Methods of Payment
Most U.S. firms exporting to Vietnam conduct business using various methods of payment, such as letters of credit (L/C’s), drafts, and wire transfers. Vietnamese companies often resist the use of confirmed L/C’s because of the additional cost and collateral requirements from banks. Local companies with acceptable credit risk, including major private enterprises and State-Owned Enterprises (SOEs), can usually obtain credit facilities, including import financing from foreign banks. For these importers, confirmation of L/C’s opened by their foreign bank may not be required and faster payment can be expected. At present, L/C’s up to 60, 90, or 120 days are most common. Foreign banks have greater capacity, but costs will be lower if the L/C is opened by one of the four state-owned banks or 31 private joint stock commercial banks.
For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.
The central bank, the State Bank of Vietnam (SBV), is the main financial regulatory agency. The SBV supervises one policy bank, the Social Policy Bank of Vietnam, four majority state-owned commercial banks (SOCB’s) Vietcombank, BIDV, Vietinbank and Agribank, 31 joint-stock (private) banks, four joint-venture banks, 52 representative offices of foreign banks, 49 branches of foreign banks, 16 financial companies, 10 financial leasing companies, and 9 wholly-owned foreign banks (Source: SBV). The SBV is not an independent body like the U.S. Federal Reserve and it continues to operate under government oversight.
The International Monetary Fund, the World Bank, and other international donors, including the United States, are assisting Vietnam with the implementation of financial reforms to help ensure stability and promote the effectiveness of the banking system in Vietnam. The reform programs focus on three main areas: the restructuring of joint-stock banks; the restructuring and equitization of the SOCB’s; and improving the regulatory framework and increasing transparency. Other ongoing projects aim to modernize the interbank market, create an international accounting system, and allow outside audits of the major Vietnamese banks. The SBV is in the process of strengthening its own internal processes and enhancing the level of inspections and supervision of the banks within its jurisdiction. In November 2017, Vietnam introduced a new law, effective in January 2018, amending and supplementing a number of articles of the 2010 Law on Credit Institutions. In this law, bankruptcy was introduced for the first time as a plan for restructuring the banking system.
Although the banking sector remains small, banking networks and services have been expanding rapidly and there is great potential for banks to develop the retail banking business (75 percent of Vietnam’s 93 million people use limited banking services, while the remaining 25 percent do not use any banking services.)
Foreign Exchange Controls
Vietnam has imposed exchange control mechanisms designed to limit foreign currency outflows. However, the Law on Investment allows foreign investors to purchase foreign currency at authorized banks to finance current and capital transactions and other allowed transactions. The availability of foreign exchange has been an intermittent problem since mid-2008, because of persistent balance of trade deficits.
Foreign businesses can remit in hard currencies all profits, shared profits, losses from joint ventures, income from legally-owned capital, properties, and services and technology transfers. Foreigners also can remit royalties and fees paid for the supply of technologies and services, principal and interest on loans obtained for business operations, investment capital, and other assets under their legitimate ownership. The SBV’s objective is to maintain a stable exchange rate so that any devaluation would not be more than two percent.
U.S. Banks & Local Correspondent Banks
There are five U.S. banks and financial institutions operating in Vietnam. Citibank and Far East National Bank have branches, Wells Fargo and Visa International have representative offices, and JP Morgan Chase has both a branch and a representative office.
The majority of state-owned banks – Vietcombank, Vietinbank, Bank for Agriculture, and the Bank for Investment and Development – have active relationships with U.S. banks. Several joint-stock banks also have correspondent relationships, such as the Asian Commercial Bank (ACB), East Asia Bank (EAB), Vietnam Export-Import Bank (EXIM Bank – no relation to the U.S. EXIM Bank), the Maritime Bank, Saigon Commercial and Industrial Bank, Saigon Thuong Tin Commercial Bank (Sacombank), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), and the Vietnam Bank for Prosperity (VP Bank).
To access Vietnam’s ICS section on financing, visit the U.S. Department of State Investment Climate Statement website.