NATIONAL ECONOMICS UNIVERSITY

ADVANCED EDUCATIONAL PROGRAMS

GROUP EXERCISES

SUBJECT: COMMERCIAL BANKING

CLASS: 64D CORPORATE FINANCE CLC

GROUP 1

TOPIC: FINANCIAL SERVICES OFFERED BY BANKS IN THE VIETNAM

FINANCIAL MARKET: CHALLENGES AND OPPORTUNITIES
 GROUP MEMBERS

Name Student code

1. Nguyễn Danh Vĩnh An 11220027
2. Hoàng Thị Minh Anh 11220208
3. Trần Gia Bảo 11220816
4. Lê Tùng Dương 11221563
5. Lưu Vân Giang 11221563
6. Lương Minh Hạnh 11222149
7. Trịnh Ngân Hương 11222729
8. Nguyễn Khánh Linh 11223569
9. Phạm Khánh Linh 11223706
10.Hoàng Đức Mạnh 11224115
11.Hoàng Minh Nguyệt 11224850
12.Lê Nhật Thành 11225807
13.Hoàng Xuân Trường 11226635
Table of Contents
I. Definition...............................................................................................................................1
1. Financial services...........................................................................................................1
2. Bank................................................................................................................................1
3. Financial market............................................................................................................1
II. Financial services provided by banks in Vietnam's financial market.............................2
1. Overview of Vietnam's financial market.....................................................................2
2. Banking system in Vietnam...........................................................................................3
a) State bank of Vietnam...............................................................................................3
b) Commercial Bank of Vietnam..................................................................................4
3. Financial services that offered by banks in the Vietnam financial market..............7
3.1. Capital mobilization..............................................................................................7
3.2. Money lending........................................................................................................9
3.3. Money transfer.....................................................................................................13
4. Evaluating financial services offered by banks in the Vietnam financial market. 14
4.1. Capital mobilization............................................................................................14
4.2. Money lending......................................................................................................15
4.3. Money transfer.....................................................................................................15
III. Opportunities and challenges.........................................................................................16
1. Opportunities...............................................................................................................16
a) Digital Banking Services:........................................................................................16
b) Expanding Financial Inclusion:..............................................................................16
c) Bancassurance..........................................................................................................17
d) ESG...........................................................................................................................17
2. Challenges.....................................................................................................................18
a) Regulatory Challenges:...........................................................................................18
b) Technological Adoption:..........................................................................................19
c) Credit Risks:.............................................................................................................20
IV. Recommendations............................................................................................................20
V. Conclusion...........................................................................................................................21
References......................................................................................................................................21
I. Definition

1. Financial services
- Financial services refer to services provided by the banks and financial
institutions in a financial system.
- In a broad sense, the term financial services mean mobilization and
allocation of savings.
- Thus, it includes all activities involved in the transformation of savings into
investment.

2. Bank
- Bank is a financial institution and financial intermediary that accepts
deposits and channels those deposits into lending activities directly or
indirectly through market capital.
- A bank is a connection between a customer with a capital deficit and a
customer with a capital surplus.
- In its role as a financial intermediary, a bank accepts deposits and makes
loans. It derives a profit from the difference between the costs (including
interest payments) of attracting and servicing deposits and the income it
receives through interest charged to borrowers or earned through securities

3. Financial market
- Financial markets are where traders buy and sell assets.
- These include stocks, bonds, derivatives, foreign exchange, and
commodities, currencies, cryptocurrencies. It acts as a platform for sellers
and buyers to connect and trade their desired financial assets at prices
determined by market forces.
- Financial markets become the intermediary between people or institutions
that need capital and those who have capital to invest. That means people
with more money give them to people who need more finance to grow their
business and make more money.

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II. Financial services provided by banks in Vietnam's financial market

1. Overview of Vietnam's financial market

- In 2023, a lot of policies have been implemented to control the inflation
target of around 4.5%. The net profit of listed companies on all three
exchanges (HOSE, HNX, UPCOM) increased by 49.5%; the pre-tax profit
of 29 commercial banks (NHTM) accounted for up to 80% of market share,
a nearly 32% increase; operating expenses decreased by 15%; digital
banking expanded rapidly, with mobile banking services increasing by 75%
in transaction volume and 87% in transaction value; the bad debt coverage
ratio increased to 152%.The credit orientation in 2023 is expected to
increase by about 14-15%.The governmental direction has contributed to
maintaining stability, transparency, and vibrancy in the market
- In the stock market, indices and market capitalization increase, foreign
capital continues to be net buyers; however, overall market liquidity
decreases sharply. As of January 31, 2023, the VN-Index reached 1,111.18
points, an increase of 10.34% compared to the end of 2022,. The market
capitalization of stocks reached VND 5,708.4 trillion, an increase of 9.22%
compared to the end of 2022. Foreign investors continued their net buying
trend with an accumulated value of VND 3.1 trillion with the average
trading value of VND 11,960 billion per session, decreasing by 38.88%
compared to the average of 2022. However, Large matured bond volumes
pose signs of increasing liquidity risks for real estate enterprises.
- In the insurance market, the total insurance premium revenue is estimated at
VND 21,358 billion, an increase of 13.38% compared to the same period in
2022. Total assets are estimated at VND 817,724 billion, an increase of
13.66% compared to the same period in 2022. Investments back into the
economy are estimated at VND 662,835 billion, an increase of 12.59%
compared to the same period in 2022. The total owner's equity is estimated
at VND 163,058 billion, an increase of 6.64% compared to the same period
in 2022.According to the estimates at the Vietnam Economic Forum 2022, in
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 2023, the average growth rate of total assets, total investment, and total
revenue of insurance companies is forecasted to increase by about 15%
compared to 2022.
- In conclusion, in line with the overall growing trend of the global financial
market, the Vietnamese financial market maintains positive growth
momentum thanks to stable macroeconomic regulations There has been an
improvement in adaptability, diversification of activities, promotion of
digital transformation, and cost reduction, reinforcing risk management
capabilities so Certain sectors and industries continue to develop well as
well as strengthened the financial capacity of various financial institutions.
[1] [2]
2. Banking system in Vietnam
a) State bank of Vietnam
- According to the website of Vietnam's central bank (sbv.gov.vn), the State
Bank of Vietnam is a ministerial-level agency of the Government, acting as
the Central Bank of the Socialist Republic of Vietnam for non-profit
purposes, not for profit.
- Functions
 Issuing currency function:

The central bank is the only financial agency with the right to issue
completely legal currency in accordance with the law to ensure uniformity in
the country's currency circulation.

 Bank of banks function:

Receive deposits from intermediary banks: Intermediary banks across the

country must deposit money at the central bank in the form of payment
deposits and mandatory deposits. In particular, mandatory deposits are the
amount of money that intermediary banks are required to deposit back to
ensure the intermediary bank's solvency against the need to withdraw money
from their customers. Payment deposits are the amount of money that
intermediary banks need to deposit regularly for the purpose of serving
payment needs, and ensuring the need for transactions with state banks and
payments to other commercial banks.

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 Granting credit to intermediary banks: By rediscounting short-term
priced documents. In other words, this is a form of funding for intermediary
banks to expand credit activities. The state bank plays the role of protecting
intermediary banks from the risk of bankruptcy. In addition, this agency is
also a payment and clearing center to save payment costs and capital
circulation for banks and the economy.

 Government bank function

The central bank will be responsible for providing banking services and
financial and monetary policy advice to the Government. However, in
Vietnam, the agency responsible for this function is the state treasury.

- Main event

 In 2023, the State Bank has reduced interest rates to support and remove
difficulties for the economy through continuously adjusting operating
interest rates 4 times, with a decrease of 0.5- 2.0%/year, in the context that
world interest rates continue to increase and stay at high levels. To date,
interest rates have decreased significantly, average deposit and loan interest
rates of new transactions in VND decreased by 2-3% compared to the end of
2022. [3]

b) Commercial Bank of Vietnam

- According to Clause 3, Article 4 of the Law on Credit Institutions 2010 in
Vietnam, a commercial bank is a type of bank that is allowed to carry out all
banking activities and other business activities as prescribed for the purpose
of profit. (Techcombank, VPBank, Vietinbank, Sacombank, …)

- Functions

 Credit intermediary function

Commercial banks act as a bridge between people with excess capital and
people in need of capital. When performing this function, commercial banks
accept deposits such as saving accounts or current accounts, and provide

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 loans by lending money to businesses, individuals or governments.This is
the most significant function of commercial banks because it brings the
largest profit for them.

 Payment intermediary function

Commercial banks facilitate domestic and international payments for their

customers. This includes services such as deposit and withdrawal, electronic
funds transfers, wire transfers, check clearing, issuing credit and debit cards,
online and mobile banking, currency exchange. As a result, money is paid
quickly and efficiently, customers don’t need to always keep cash in their
pocket or spend time trading face-to-face. This will save a lot of time and
costs of customers while still ensuring safe transactions.

 Money generation function

The money creation function is implemented on the basis of two other

functions of commercial banks: credit function and payment function.
Through the credit intermediary function, the bank uses the raised capital to
lend, the loan amount is used by the customer to buy goods and pay for
services while the balance on the customer's current deposit account is still
considered a part of the transaction money. With this function, the
commercial banking system has increased the total means of payment in the
economy, meeting the payment and payment needs of society.

- Main event

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- In 2023, despite facing many difficulties and major challenges, banks ended
the year with profit after tax figures as shown in the table above:

 Vietcombank continued to maintain the top position in profit with profit after
tax of VND 33,054 billion, an increase of 10.5% over the same period last
year. Regardless, the bank's profits slowed in the fourth quarter of 2023.

Specifically, net interest income decreased by 13.6% compared to the same

period last year. Net profit from services and foreign exchange trading
decreased by 22.4% and 24.9%. Vietcombank's total operating income
decreased by 14.5% and net profit from operating activities decreased by
27.6% in the last quarter of 2023.

 BIDV rose to win the runner-up position from Techcombank with profit after
tax of VND 22,027 billion, up 20% over the same period.

By the end of 2023, BIDV's total assets reached 2.3 million billion VND, an
increase of 8.5% compared to the beginning of the year and maintained the
title of largest bank in Vietnam. Customer loans grew by 16.8%, to 1.78
million billion VND, also leading the entire industry.

 MB also improved one place in the rankings, to third place with a profit of
VND 20,667 billion, an increase of 18.3%. The bank's profitability is also
high, return on assets (ROA) is about 2.5% and return on capital (ROE) is
about 25%.

 VietinBank also increased one level in the rankings with profit after tax
reaching 20,133 billion VND, ranking 4th in the industry.

By the end of 2023, VietinBank's total assets have exceeded the 2 million
billion VND mark, an increase of 12.4% compared to the beginning of the
year. Customer loans reached 1.47 million billion VND, an increase of
15.6%

Customer deposits reached 1.41 million billion VND, an increase of 12.9%

compared to the beginning of the year. At the end of 2023, VietinBank's bad
debt balance was at VND 16,608 billion, down from the end of the third

6
 quarter result of VND 18,941 billion. The bad debt ratio decreased to 1.13%,
lower than the beginning of the year.

 Runner-up in profit in 2022 - Techcombank dropped to 5th place again with

VND 18,191 billion in profit after tax, down 11% over the same period.

 Notably, ACB quickly rose to the 6th position in banking industry profits
with pre-tax profits increasing by 17% compared to the previous year,
reaching 20,068 billion VND - joining the "club" of banks with pre-tax
profits. tax over 20,000 billion VND. This bank's profit after tax in 2023 will
reach VND 16,045 billion.

By the end of 2023, ACB's total assets increased by 18% compared to the
beginning of the year, reaching VND 718,794 billion. Customer loans
reached nearly 488,000 billion VND, an increase of 18%. This is the bank's
highest credit growth in the past 10 years. Customer deposits reached more
than 482,702 billion VND, an increase of 17% compared to the beginning of
the year.

 HDBank also rose two places, ranked 7th with profit after tax of 10,366
billion VND, an increase of 25.9%.

 VPBank, the bank that once ranked 6th in profit for the whole year 2022,
dropped to 8th place. VPBank's after-tax profit last year was 8,641 billion
VND, down 48.9%.

 VIB also dropped to 9th place with profit after tax almost flat compared to
the previous year, reaching 8,562 billion VND. [4]

3. Financial services that offered by banks in the Vietnam financial market

3.1. Capital mobilization
a) Definition
- Capital mobilization is the most basic and important traditional activity of
all commercial banks by which the Bank collects money, assets or financial
resources from many different sources to use for its business activities. The
main goal of capital mobilization is to meet capital needs and create funding
sources to provide financial services to customers, such as loans, deposits
and other services.
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 - Like any economic organization, commercial banks want to carry out their
business activities, they must have capital, business capital including equity
capital and loans. In order to be able to get loans from customers with idle
money, the borrowers, commercial banks must prove their prestige,
especially their financial prestige to ensure the repayment capability to the
lenders
b) Common types of mobilized capital sources
- Deposit sources: Mobilizing capital from deposits is an important method
that commercial banks use to collect capital. This is the most popular form
and plays an important role in the bank's business activities.

 Payment deposit: Commercial banks collect capital through payment

deposits from customers' short-term deposit accounts. Customers can make
payment transactions, such as cash withdrawal, bank transfer or using
credit/debit card, from this account.

 Saving deposit: Commercial banks mobilize capital by providing saving

accounts to customers who deposit their idle’s money into that with a view
to enjoy saving interest and must be in accordance with the regulations of
the commercial banks.

 Demand deposit: Commercial banks collect deposits from customers

through demand deposit accounts. Customers can deposit and withdraw
money flexibly in this account. Interest rates on demand deposits are usually
lower than on savings deposits.

- Borrowings: Commercial banks can mobilize capital by borrowing from

different sources to meet their capital needs. Below are some popular
sources that commercial banks often use:

 Central banks

 Interbanks

 Financial market (by issuing bonds, promissory notes, certificates of

deposit,...)

c) Role of capital mobilization

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 - Providing financial services: borrowing money, granting credit, issuing
credit cards and financing business transactions.
- Capital Investment: Commercial banks provide capital to businesses and
individuals who need loans to develop their business activities, expand
business scope, upgrade services and other needs.
- Financial Risk Management: Banks can minimize financial risks in case a
financial source encounters difficulty or decline because they already have a
certain source of capital.
- Competitive Advantages: Capital mobilization allows commercial banks to
enhance their competitiveness in the industry by providing financial services
with attractive interest rates and service fees. This helps attract customers
and increase the Bank's market share.
d) Example
- According to Mr. Nguyen Thanh Tung - General Director of Joint Stock
Commercial Bank for Foreign Trade of Vietnam (Vietcombank), by the end
of June 2023, Vietcombank capital mobilization increased by 6.6% while
credit only increased by 2.6%. Thus, the capital mobilization growth rate is
2.5 times higher than the credit growth rate. The scale of capital
mobilization and credit reached 1.3 and 1.2 million billion VND,
respectively. Credit quality is controlled, bad debt ratio is at 0.85%, bad debt
provision ratio is over 350%.
- Although credit growth is slow, recently, Vietcombank has implemented
many solutions to support customers. Within the first 6 months in 2023,
Vietcombank implemented 10 deposit interest rate reductions and 5 loan
interest rate reductions for all individual and corporate customer segments.
At the same time, this bank also implemented many lending programs with
preferential interest rates for priority segments and subjects: Preferential
short-term loan program; FDI customer loan program; 1-5 year fixed interest
loan program; Preferential production and business loan program for SME
customers and business households; Interest rate peace of mind program…
[5]

3.2. Money lending

a) Definition

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 - Money lending is the process by which a financial institution provides funds
to a borrower. Often called a lender, the institution typically receives interest
in return for the loan. Lending in banking benefits lenders and borrowers
alike by increasing liquidity within the marketplaces where loans are
originated and used.
- This is considered one of the key activities of commercial banks because
through this activity banks provide loans to businesses and consumers,
which help finance new investments and stimulate demand in the economy.
In addition, this service also brings a large amount of income to the bank,
but there are still potential risks
b) Forms of lending activities
- Based on the loan period:

 Short-term loan

 Medium-term loan

 Long-term loan

- Based on the nature of loan rotation

 Fixed capital loan

 Lending working capital

- Based on the purpose of using capital

 Production and business loans

 Consumer loan

- Based on loan security measures

 Property secured loan

 Unsecured loans with assets

- Based on the refund method

 Installment loan

 Non-installment loan
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  Overdraft loan

 Lending one at a time

 Lending according to the credit limit

c) Role of Money Lending

- Increased economic growth: Banks play an important role in financing new
business investment, leading to increased production and output, higher
employment levels, greater innovation and more competitive companies. In
addition, when consumers have access to credit, they can increase their
spending on goods and services, boosting overall economic activity.
- More jobs: By providing credit facilities for businesses that are expanding
or starting up operations, banks can create jobs that might not otherwise
exist. Furthermore, bank lending helps foster a healthy business climate
where firms are confident about investing in future expansion plans,
knowing that there will be adequate funding available if needed. This
contributes significantly to maintaining stable employment levels during
tough periods such as in a recession.
- Reduced borrowing costs: Lower interest rates charged on loans by banks
result in companies having more cash flow to reinvest back into their
businesses, thereby stimulating economic growth. For consumers, it means
they can borrow money at a lower cost to finance things like cars, homes and
education.
- Improved economic stability: Finally, bank lending helps ensure an
economy's overall stability since creditworthy firms can obtain the funding
they need even during tough times. This prevents severe contractions or
credit crunches from happening, which can lead to widespread layoffs and
business failures.
d) Example
- Regarding loans, according to the statistics in the financial statements in the
second quarter of 2023, the total loans to customers of the banking industry
after the first 6 months of 2023 reached more than 10.6 million billion dong,
an increase of 6% compared to the beginning of the year.

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 Among them, the leading banks with the highest credit balance as of June
30, 2023 continue to be 3 international banks. The bank has the largest
outstanding debt in the entire system with nearly 1.63 million billion VND,
increasing to 1.52 million billion VND at the beginning of the year,
equivalent to an increase of 7%. Next is VietinBank with 1.36 million billion
VND, up 6.6% compared to the beginning of the year and VietinBank with
1.18 million billion VND, up 2.9%.

 In the joint stock commercial bank group, MB still maintains its

performance and is the joint stock bank with the largest customer lending
balance with more than 518,000 billion VND, up 12.5% from the beginning
of the year, the highest increase in the Top 10 banks.

 Following, VPBank and Techcombank also recorded a growth in customer

lending of more than 10%, reaching VND 488,644 billion and VND 466,546
billion, respectively.
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  Also in the top 10 banks with the highest credit balance in the whole system
are Sacombank with 460,000 billion, ACB with 434 trillion, SHB with
408,000 billion and HDBank with 287,000 billion. [6]

3.3. Money transfer

a) Definition
- Money-transferring service is when a payment service provider performs at
the request of the paying party to transfer a certain amount of money to the
beneficiary. Money transfer services include money transfer services
through payment accounts and not through customers' payment accounts.
b) Ways to transfer money
- Transferring money through mobile banking

 Mobile Banking is an online banking application that is installed and used

directly on smartphones. Currently all banks offer Mobile Banking
applications. To use this application, you must go to the transaction counter
to register and receive login information.

- Transferring money through internet banking

 Internet Banking operates on a web platform. The steps for internal transfer
are similar to those via Mobile Banking. The condition for using Internet
banking services is that you must register with the bank to get a username
and password. After that, you must change the default password to a new
password to activate the service.

- Transferring money via ATM

 Money transfer via ATM card is a service provided by banks to customers

when using ATM cards at that bank. There are two ways to transfer money
through ATMs: same bank transfer and different bank transfer. When
transferring money through an ATM, you just need to go to the nearest ATM
and follow the instructions on the screen. However, for transferring money
to different banks, you need to know which banks can transfer money to
each other.

- Transferring money at the bank counter.

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  Customers can go to the bank counter where they have an account to transfer
money from their personal account to the beneficiary account. Customers
need to fill out all information in the Payment Authorization form, including
sender account information and recipient account information, then sign and
return it. The bank will create an order to deduct money from the sender's
account to the beneficiary account.

c) Role of money transfer

- With Customers: Money transferring services make every transaction safe,
convenient, simple.
- With Economy: Money transferring services have important implications
for saving the amount of cash in circulation, thereby reducing huge social
costs related to the issuance and circulation of money.
- With banks: Reducing operating costs and improving banks' efficiency.
d) Example
- From July 3, 2023, Vietcombank officially launches overseas money transfer
service on the online channel. Customers can make overseas money
transfers right on VCB Digibank without having to go to the bank's
transaction point.
- Transfer currency: AUD, CAD, CHF, DKK, EUR, GBP, HKD, JPY, NOK,
SEK, SGD, THB, USD (according to VCB's regulations from time to time).
- The expense of service

 For sender: Service fees varies depending on the type of transfer

 For receiver : The fee is dependent on the tariff of foreign banks [7]

4. Evaluating financial services offered by banks in the Vietnam financial

market
4.1. Capital mobilization
- According to the latest report released by the General Statistics Office, as of
September 20, 2023, the total means of payment increased by 4.75%
compared to the end of 2022. Capital mobilization by credit institutions
increased by 5.8%, while credit growth in the economy only reached 5.73%.
- Meanwhile, previous data from the State Bank of Vietnam showed that the
total deposit mobilization of the credit institution system by the end of June

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 2023 increased by 4.6% compared to the beginning of the year. Therefore,
from July onwards, the capital mobilization of the banking system has
continued to grow positively, despite deposit interest rates falling to record
lows.
- This is the first time in 3 years that the banking system has witnessed the
phenomenon of capital mobilization growth higher than credit growth in the
first 9 months of the year. Specifically, in 2022, capital mobilization in the
first 9 months increased by only 4.6% while credit increased by 11.05%; in
2021, the corresponding figures were 5.2% and 7.88%. [8]
4.2. Money lending
- About money lending, Vietnam’s credit growth reached around 13.5 percent
in 2023 although unprecedented developments of the global economy posed
formidable challenges to the country’s monetary policy, Deputy Governor of
the State Bank of Vietnam (SBV) Dao Minh Tu said on January 3.
According to Tu, the result was spurred by the drastic direction of the Prime
Minister and resolve of the banking sector in the past year. The SBV rolled
out an array of measures, policies and programs to ensure sufficient capital
for the economy, helping the country achieve the GDP growth rate of around
5 percent, the official stressed. The central bank has set a credit growth
target of 15% for the domestic banking system in 2024, with possible
adjustments in line with the development of the macro-economy and
inflation rates. The bank will continue directing credit institutions to
prioritize capital for critical spearheads - investment, consumption and
export that drive the economic growth, the official said, adding it will
strictly control the credit in potentially risky areas. [9]
4.3. Money transfer
- And about the money transfer, in the first quarter of 2023, the value of
transactions via domestic credit transfer reached over 48 quadrillion
Vietnamese dong in Vietnam. In the same period, the number of these
transactions amounted to around 2.1 billion in the country. Previously one of
the most cash-dependent countries in Southeast Asia, Vietnam has seen
substantial growth in cashless payment usage among its population in recent
years.
- Alongside the expansion of the e-commerce market and the mainstream
usage of the internet and smartphones, digital payments have constantly
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 proved to be of growing importance in the finance sector in Vietnam. In
2022, the transaction value via these forms of payments was expected to
amount to over 19 billion U.S. dollars, higher than that of many of
Vietnam’s fellow Southeast Asian countries, such as Singapore or Malaysia.
In 2023, the country beat most countries to become the nation with the
second highest mobile payment adoption rate, ranking only after China. [10]
III. Opportunities and challenges
1. Opportunities
a) Digital Banking Services:
- Opportunity: Embracing digital banking solutions, including mobile
banking apps, online account management, and digital payment
servicesServe people's needs more conveniently and easily.
- Example:

 At Sacombank, 50% of customers are now "digital customers". This is a

growing customer base on digital channels, using digital banking services
such as: Internet Banking, Mobile Banking, Sacombank Pay. The number of
transactions on this bank's digital channel increased 5 times in the period
2018 - 2022, or an average growth of 43%/year. In 2022 alone, 97% of
transactions at Sacombank will be digital transactions.

 At VIB, in the first 6 months of 2023, the total number of customer

transactions made on digital channels at VIB reached nearly 160 million,
accounting for more than 90% of total transactions. The ending balance of
online payment accounts after the first 6 months of 2023 has increased by
149%, while the online deposit balance is 329% compared to the end of
2022. Number of new credit cards opened entirely through the channel
MyVIB website and application online traffic in the first 6 months of 2023
will reach more than 200% for the whole year 2022. [11]

b) Expanding Financial Inclusion:

- Opportunity: Extending financial services to underserved and unbanked
populations, especially in rural areas, to promote financial inclusion and tap
into new markets.

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 - Example: The Vietnam Farmers' Association and the State Bank of Vietnam
organized the Workshop "Digital transformation of finance, banking and
opportunities for farmers" with a presentation titled "Digital transformation
of the banking industry associated with agriculture and rural areas".
c) Bancassurance
- Opportunity: The utilization of banking systems for payment processes in
collaboration with insurance organizations is becoming increasingly
successful in Vietnam.
- Example:

 Notable partnerships include those between Techcombank – Manulife, SCB

– Manulife, VPBank – AIA, MB Bank – MB Ageas Life, Vietinbank – Aviva
Vietnam, among others.

 In the year 2022, MBBank achieved over VND 10,180 billion in revenue
from insurance-related businesses, marking a 21% increase compared to the
same period the previous year. This accounted for an impressive 72% of the
total revenue in the service sector, surpassing activities such as payment
services, fund management, consultancy, debt processing, valuation, and
asset exploitation. [12]

 Banks have the potential to boost their revenue by offering banking services
in conjunction with insurance. Additional income is derived from banking
fees, leasing properties, and commissions from insurance sales. Leveraging
their existing customer base and long-term relationships, banks gain a
competitive advantage in insurance distribution, enhancing brand reputation
and credibility while mitigating profit volatility. Bancassurance also aids in
reducing the capital risk exposure for banks.

d) ESG
- Opportunity: The ESG index set (E-Environmental: Environment; S-
Social: Society and G-Governance: Governance) is one of the measures of
sustainable development of businesses. The benefits of good ESG practices
include minimizing long-term costs and risks through implementing new
technologies and improving operational efficiency, developing new

17
 products, and expanding markets to meet the needs of customers. new
customer needs, improving operational efficiency and business reputation...
- Example:

 Vietcombank has made efforts to integrate ESG principles into its business
strategy and has policies on environmental protection and good governance.

 Implementing ESG principles brings various benefits, including building a

positive reputation, attracting investors and customers interested in
sustainable strategies, better risk management, developing green financial
products and services, attracting and retaining talented personnel, legal
compliance and enhanced governance, promoting innovation, preventing
discrimination, and making positive contributions to the community. All of
these aspects support Vietcombank in maintaining a sustainable and long-
term business environment.

 Vietcombank ranks in the top 20 companies with stocks in the highest

Sustainable Development Index (VNSI) list on the market. The results were
announced by the Ho Chi Minh City Stock Exchange on July 17. The VNSI
index reflects the investment trend according to ESG criteria with goals
including determining sustainable development standards for listed
companies, assisting investors in identifying businesses with "green"
characteristics, increasing Strengthening the sustainable development trend
of the entire economy, identifying criteria for best environmental, social and
governance practices, adding a new investment tool, contributing to
promoting growth stock market and economy.

 In the past 10 years alone, Vietcombank has spent more than VND 3,000
billion on social security and volunteer activities, focusing on key areas of
health, education, poverty reduction, and support. policy families... With
outstanding results in business activities and great contributions to the
economy and society, the bank was recently awarded the title of Labor Hero
on the occasion of the anniversary. 60 years of establishment. [13]

2. Challenges
a) Regulatory Challenges:

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 - Regulatory challenges inVietnam financial market could be complex and
dynamic. While regulatory frameworks are vital for maintaining stability
and protecting consumers, most banks in Vietnam have to deal with
difficulties in adapting and complying with evolving regulations. For
instance:

 Changing regulatory landscape.

 Compliance cost.

 Anti-Money Laundering (AML) and Know Your Customer (KYC)

compliance.

 Cybersecurity and Data protection.

 Capital Adequacy and Risk Management.

 Interest Rate and Foreign Exchange Rate Regulation.

 Sustainable Finance Regulation.

b) Technological Adoption:
- Technological adoption challenges in the banking sector in Vietnam can
impact a financial institution's ability to stay competitive and meet customer
expectations. However, there could be a number of challenges that banks
have to face, as:

 Legacy System and Infrastructure

 Cost of Technology Implementation

 Skills and Talent Gap.

 Data Security and Privacy Concerns.

Eg: NY AG sues Citibank for failing to protect customers from hackers and
scammers. The complaint claims that due to Citi's lax security and anti-fraud
procedures, New York consumers lost millions of dollars—in some cases their
whole life savings—to scammers and hackers. The NY AG claims that Citi
improperly refuses to compensate fraud victims, does not take sufficient steps

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 to prevent unauthorized account takeovers, and "misleads" clients about their
rights following account hacks.

 Technology Obsolescence.

c) Credit Risks:
- Credit risk challenges in the banking sector of Vietnam can impact the
stability and profitability of financial institutions. Here are some topic-
related obstacles that banks have to face with:

 Economic Downturns.

 Sector Concentration.

 Small and Medium-sized Enterprises (SMEs) Risks.

 Retail Lending Risks.

 Lack of Collateral.

 Over Reliance on Credit Ratings.

IV. Recommendations
- First of all, banks continue to actively balance, fully and promptly meet
capital needs for production and business; step up reform of administrative
procedures, shorten the time for loan application approval, improve
customers' access to loans; continue to review and perfect the legal
framework in order to solve the risks for consumer protection and establish
sanctions related to supplier's responsibility for agent's conduct and
information security for crypto accounts..
- At the same time, organizations providing digital services must also have a
transformation in their business model, consistency in their governance
model, digital transformation plan, and operation method on the basis of
promoting their financial resources, human resources... and minimize the
risks arising, thereby promoting the transformation process according to the
set goals.
- Beside , it is also needed to create a market with equal competition through
researching solutions on appropriate and effective connection models
between banks, payment intermediary organizations and the National Public
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 Service Portal, or an electronic one-stop system of relevant ministries,
branches, localities and units.
- Furthermore, Commercial banks need to actively handle bad debts
associated with effective credit growth. These are two closely related
activities with direct and consequential impacts. In addition to implementing
solutions to deal with bad debts that credit institutions have been
implementing (through asset management companies; handling provisions;
classification and assessment of debts for debt restructuring....), commercial
banks need to focus on solutions to effectively grow credit, increase income,
offset costs and create positive spillovers from the credit activities of each
credit institution.
V. Conclusion
- In summary, the financial services landscape in Vietnam's banking sector
presents a blend of challenges and opportunities. While digital banking
solutions and expanding financial inclusion offer promising avenues for
growth, banks must navigate economic uncertainties and regulatory changes.

References

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[4] K. Chinh, "Bảng xếp hạng lợi nhuận ngành ngân hàng có xáo trộn?," 3 2

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[5] "CEO Vietcombank: Huy động vốn 6 tháng tăng gấp 2,5 lần tín dụng, giảm
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[9] "Banking system posts credit growth of 13.5 percent in 2023," 4 1 2024.
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[11] V. Cường, "Xu hướng chuyển đổi số của ngân hàng thương mại Việt Nam,"
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[12] H. Phương, "Top 10 ngân hàng có doanh số bảo hiểm mới cao nhất năm
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[13] A. Hy, "Vietcombank thuộc top 20 doanh nghiệp phát triển bền vững," 21 7
2023. [Online]. Available: https://s.net.vn/t9e9. [Accessed 2 2024].

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