Financial center in Vietnam: different, but still approaching international standards

Close coordination between the State Bank and relevant parties will create a solid foundation for the development of the financial center.

Sharing some differences between the practices of Vietnam and some other countries, Mr. Nguyen Duc Long - Director of the Department of Credit Institutions Safety, State Bank of Vietnam (SBV) affirmed that the policy of establishing IFC is a big and important policy but also a difficult and complicated issue for Vietnam, not only in terms of population size, geography, etc., but also in terms of legal framework. International IFCs have been operating for a long time in developed countries with open legal corridors, and countries with lower starting points also have more open legal areas. Meanwhile, in Vietnam, there are strict regulations to ensure macroeconomic safety. For example, regarding capital transaction regulations, capital flow liberalization is a major condition for establishing IFC. Currently, Vietnam has strict regulations on this issue.

From many years of experience working in major financial centers around the world , Mr. Richard D. McClellan, an economist and independent consultant specializing in economic policy, financial sector development and investment strategy, realized that one of the major differences and challenges for Vietnam, especially Ho Chi Minh City, compared to IFCs that have developed over the past decades, lies in the scale and management mechanism. IFCs in Astana or Dubai, which are built on small areas, have small populations, and have a high concentration of government...

This shows that while other countries can easily establish complex decision-making structures thanks to their simple governance models, Vietnam is much larger in scale and requires a more consensual decision-making model. Vietnam needs to consult many parties, both at the central and local levels, before making important decisions. This means that the consultation and consultation process will be significantly more complex and lengthy than in other countries.

Despite the differences, Mr. Richard D. McClellan still affirmed, "no matter what we do, we must make the environment within the IFC as close to international standards as possible." To do this, Vietnam will need to improve the legal environment to be able to implement the IFC. This includes ensuring capital mobility, improving foreign exchange management regulations and possibly having a separate court system for financial centers; complying with international financial standards so that foreign investors can come to Vietnam but still operate in a familiar environment, because there is an IFC environment.

Event Overview

Always ensure macroeconomic safety

To create a legal framework to ensure IFC operates effectively but still ensures macroeconomic safety, Mr. Nguyen Duc Long understands that traditional banking activities will not be much but will be oriented towards new banking activities, according to international practices. Along with that, the management of operational safety is also set. Currently, the regulations will be in the direction that financial institutions when established in the financial center must perform financial reporting according to international standards, according to safety regulations according to international practices.

For Vietnamese financial institutions established in IFC, in principle, international practices will also be applied, with a new circular on capital adequacy ratio, complying with advanced Basel II. In addition, there will be 3 groups of customers that financial institutions in IFC serve, namely providing cross-border financial services to foreign partners, providing services to members... from the perspective of the management agency, it will coordinate with the parties to build an effective financial center while also ensuring macroeconomic stability.

In addition to efforts to improve the legal framework, Mr. Nguyen Manh Khoi, Head of Capital Trading Department, Capital Trading and Markets Division of Vietnam Joint Stock Commercial Bank for Industry and Trade ( VietinBank ) hopes that IFCs will diversify financial products and gradually approach major financial centers in the region and the world; need to encourage and support the development of new financial products, derivatives and innovative investment products, helping to increase flexibility and depth for the market; promote conditions to upgrade the stock market, at the same time research, test and gradually put into operation new markets such as commodity markets, foreign currencies, digital assets..., approaching the model of international financial centers. At the same time, develop the commodity market based on national advantages; focus on developing commodity derivative products with key products that Vietnam has competitive advantages such as rice... while other commodity markets have not yet deployed this product. Building a clear and transparent legal corridor to support businesses, farmers and investors to effectively participate in this market, contributing to minimizing price risks and increasing value for the agricultural sector; gradually expanding connectivity with other markets in the region and the world.

It can be seen that the stability and transparency of the Vietnamese banking system is a key factor in attracting foreign investment; and foreign banks also play a special role in building and operating an effective IFC. Mr. Ryu Je Eun, Deputy General Director of Shinhan Bank Vietnam, said that the bank has provided significant financial support to Korean enterprises so that they can operate effectively in Vietnam. Not only providing capital for enterprises in Vietnam, the bank also takes advantage of its international network with branches in 20 countries to support Vietnamese enterprises operating in Korea, Hong Kong and many other markets. “IFC is built on a foundation of transparent regulations and the participation of financial institutions to facilitate investment flows. Through this, we not only provide financial support to companies in the manufacturing sector, but also contribute to the development of startups, creative industries and the financial technology (Fintech) sector.”

To build an influential international financial center, Associate Professor Dr. Hoang Cong Gia Khanh, Rector of the University of Economics and Law, Ho Chi Minh City National University, said that it is necessary to combine policies focusing on technological innovation, sustainable development, a flexible and effective legal framework, developing high-quality human resources, promoting both competition and cooperation, and building a solid economic and legal foundation.

Ho Chi Minh City should not follow the traditional financial center model, but should pay more attention to technology infrastructure and digital capacity; encourage growth in sustainable finance by leading multilateral groups to develop sustainable strategies.

Trusting in the thorough preparation of the State Bank and the banking system, Associate Professor, Dr. Dang Ngoc Duc affirmed that the clear directions of the State Bank in applying international standards and practices are an important step forward, aiming to ensure the safety, transparency and efficiency of the operations of financial institutions. The close coordination between the State Bank and relevant parties will create a solid foundation for the development of IFC. This not only strengthens the confidence of domestic and foreign investors, but also contributes to enhancing Vietnam's position on the regional and international financial map. Compliance with international standards will help the Vietnamese financial market integrate more deeply, attract high-quality investment capital, and promote sustainable economic development.

Source: https://thoibaonganhang.vn/trung-tam-tai-chinh-tai-viet-nam-khac-biet-nhung-van-tiem-can-chuan-muc-quoc-te-162881.html