Nov 2009 to 26 Nov 2009
MRM -
Approval 18 Dec 2009
Last Review Mission -
PDS Creation Date 27 Oct 2010
Last PDS Update 25 May 2011

TA 7464-VIE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
18 Dec 2009 15 Feb 2010 15 Feb 2010 28 Feb 2011 31 Dec 2013 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
1,000,000.00 0.00 250,000.00 0.00 0.00 0.00 1,250,000.00 18 Dec 2009 790,768.80

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Safeguard Documents

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Evaluation Documents

See also: Independent Evaluation

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