VietNamNet Bridge – The State Bank of Vietnam believes that the number of bank branches and transaction offices is now “bigger than enough.” However, banks still have been trying to set up more branches.
According to the HCM City branch of the State Bank of Vietnam, there are 2,102 transaction points in HCM City, including 144 bank branches and 628 transaction offices of HCM City-based banks. The other 59 bank branches and 419 transaction offices belong to the banks headquartered in other localities.
Of these, state owned banks have 96 branches and 400 transaction offices located in HCM City.
As such, there are over 6.5 transaction points in every ward, commune or town in HCM City.
A bank branch director in district 3 said the competition among banks has become stiffer than ever with more and more bank branches newly set up, especially in key areas.
In principle, banks have to conduct market surveys before deciding to establish a new branch. They need to learn about the population density, consumption habit and the living standards in the areas.
Sometimes what they find show that they should not set up branches there. However, they still decided to do that, just because the streets where they plan to set branches are very crowded with heavy traffic. More importantly, they believe that they need to establish branches on the streets as other banks did already.
Dr. Cao Sy Kiem, former Governor of the State Bank of Vietnam, noted that the existence of too many transaction offices has pushed the banks’ operation costs up, while it has reduced their risk management capability.
Dr. Le Tham Duong from the HCM City Banking University noted that Vietnamese commercial banks have developed their networks too rapidly, which goes beyond their capacity. This may lead them to a series of risks.
“Commercial banks have been trying every possible means to develop networks, bringing high risks to themselves and the whole banking system. The State Bank has made a right decision to tighten the control over the banks’ networks,” Duong said.
Banks seem to believe that opening more branches and transaction offices is the best way for them to compete with other banks. Therefore, banks dare not shut down any branches or offices, even if they take a loss. In some cases, banks halted the operation of some branches, but did not report this to the State Bank. They tried to keep the operation license for fear that they may not get other licenses in the future.
According to Nguyen Hoang Minh, Deputy Director of the HCM City branch of the State Bank of Vietnam, says some banks still have opened new branches underhand over the last two years, since the day the State Bank began tightening the licensing.
Minh said that the existence of too many bank branches is one of the reasons behind the banks’ unhealthy competition. Banks have been trying to scramble for clients from each other, while they repeatedly denounce each other of “breaking the ceiling” when offering the deposit interest rates higher than the ceiling rates stipulated by the central bank.
K. Chi