Banking in Vietnam: Industry Overview 2024

Banking in Vietnam, for many Vietnamese, is still a relatively new concept. In fact, according to the World Bank’s Global Findex Database just 56 percent of Vietnamese over the age of 15 had a bank account in 2022, with the remaining 44 percent unbanked. The same World Bank dataset also found that just 6 percent of Vietnamese had a credit card.

But that is not to say Vietnamese have an aversion to banking products. Mobile money, for example, has become extremely popular in day-to-day transactions. Around 16 percent of those surveyed said they had a mobile money account, up from 3 percent in 2017, this is in line with 96 percent of people owning a mobile phone.

This has created an interesting landscape within which banking in Vietnam is evolving and in many ways puts banking in Vietnam at the forefront of consumer banking product development. That said, the banking industry in Vietnam is among the most heavily regulated sectors. Not only that, core tenets of international banking often do not apply in this rapidly developing nation. With this in mind, it is fairly safe to say that, when it comes to banking in Vietnam, the country is carving out a unique path of its own.

This article brings together these concepts into an overview of banking in Vietnam that should provide a broad understanding of the sector and a solid framework on which individuals and organisations with an interest in Vietnam’s banking industry can build their understanding of the sector.

Vietnam’s banking industry in numbers

Vietnam’s banking sector is projected to achieve a net interest income of approximately US$16.69 billion in 2024, with traditional banks contributing around US$15.63 billion to this total. This represents a significant portion of the market, highlighting the continued dominance of traditional banking institutions.

Looking ahead, the net interest income is anticipated to grow at a compound annual growth rate of 5.12 percent from 2024 to 2029, reaching an estimated US$21.42 billion by 2029, according to data compiled by Statista.

Net interest income, key Vietnam banks, US$millions, quarterly

Net interest income, key Vietnam banks, US$millions, yearly

FDI in banking and finance in Vietnam

In November, Vietnam’s financial, banking, and insurance activities sector registered no new projects and US$658,000 in newly registered capital, according to Vietnam’s Ministry of Planning and Investment. This represents a significant decline compared to October, which recorded 1 new project and US$8.9 million in newly registered capital, marking a 92.63 percent decrease.

Year-to-date (YTD), the sector has attracted a total of 6 new projects with US$122.1 million in newly registered capital, reflecting a decrease in investment activity compared to previous months.

Outstanding credit to the economy 2024, VND/US$billions

Source: State Bank of Vietnam

Vietnam’s central bank

At the heart of Vietnam’s banking system is the State Bank of Vietnam (SBV). The SBV has powers far broader than many other central banks around the world but these powers come with much more responsibility, too.

Key objectives of the SBV include:

• Keep the US dollar-Vietnamese dong exchange rate stable;
• Maintain credit growth in Vietnam’s economy of about 14 percent;
• Keep inflation below 4.5 percent. 

To achieve these objectives the SBV also has a number of tools it can use. Chief among them are:

• Increasing or decreasing multiple interest rates;
• Increasing or decreasing credit growth limits;
• Increasing or decreasing the money supply; and
• Increasing or decreasing the base exchange rate.

Interest rates

The two key interest rates in Vietnam are the Discount Rate and the Refinancing Rate. However, the SBV has broad powers to set different interest rates for different products if it deems this is necessary. For example, in October 2022, it set different interest rates for eight different types of borrowed funds.

That said, interest rates generally go relatively untouched in normal circumstances with the SBV preferring to use other tools to manage economic growth–an interest rate rise in September 2022, was the first change in interest rates in two years.

Credit growth limits

Credit growth limits are common in emerging economies. These are used to avoid excessive lending and subsequently high inflation. On this measure, credit growth limits in Vietnam have worked relatively well with inflation around 4 percent a year since its inception. However, this has come at a cost. For example, in October of 2022 the credit growth limit for the year was reached which meant that many businesses could no longer borrow. This impacted cash flows and created a number of problems.

Note that there has been some debate as to whether the use of credit growth limits have run their course and should be done away with altogether. This has been largely rejected by the SBV, however, this suggestion does have traction in the local business community.

See also: It’s Time to Talk About Vietnam’s Credit Growth Policy…

Exchange rates

Vietnam’s local currency, the Vietnamese dong, is currently on a managed float, sometimes called a managed peg.  Essentially, each day the SBV sets an exchange rate for the dong to dollars and banks and currency traders can only trade with a certain percentage either side. That was 3 percent until October of 2022 when it was increased to 5 percent.

On a  side note, Vietnam has a long and storied on-again-off-again relationship with the US Treasury’s currency manipulator watch list.

See also: The Dong’s Wild Ride: Unpacked

Money supply

Vietnam has been known to increase or decrease the money supply through the issuance of treasury bills. In September of 2023, with the value of the dong getting close to a record low, the SBV began pulling cash from the financial system by issuing short-term treasury bills. At its peak, there were around US$10 billion worth of treasury bills in circulation.

The SBV is also responsible for printing money as well if need be.

National Payment Corporation of Vietnam (NAPAS)

NAPAS is the national payment intermediary. The SBV has a majority stake in NAPAS, however, it is also partly owned by a number of other local banks. NAPAS offers a number of payment services, but it is probably most well known for facilitating instant transfers between Vietnamese bank accounts–this has become a very popular way to pay for goods with most businesses accepting instant transfer through QR codes facilitated by NAPAS.

Banking regulations in Vietnam

At the core of Vietnam’s regulatory environment for banking in Vietnam is the Law on Credit Institutions. Issued in 2010 this has become the backbone of myriad circulars, decrees, and decisions that have guided the development of the sector. Within this framework there are two key pieces of legislation that individuals with an interest in banking in Vietnam should be aware of. These are: Circular No. 41/2016/TT-NHNN pertaining to the implementation of the Basel Accords, and Decree No. 01/2004/ND-CP which addressed foreign ownership limits in the banking sector.

International banking standards

Most banks in Vietnam have been expected to meet Basel II standards since January 1, 2020, per Circular No. 41/2016/TT-NHNN with a vision to all banks complying with Basel III standards by 2025. Though there are currently no codified requirements to meet Basel III standards, many banks are already pursuing these standards of their own volition. This is largely being driven by a desire to appear more appealing to foreign lenders and investors.

Foreign ownership limits 

Foreign ownership limits for banks are outlined in Decree No. 01/2004/ND-CP. This decree limits foreign ownership of a bank to:

• No more than 5 percent for a foreign individual;
• A maximum of 15 percent for foreign institutions;
• A total of 20 percent for ‘foreign strategic investors’; and
• No more than 20 percent combined in the case of multiple foreign investors.

That said, local banks can raise their foreign ownership limits with the approval of the SBV.

(A foreign strategic investor is a foreign organisation with the means to support a local bank and its development over the long term and from which a key executive is willing to sign a declaration to that effect.)

Transferring money abroad

International transfers are monitored and controlled. To move money out of Vietnam, foreign firms and individuals need to prove that the funds were legitimately earned. This is usually done with tax receipts or payslips.

Major banks in Vietnam

Vietnam’s banking sector is dominated by four state-owned banks dubbed the ‘Big Four’. These banks are the four most well-known but not necessarily the biggest.

Vietcombank (Joint Stock Commercial Bank for Foreign Trade of Vietnam)

Vietcombank is one of the largest and most prestigious banks in Vietnam. It provides comprehensive banking services, including retail, corporate, and international trade financing, and has a strong presence in both domestic and global financial markets.

BIDV (Bank for Investment and Development of Vietnam)

BIDV is a state-owned bank focusing on corporate and investment banking. It is a leading financier of large infrastructure projects and offers extensive retail banking services, making it a key player in Vietnam’s financial sector.

VietinBank (Vietnam Joint Stock Commercial Bank for Industry and Trade)

VietinBank is a prominent state-owned bank specializing in trade financing, corporate banking, and partnerships with foreign investors. It serves individuals, businesses, and government institutions, playing a vital role in Vietnam’s economic development.

Agribank (Vietnam Bank for Agriculture and Rural Development)

Agribank is Vietnam’s largest bank by assets, focusing on rural and agricultural development. It provides critical financial support to small-scale farmers and rural businesses, contributing significantly to the country’s agricultural sector.

Techcombank (Vietnam Technological and Commercial Joint Stock Bank)

Techcombank is a leading private bank, known for its innovative digital banking services. It caters to both individuals and businesses, offering a range of financial products, including wealth management and corporate banking solutions.

MB Bank (Military Commercial Joint Stock Bank)

Initially serving military personnel, MB Bank has grown into a full-service commercial bank. It provides retail banking, corporate banking, and investment services, with a strong focus on digital transformation.

VPBank (Vietnam Prosperity Joint Stock Commercial Bank)

VPBank is a private bank that focuses on retail banking, SME financing, and consumer loans. It is known for its modern banking solutions and growing presence in the digital banking space.

ACB (Asia Commercial Bank)

ACB is a private commercial bank with a strong retail focus. It offers a wide range of services, including personal loans, deposits, and wealth management, and is recognised for its customer-centric approach.

Sacombank (Saigon Thuong Tin Commercial Joint Stock Bank)

Sacombank is a major private bank catering to retail and corporate clients. It is well-regarded for its extensive branch network and a strong focus on trade finance and savings products.

SHB (Saigon-Hanoi Commercial Joint Stock Bank)

SHB is a growing private bank offering retail and corporate banking services. It is particularly known for its focus on SME financing and partnerships with international financial institutions.

These banks represent the core of Vietnam’s financial system, driving economic growth and offering a broad range of services to meet the needs of individuals, businesses, and industries.

Main banking products in Vietnam

Vietnam’s banks still operate mostly on a more traditional banking system whereby they use customer deposits to make loans. When they need more cash they raise deposit interest rates and when they are flush with cash they lower them.

Savings accounts

Savings accounts, in particular everyday accounts are becoming increasingly necessary with most businesses in key economic hubs paying their staff by direct deposits. Most everyday accounts are connected to the NAPAS system facilitating instant transfer quickly and easily. These accounts, however, are for day to day use with lower interest rates than consumer might get with other savings products.

Term deposits

As a savings and interest generating vehicle, term deposits are a popular choice in Vietnam. Terms vary and they are handled in much the same way as term deposits elsewhere in the world. Interest rates on term deposits in Vietnam have historically been quite high although that changed in 2023 as the economy began to slow down and local businesses stopped borrowing.

Loans

Only about 10 percent of respondents to the aforementioned World Bank survey, had taken out a loan from a formal financial institution in 2022. A further 18 percent of people, however, had borrowed funds from family and friends. This highlights a cultural phenomena whereby it is quite normal for Vietnamese to borrow and lend money within their community to friends and even casual acquaintances.

Credit cards

Credit cards are not particularly popular in Vietnam with just 6 percent of World Bank Findex survey respondents reportedly having one. Vietnam is still very much a cash society with most consumers buying their day-to-day goods, like fruits, vegetables, and meat from street side vendors at price points well below the need for a credit card. The aforementioned QR code transfers are also quick, easy, and free and this largely removes the need for a credit card.

Controversies

From time to time, the banking sector in Vietnam has a controversy that takes over the nation. In the past year or so, there have been two relatively big ones.

Embezzlement at Saigon Commercial Bank (SCB)

In late 2022, there was a small bank-run on SCB after it was announced that Truong My Lan, the head of Van Thinh Phat Holdings Group, a real estate conglomerate with close ties to SCB had been arrested. The bank, as a result, was put under ‘special administration’ by the SBV. Just over a year later, it was revealed that Lan was alleged to have embezzled from SCB, upwards of US$12.4 billion.

In April 2024, Truong My Lan was sentenced to death for her alleged crimes.

Bancassurance scam

In early 2023, Vietnam’s banking and insurance sectors were embroiled in a scandal involving the mis-selling of insurance products. Allegations surfaced that borrowers were misled into purchasing insurance policies under the false impression that they were making regular bank deposits. These practices were linked to bancassurance agreements, where banks and insurance companies partnered to sell insurance products through banking channels. Under these arrangements, bank employees were incentivised by commissions from insurance companies, driving aggressive sales tactics.

Many bank customers, unaware of the true nature of these transactions, believed they were securing their savings but were instead sold insurance products, often with less favourable terms and conditions than traditional savings accounts. This controversy led to widespread criticism of both industries. The insurance sector, in particular, faced severe reputational damage, as it bore the brunt of public outrage. However, the banking sector was not left unscathed, as many felt that the mis-selling practices were encouraged or overlooked by bank management.

Banking in Vietnam moving forward

Vietnam’s banking sector has experienced huge growth since Vietnam initiated economic reforms in the 1980s. It has become a key pillar of the economy and is responsible for billions of dollars of funds each year.

Fintech has also seen exceptional growth in recent years and this will likely continue as Vietnamese consumers gravitate toward products that better suit their mobile phone dependent lifestyles.

What’s next?

Vietnam’s financial sector, from its securities industry to its insurance industry and, of course banking, is changing rapidly and policy and regulations can turn on a dime. With this in mind, firms and individuals with an interest in Vietnam’s financial sector should ensure they subscribe to the-shiv.

Last updated: December 28, 2024