Banking in the Financial Center: Many Points to Clarify

On March 28, the Workshop on Building a Financial Center in Vietnam was held in Ho Chi Minh City. This is one of the activities to contribute to the development of the National Assembly Resolution on this issue, expected to be passed at the May 2025 session.

International financial experts have contributed many opinions on the experience of developing an international financial center. However, the recommendations also raise questions about what advantages Vietnam's financial center will have to attract global investors, especially in the context of forecasts that Vietnam will have the opportunity to take advantage of the shifting capital and technology flows in the world to develop the economy into a "new era".

Deputy Governor Pham Tien Dung said that building a legal framework for financial centers needs to ensure that participating entities operate stably and safely - Photo: Dinh Hai

Speaking to domestic and international speakers at the seminar, Deputy Governor of the State Bank of Vietnam (SBV) Pham Tien Dung said that participating entities must be legal entities registered to operate in the Financial Center and comply with specific regulations.

Relevant ministries, sectors and localities are building a legal framework for the Financial Center in Vietnam based on international experience and there will be differences between Vietnam's International Financial Center and those of other countries.

Accordingly, the legal framework must clarify what entities participating in the Financial Center “can and cannot do”. At the same time, how banks, securities companies, insurance companies, investment funds, asset managers, etc. operate in the Financial Center must be clarified. This distinction is to distinguish a financial institution operating under current legal regulations, from doing business in the superior policy environment of the Financial Center.

In the first option, financial institutions operating in the Financial Center will provide similar services as outside, and current legal regulations will apply.

With the second option, financial institutions in the Financial Center operate under a common regulatory framework of the National Assembly Resolution. In which, financial institutions in the Financial Center can freely trade foreign currencies, while current law does not allow this.

According to the Deputy Governor, the State Bank will draft a Decree to submit to the Government to guide the implementation of the National Assembly Resolution on superior mechanisms in the Financial Center, and there will be specific and detailed circulars for investors.

The direction of the Decree must set out regulations for all banking activities from licensing, organization of activities, service provision, safety ratios, to inspection and supervision, etc.

Along with the application of superior mechanisms, are commercial banks operating in the Financial Center allowed to mobilize deposits from residents, apply the loan-to-deposit ratio as the market is applying to banks, are the operators able to intervene early when encountering sudden deposit withdrawals, are there recapitalization mechanisms... these are the issues that need to be raised.

For financial and non-financial institutions registered to operate in the Financial Center, the factors of residents, non-residents, etc. also need to be specified.

According to the National Assembly Resolution Drafting Committee, the draft is built in the direction that foreign bank branches, 100% foreign-owned banks and subsidiary banks of Vietnamese credit institutions will be allowed to register to operate at financial centers in Vietnam.

However, the representative of the State Bank said that a domestic credit institution cannot apply two legal mechanisms. This spirit will be included by the Drafting Committee in the National Assembly Resolution, along with the accompanying guiding Decree, to be submitted to the National Assembly's May 2025 session. This draft Decree will be made public for foreign banks and entities participating in the Financial Center to comment, and for the drafting agencies to listen to and accept opinions.

Deputy Governor Pham Tien Dung called on international organizations with experience in financial centers to help Vietnam build a financial center with practical content, thereby ensuring the stable operation of entities participating in Vietnam's financial center.

Regarding fintech (financial technology) in the Financial Center, Deputy Governor Pham Tien Dung said there are two types of fintech, firstly, fintech has recently coordinated very well with commercial banks to do eKYC (electronic customer authentication), including fitech that has become a "unicorn"; secondly, fitech has developed widely with tens of millions of customers such as MoMo Financial Application. Accordingly, there needs to be a legal framework for them to operate, not that fintech is simply a digital asset. The Drafting Committee needs to clarify this point.

Source: https://thoibaonganhang.vn/ngan-hang-tai-trung-tam-tai-chinh-nhieu-diem-can-lam-ro-162010.html