Vietnam: The dilemma of bringing global financial standards to a socialist market economy

The implementation of international banking standards in Vietnam has been the subject of contestation between reformist and conservative factions within the governing political party. In any given period, the speed of implementation has been affected by which of these factions dominates regulatory decision-making, as well as the health of the banking sector.

The adoption and implementation of Basel standards in Vietnam has gone through three distinctive periods: from 1999–2006, the internationally-oriented reformist faction pursued international regulations in order to discipline state-owned banks and improve the functioning of the financial sector. From 2006-13, the central bank (SBV) formally adopted Basel II but a domestic banking crisis effectively halted implementation. More recently there has been a return to pro-Basel preferences. However, interventionist financial policies, high implementation costs, the low internationalisation level of the banking sector, and the lack of competent technocrats inside both the State Bank of Vietnam and domestic private banks have all contributed to a high level of forbearance in Basel enforcement.

Policy Research
Date Published:
Jun 20, 2019

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