Doing Business


Trường Lăng

August 21, 2023

Doing Business


Trường Lăng

August 21, 2023

Overview of Banking Sector in Vietnam

Given the slowdown of the economy in 2023, Vietnam’s banking sector has relatively downturned.

Vietnam’s banking sector faced difficulties in H1/ 2023 with stagnant credit growth of 4.73% in June 2023 due to disruption in the real estate market, the slowdown of the global economy and an increase in bad debts. Despite its slowdown, deposit growth was seen to be more severe than credit growth, The net interest margin (NIM) also saw a contraction with growth rate at only 3.68% compared to 8.15% in H1/2022 due to the rise in deposit rate and stagnant credit disbursement. Ensuring to meet the minimum capital adequacy ratio (CAR) of 10% continues to be a challenge for several banks.

A JP Morgan report showed that Vietnamese banks offer the best combination of growth and ROE in banks are projected to slightly decline as a result of slow economic growth. ROE of those who had high buffer and less exposed to the real estate market were still remain high and projected to recover in 2024.

Vietnam started opening up its banking system in 1990. Following that, the wave of foreign banks’ presence in Vietnam exploded following its joining the WTO in 2007 and completing the integration policies. HSBC, Citibank, ANZ, and Shinhan Bank currently account for the majority share of the foreign banks market in Vietnam.

The four traditional modes of market entry for foreign banks in Vietnam are:

  • Representative office
  • Branch office
  • Wholly foreign-owned bank
  • Joint venture bank
Number of banks in Vietnam
Number of banks in Vietnam. Source: Viettonkin Consulting

Though popular, these licensing modes have been tightened in recent years . Nevertheless, investors can still consider an alternative approach called New forms of investment (NFI). Under NFI, a foreign bank may choose to join forces with a local partner under (i) a Business Cooperation Contract (BCC) or (ii) Strategic Partnership or partake in (iii) an M&A arrangement.

Guidelines on establishment of Foreign Banks presence in Vietnam

Modes of market entry


An RO is the most limited form of setup due to its inability to perform revenue-generating activities, hence the least expensive option and usually only used at early market entry stages.

A branch office, on the other hand, can provide banking services. However, it is still heavily dependent on the parent bank for decision-making procedures and financing resources. The branches of foreign banks are subject to banking supervision from both the home country and Vietnam, with many limitations on activities as stipulated in Circular 23/2020/TT-NHNN.

Subsidiaries of foreign banks including Wholly foreign-owned and Joint ventures are legally independent of the foreign investor and utilize their own capital to do business. Thus, foreign banks will need to invest more capital abroad if they want to facilitate the same level of lending activity through a subsidiary rather than through a branch.


However, the issuance of such new licenses will likely be limited or possibly even discontinued in the future. The most recent 100% FDI bank in Vietnam is the Singaporean-invested United Overseas Bank (UOB), licensed in 2017 with a VND 3,000 billion (approximately USD 130,400,000 ) charter capital.


For representative office (RO), Vietnam has no restriction in accordance with WTO commitments on services. The bank is eligible to set up a RO in Vietnam when it meets the requirements to operate abroad in accordance with the legal system of its home country. For branch offices/branches, the parent bank needs to maintain total assets of more than USD 20 billion at the end of the year preceding setup application. The bank must also provide a written guarantee to be liable for all obligations and commitments of its branch in Vietnam. The minimum charter capital for a branch is USD 15 million.

In general, branches are the most difficult and complex forms to obtain operating licenses and the only way for any foreign FI who would like to open foreign bank branch or found-up a new bank/nonbank credit institution is buying an existing one, especially the ones that have been applied the special controlling method by SBV. Thus, these modes of market entry are not encouraged by Viettonkin’s consulting team.

For wholly foreign-owned and joint ventures, the foreign partner will be asked for a written guarantee to provide financial, technological, administrative, executive and operational support. This written guarantee is to ensure to maintain the charter capital not lower than the legal amount and to comply with regulations on safety assurances. There should also be an agreement in place between a competent foreign Government authority and State Bank of Vietnam (“SBV”) on collaborative supervision of financial institutions’ operation according to international practices.

General guideline

In general, there are two steps that foreign banks must go through in order to successfully establish a RO/branch/wholly-owned foreign bank/joint venture in Vietnam. First, they must obtain a banking license issued by the SBV. Specific procedures can be found under Circular 40/2011/TT-NHNN or through the consultation of legal experts. Obtaining a banking license requires specific conditions such as charter capital and years of establishment, and takes longer periods of time. For RO, it takes 30-60 days to receive the license, and for branches and corporate forms, the process could consume up to 242 working days.

Upon obtaining the banking license, foreign investors must undergo the business registration process to acquire the relevant business licenses at the local Department of Industry and Trade (for ROs and branches) or Department of Planning and Investment (for wholly-owned and joint ventures). This procedure takes 30-60 working days, followed by the compulsory seal and tax registrations.

New forms of investment (BCC, Strategic Partnership, M&A)

Business Cooperation Contract (BCC)


Under Business Cooperation Contracts (BCC), the parties, either a Vietnamese and a foreign bank or all foreign partners, will enter a contract to formally establish a cooperative relationship in business and agree to share profits or products in ratios decided through negotiation. Utilizing this form of investment, such parties are not required to establish a new legal entity. Instead, a coordinating board will be formed to execute the BCC. Investors can freely negotiate the details of the contract and said coordinating board. There are many ways to classify BCC contracts, such as jointly controlled assets or jointly controlled operations, or earning sharing based on either revenue before tax or net profits.

General guideline

The foreign investor needs to apply for an Investment Registration Certificate and depending on the size of the project, it might be required to apply for an Investment Policy Decision first. The focal point of coordination and instruction will be the local Department of Planning and Investment. After being granted the Investment Registration Certificate, investors can carry out investment activities to implement the project according to the BCC Contract.

Pros and Cons

BCC enables the investor to gain speedy access to the market through domestic partners and start generating earnings immediately. This works best between a foreign partner with abundant expertise and a domestic partner with good access to local permits and real assets. Another characteristic of BCC is the lack of a separate legal entity.

For many, it is advantageous for saving time and cost significantly, and sparing them the headache of dissolution once the project is completed. However, this can also be considered risky for investors, given there are no clear regulations on the implementation of the BCC contract. The parties are fully responsible for their negotiation results and can only refer to high-level guidelines from the Law on Investment and the Civil Code.

Strategic Partnership


Rather than pinning down the business into a specific product or project, Strategic Partnership is a form of investment which offers greater flexibility. These engagements can be categorized into: (1) Contractual arrangements, (2) Equity investments, and (3) Joint ventures, as follows:


To qualify for this form, the foreign investor is expected to have a good credit rating by an international agency and total assets of US$10 billion (to own from 10% of shares) or US$20 billion (to be qualified as a strategic investor).

General guideline

Similar to BCC, strategic partnerships operate under the provisions of the Civil Code and the Law on Investment.

The general process of establishing a strategic partnership follows these 6 steps:


Pros and Cons

This could be a highly viable market entry solution for international banks or institutions. Strategic Partnerships present a wide array of opportunities for investors with different backgrounds and levels of familiarity with the Vietnam market. However, along with this flexibility comes the timeline issue. Banks will be cautious and meticulous in selection as engagement on a strategic level touches core business pillars, leading to a longer negotiation time period, which can last 2-3 years.

Opportunities for foreign investor

During the last Annual General Meeting of Shareholders season, many banks continued to reveal their intention to seek foreign strategic partners, including OCB, LienVietPostBank, SCB, Ban Viet Bank, Nam A Bank, VPBank, and NCB. Since the beginning of 2021, under new policies, banks have been allowed to register a maximum foreign ownership ratio that is lower than the prescribed ceiling.

A number of large banks requested to increase current ownership limits to mitigate the effect of stagnant real estate market resulting in rising non-performing loans and bad debts. With regulations stipulating the maximum cap on the shares of a foreign strategic investor being 20% of the charter capital and the total foreign ownership being 30%, the current foreign ownership is seen as ranging from 12-20% below the ceiling limit. While some banks expressed their interests in increasing foreign ownership, others chose to lock their foreign rooms in order to retain part of the foreign ownership ratio for strategic investors. This proves an opportunity for foreign investors and the ongoing trend of increasing interests in foreign investments in the future. For instance, the foreign room at Techcombank is 22.5%, at OCB is 22% and at VPBank is 17.64%.



Mergers and acquisitions (“M&A”) is an umbrella term that encompasses all forms of consolidation of companies and assets through various financial mechanisms including mergers, acquisitions, consolidations, tender offers, purchase of assets, and management takeover. In the current policy environment of Vietnam, M&A is one of the most recommended forms of investment, due to its alignment with recent regulations and less administrative complexity compared to traditional forms.

General guidelines

Despite its relative openness, M&A is still subject to certain conditions. Circular 36 stipulates that mergers, consolidation and acquisitions between credit institutions can only be conducted under certain forms: a commercial bank or a financial institution being merged or consolidated into another commercial bank; or a financial institution being merged or consolidated into another financial institution. Other than Circular 36, in general, the banking sector is mainly regulated by the Law on Credit Institutions 2010 and relevant documents analyzed above. Regulations on M&A activities in the sector are articulated in many different legal documents such as Law on Investment, Law on Enterprise, Law on Securities, Law on Credit Institution, Law on Competition, among others.

According to SBV, completing a bank M&A requires going through a process with 07 steps as follows:

  1. Developing an M&A strategy, whereby bank managers need to define clear goals, ideas, and the expectations from the M&A;
  2. Determine the criteria for the selection of M&A partners;
  3. Planning: Detailed implementation, specifically from the beginning is identifying partners to approach, collect information and data, prepare legal issues, implement people (establishment) related teams and committees for implementation), time and content of valuation analysis, negotiation, preparation of capital sources, etc.;
  4. Appraisal;
  5. Drafting and signing contracts;
  6. Releasing the committed capital;
  7. Completion.

Pros and Cons

The biggest advantage of M&A is its alignment with the Government’s direction and policies on banking restructuring. Furthermore, commercial banks are required to publicly disclose information about business performance and investment activities and to be listed on HOSE or HNX, therefore it can enhance information transparency for the investors. M&A will also promote business efficiency by upscaling. Once the deal is in place, parties in the transaction can also exploit each other’s resources, increase market share, take advantage of customer relationships, thereby contributing to improving competitiveness and creating new business opportunities (Nguyen Thi Gam, 2019).

On the flipside, Vietnam has yet to develop a standard legal framework for M&A. With a plethora of laws to cross-examine, investors will have a hard time navigating through transaction and operation, while authorities also find it difficult to manage and give comprehensive instructions. Additionally, the Vietnam side of M&A is still passive and inexperienced, especially in due diligence, thus foreign investors should expect to take the lead in guiding them through the process.

Opportunities for foreign investor

There are many factors contributing to the growth of the banking M&A scene in Vietnam. The government is intending to expand foreign rooms limit to 49% from the original 30% for banks categorized as weak, including Vietcombank, MBBank, HDBank and VPBank, with the government’s voting share holding at least 65% of the total share.

Second, still driven by policy, Circular 22/2019/TT-NHNN stipulated that all commercial banks must declare their capital adequacy ratio (CAR) and other regulatory ratios to SBV following Basel II standards. On the other hand, the European Union – Vietnam Free Trade Agreement (EVFTA) may facilitate European financial firms to penetrate the Vietnamese market. One of the key changes under the trade pact is that European investors are now able to increase their ownership ratio to a maximum 49 per cent in two Vietnamese banks.

The following financial instruments are available to foreign investors:



Given the slowdown of global and Vietnam economy, Vietnam’s GDP growth rate is set low at 4.6% (HSBC 2023) with the banking sector’s pre-tax profit is expected to increase by only 10% YoY (VCBS). Despite of the banking sector saw a sharp recovery in the first half of 2023, its projected growth rate remained low due to the recovery of bad debts and the stagnant real estate sector.

Viettonkin offers a full range of consulting services for all NFI variations, BCC, Strategic Partnership, or M&A. Our network of international experts, local connection, and strong on-the-ground support team guarantee a holistic and systemized approach customized to your company profile and demands.

Our CEO, Mr. David Lang is the country representative of a European Bank in Vietnam. Viettonkin plays a role as third parties to help this bank enhance its presence in Vietnam through credit packages for Vietnamese businesses. Currently, Viettonkin has consulted and connected a manufacturing enterprise in Vietnam to access a large loan with preferential interest rate from this Bank so that the business can recover and continue to grow.

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