Abstract
Vietnamese banking system has been playing a vital role in the development and economic growth since the economic renewal campaign namely “Doi Moi” in 1986. However, since the global financial crisis, financial and banking system has been put under stress, exposing much weaknesses, severely affecting the whole economy. Additionally, the wave of financial liberalization raise questions about the competitiveness of Vietnamese commercial banks in the competition with the foreigners. The main purpose of this paper is to measure the market concentration using the k banks concentration ratio (CRk) and the Hirschman-Herfindahl index (HHI) and test for the market competition in Vietnamese banking sector under Panzar-Rossse approach by an unbalanced panel data of 33 commercial banks for the period from 2004 to 2013. Vietnamese banking sector is found to be high-concentration although it is experiencing a decreasing trend. The test for market competition indicate a monopolistic behavior of Vietnamese commercial banks. No surprising, the state-owned commercial banks and foreign banks are found to be superior in the competition with joint-stock commercial banks and domestic banks, respectively. In addition, commercial banks seem to get benefit with foreign investments.
Highlights
Since 1986, Vietnamese government launched an economic renewal campaign namely “Doi Moi” to strengthen and promote economic development and growth in order to become a more open and market oriented economy
The test for market competition indicate a monopolistic behavior of Vietnamese commercial banks
The stateowned commercial banks and foreign banks are found to be superior in the competition with joint-stock commercial banks and domestic banks respectively
Summary
Since 1986, Vietnamese government launched an economic renewal campaign namely “Doi Moi” to strengthen and promote economic development and growth in order to become a more open and market oriented economy. It is undoubtedly that Vietnamese banking sector has contributed a large part in the economic expansion recently. The banking sector has been developing substantially in recent years since the banking market has been opened to both foreign and private sector banks in 1991. By the end of 2011, the total domestic of credit provided by banking sector constituted to 120.8% of GDP, while domestic deposit to banking sector accounted for 106.56% of GDP. High-level of credit growth of around 30% in a long-time periods was one of the most important factor in the high-rate of Vietnamese economic development and growth
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