Bank accompanies the strategy of developing an international financial center

Workshop "International experience and the role of the banking system in financial centers" - Photo: VGP/HT

At the workshop "International experience and the role of the banking system in the financial center" organized by Banking Times on April 16, in Hanoi , domestic and foreign experts shared in-depth analysis and practical recommendations to enhance the role of the banking industry in this process.

Why do financial centers need banking systems?

Governor of the State Bank of Vietnam Nguyen Thi Hong affirmed that developing an international financial center is a strategic task of great significance, contributing to Vietnam's deep integration with the global financial market. However, for a financial center to not only be formed but also operate effectively, the prerequisite is to have a modern financial infrastructure, a synchronous institutional system and a finance-banking system that is open enough, but still maintains stability.

In that spirit, the State Bank of Vietnam (SBV) has been developing many key policies, including a roadmap to gradually loosen foreign exchange activities, improve liquidity, develop the interbank money market and promote the digital ecosystem in the banking sector. However, Governor Nguyen Thi Hong also emphasized that although the goal of opening up and attracting capital flows is urgent, it must still go hand in hand with ensuring financial security, monetary sovereignty and system safety.

Mr. Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam Region 2, commented: Domestic credit institutions will play three important roles in the international financial center: First, creating a legal corridor; second, increasing competitiveness with international banks; and third, meeting capital needs for the economy.

It is important for Vietnamese credit institutions to upgrade their technological, human and management capabilities to compete fairly with foreign financial institutions. Competition in the IFC is not only an opportunity to expand market share but also a driving force for domestic banks to reach international standards.

Perfecting institutions - the foundation for a modern financial center

Speaking at the workshop, a representative of the Ministry of Finance said that in order for Vietnam to become an international financial center, it is necessary to develop outstanding preferential policies, not only in terms of taxes, but also in terms of market access, ownership regulations and operating standards. Singapore and Hong Kong (China) are successful because of their flexible legal frameworks and good financial infrastructure, but more importantly, their ability to connect with other financial centers, creating a cross-border capital trading network.

To achieve this, Vietnam needs to set clear goals, not create two domestic competitive centers. Instead, it should clearly define Ho Chi Minh City as an international center, while Da Nang is at the regional level. This both ensures regional connectivity and limits resource dispersion.

"Vietnam needs to improve its score on the GFCI (Global Financial Centres Index) rankings, especially in the criteria of business environment, infrastructure, human resources and institutional transparency," a representative of the Ministry of Finance recommended.

Institutional issues are considered by experts to be a point that needs to be improved in the coming time. According to the representative of the Ministry of Finance, Vietnam needs to quickly issue a legal framework for new financial models such as fintech, digital assets, and test the sandbox model following Singapore's example. A transparent, flexible, and synchronous legal environment will create conditions for international capital to flow in with confidence.

At the same time, it is necessary to build a risk monitoring system according to international standards, applying financial prudence criteria according to Basel III. Accordingly, financial institutions in the international financial center must report financial standards, comply with capital adequacy ratios and be transparent in their operations.

Mr. Nguyen Duc Long - Director of the Department of Credit Institutions Safety (SBV) - Photo: VGP/HT

Mr. Nguyen Duc Long - Director of the Department of Credit Institutions Safety (SBV) commented: Forming a financial center is "not easy" because Vietnam still has many differences in terms of institutions, scale and development level. Especially, in the current context, liberalized capital flows need to be strictly controlled to avoid causing macroeconomic imbalance.

According to Mr. Nguyen Duc Long, banking activities in the financial center will tend towards modern financial models rather than traditional banking. This requires the legal system to be constantly updated, and safety standards must follow international practices. The State Bank of Vietnam is developing a new circular on capital safety ratios, towards approaching advanced Basel II and Basel III, at the same time, requiring financial institutions to implement clear financial disclosure.

Mr. Nguyen Manh Khoi, Head of Capital Business Department of VietinBank, said that in order for the financial market to be attractive enough for international investors, Vietnam needs to diversify its financial products. Currently, derivative products and risk hedging tools are still in their infancy, while they are essential tools in major financial centers. According to a representative of VietinBank, it is necessary to promote new markets such as commodities, digital assets, foreign currencies, etc., with priority given to Vietnamese products with strengths such as rice. This not only helps deepen the financial market, but also contributes to creating a transparent legal corridor for businesses and investors to operate with peace of mind.

Expert Richard D. McClellan

From the perspective of international experience, expert Richard D. McClellan, an economist and independent consultant specializing in economic policy, financial sector development and investment strategy, recommends that Vietnam should consider compliance with FATF recommendations on anti-money laundering and terrorist financing as a top priority. This is a fundamental step to avoid being placed on the special monitoring list, as well as to create confidence with international investors.

As the regulatory body for banking activities in the financial center, the SBV needs to play a leading role in establishing a roadmap for compliance with the recommendations of the Financial Action Task Force (FATF), ensuring that sandbox regulations are consistent with anti-money laundering (AML) and counter-terrorism financing (CFT) standards from the very beginning.

It is important for the SBV to proactively and clearly communicate its compliance progress to the international market to build trust and attract investment. The SBV needs to design transparent and secure capital movement mechanisms that can be implemented in phases, while ensuring close monitoring of AML/CFT activities to avoid the risk of being placed on the FATF grey list. Developing a legal framework for digital finance, including sandbox regulations for fintech, crypto-assets and cryptocurrencies, as well as applying prudential standards consistent with Basel III, is necessary to create a safe and effective operating environment for the International Finance Corporation (IFC).

"It is necessary to proactively build a transparent capital movement mechanism and gradually apply the sandbox model for financial technology, cryptocurrencies, and crypto assets. At the same time, it is necessary to perfect the risk monitoring system and issue synchronous financial standards according to Basel III to create a safe and attractive operating environment for global financial institutions," Mr. Richard D. McClellan recommended.

At the recent Conference on Building Financial Centers in Vietnam, Minister of Finance Nguyen Van Thang emphasized: Building a financial center is not a new content in the world, but for Vietnam this is a new and unprecedented issue. Vietnam will do it and learn from experience, not be hasty but also not be perfectionist, so as not to miss the opportunity. "With the strong and decisive direction of the Politburo, General Secretary To Lam, the Government, the Prime Minister, the joint efforts of ministries, branches, localities, the cooperation of the international community and businesses, I believe that Vietnam will successfully build a modern and world-class financial center, contributing to the stable and sustainable development of the region and the world" - Minister Nguyen Van Thang said.

Mr. Minh

Source: https://baochinhphu.vn/ngan-hang-dong-hanh-cung-chien-luoc-phat-trien-trung-tam-tai-chinh-quoc-te-102250416163222676.htm