(Tiểu luận) major logistics and supply chain management

Implications and Orientation for Banking Service Companies 37 Trang 4 LIST OF ABBREVIATION WORDSAbbreviation ExplanationSRI Socially Responsible InvestmentHSBC Hong Kong-Shanghai Bankin

FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

-*** -MIDTERM ASSIGNMENT MAJOR: LOGISTICS AND SUPPLY CHAIN MANAGEMENT

CLASS: K59CLC7 SUBJECT: Trade in Services LECTURER: PhD TRAN NGUYEN CHAT

ANALYSIS ON TRADE IN VIETNAMESE BANKING SERVICE SECTOR AND HSBC CASE STUDYGroup 9 Student ID

1 Nguyễn Duy Thuận Tú 2013316815

2 Hồ Diên Việt Anh 2015535016

3 Trần Thị Huệ Linh 2013316716

4 Vũ Thị Thùy Dương 2015536206

1.1 The rationale of the research 1

1.2 Aims and objectives 2

1.2.1 Aims of the research 2

1.2.2 Objectives of the research 3

1.3 Research scope and objects 3

1.3.1 Research object 3

1.3.2 Scope of the research 3

Chapter 2 Overview of trade policy in banking sector 4

2.1 An Overview of the banking sector in Vietnam 4

2.2 A general summary of HSBC banking services 6

Chapter 3 PENETRATION OF HSBC BANK IN VIETNAM’S MARKET 9

3.1 Policy when HSBC penetrates in Vietnam market 9

3.1.1 Policy related to banking sector 9

3.1.1.1 FTA policy that Vietnam involve in 9

3.1.1.2 FTAs’ impact on banking sector 9

3.1.1.3 Vietnamese policy that impact banking sector 13

3.1.2 Impact of trade policy on HSBC Bank 19

3.1.2.1 Positive impacts 19

3.1.2.2 Negative impacts 20

3.2 HSBC Bank Process Entering Vietnam 21

3.3 HSBC Vietnam strategy and Mode of supply 27

3.3.1 HSBC Vietnam's services and mode of supply 27

3.3.2 HSBC Bank Vietnam’s New Strategy: “Shifting Focus on Sustainable Finance” 32

Chapter 4 CONCLUSION 35

4.1 Summary of how HSBC Banks provide service in Vietnam 35

4.2 Future Trends in Banking Service and Implications 36

4.2.1 Future Trends in Banking Service 36

4.2.2 Implications and Orientation for Banking Service Companies 37

REFERENCES 40

LIST OF ABBREVIATION WORDSAbbreviation Explanation

SRI Socially Responsible Investment

HSBC Hong Kong-Shanghai Banking Corporation

GATS The General Agreement on Trade in Services

WTO World Trade Organization

FTA Free Trade Agreement

EVFTA EU-Vietnam Free Trade Agreement

EU European Union

CPTPP Comprehensive and Progressive Agreement for Trans-Pacific

Partnership

AEC ASEAN Economic Community

FDI Foreign Direct Investment

VNPOST Vietnam Post

ATM Automated Teller Machine

SMEs Small and medium-sized enterprises

GDP Gross domestic product

M&A Mergers and acquisitions

HNWIs High-net-worth individuals

UHNWIs Ultra-high-net-worth individuals

MFN Most-favored nation

ASEAN The Association of South East Asian NationsAPIs Application Programming Interfaces

LIST OF FIGURES

Figure 1: Number of FDI project and the total of Registered capital (million USD)13

Figure 2: Growth in Profit before tax (%), 2006 vs 2005 Asia 21

Figure 3: Personal Financial Services Growth in profit before tax (%), 2006 vs 2005 22

Figure 4: The four modes of supply 28

Figure 5: Ansoff Growth Matrix 29

Figure 6: The Four International Strategies 30

Figure 7: Value of sustainable finance investment of HSBC bank from 2017 to 2020

by investment type (in billion US dollars) 32

Accounting 100% (16)

112

Chapter 2 - fddsfManagerial

157

Chapter 1 - dsaManagerial

LIST OF TABLES

Table 1: The list of foreign-owned banks in Vietnam 15

Table 2: Comparison openness level between Vietnam and other countries 17

Table 3: Foreign investor partnership in Vietnam’s banking sector 25

Chapter 7 - dssadManagerial

117

Chapter 1 INTRODUCTION1.1 Rationale of the research

The banking industry is dynamic and changing quickly In an aspect of policiesand regulations, banks operate in a highly regulated environment, and regulatoryrequirements change on a regular basis New rules and regulations are enacted bygovernments and regulatory agencies to improve financial stability, protect consumers,and prevent fraudulent activity Banks must adapt to changing regulatoryenvironments, which frequently involve changes to operating operations, complianceprocedures, and risk management methods To better evaluate and analyze the currentcondition of the banking service industry, including any recent developments, trends,difficulties, and opportunities, by doing the most recent study research Moreover, thebanking sector is highly competitive, with numerous players vying for market share(Michelle W Bowman, 2022) Therefore, researching the banking sector cancontribute to identifying strategies and innovative solutions to gain a competitiveadvantage in response to market changes

The banking sector plays a crucial role in the economic development andstability of Vietnam Its stability and effectiveness are essential for fostering a healthyand vibrant economy in Vietnam Small and medium-sized enterprises (SMEs) formthe backbone of Vietnam's economy, contributing significantly to employment andGDP (OECD Studies on SMEs and Entrepreneurship, 2021) Banks in Vietnam play acrucial role in supporting SMEs by mobilizing savings, providing credit, facilitatingfinancial transactions, managing risks, promoting financial inclusion, and supportingeconomic growth

These days, Vietnam has experienced rapid growth in international trade, with

an increasing number of businesses engaging in export and import activities(WorldBank, 2023) Banks play a pivotal role in facilitating trade finance, providing

services such as letters of credit, export financing, and foreign exchange transactions.These services streamline cross-border trade, mitigate risks, and support the growth ofVietnam's export-oriented economy Conducting the study research on the bankingsector allows for a comparison with international best practices and benchmarks Inother words, learning from the performance and regulatory frameworks of bankingsectors in other countries, and identifying lessons that can be applied to Vietnam Thiscan facilitate knowledge sharing, collaboration, and the adoption of global standardsand best practices.

Therefore, conducting research on the impact of policies on the banking sector

is essential due to the mission of understanding the overall development andsustainability of the banking sector and the broader economy These findings alsoprovide in-depth knowledge about trade in service insight and their roles in theeconomy, develop research skills such as literature review, data collection methods,and research design, which are transferable to other areas of study and professionalendeavors as well as benefit students in managing their own personal finances.Furthermore, it would open up career opportunities for students in the financialindustry which showcases a student's expertise and interest in banking and thefinancial sector

1.2 Aim and Objectives

1.2.1 Aims of the research

The findings from such research can inform policymakers, regulators, andindustry participants in making informed decisions and shaping the future of thebanking sector by taking HSBC Banking Company as an objective to analyze theirstrategies when providing financial services in Vietnam

The aim of this research is to identify how existing policies and regulationsrelated to the banking sector will affect banking services in Vietnam Furthermore,research can contribute to the development of new regulatory frameworks or

guidelines that address emerging issues or suggest future trends and orientations forsimilar companies

1.2.2 Objectives of the research

To understand how policies affect the HSBC Banking Company, this analysiswill go from a broad overview into specifics, looking at the banking industry inVietnam, the effect of trade policies on banking services there, the method and mode

of supply used by HSBC to deliver its services there, and the implications for theopportunities, difficulties, the long-term goal of Sustainable Finance and potentialfuture trends of these banking services

1.3 Research Object and Scope

1.3.1 Research object

These findings focus on HSBC Banking company in Vietnam is affected by theVietnam policies and some free trade agreements (FTAs) involved in the bankingsector including EVFTA, CPTPP, and AEC

1.3.2 Scope of the research

The research will focus on how HSBC Banking Company provided services inVietnam from 2005 to the present Moreover, the policies and regulations involved arealso in the scope of the GATS and Vietnam

Chapter 2 Overview of trade policy in banking sector

2.1 An Overview of the banking sector in Vietnam

Over the last few decades, Vietnam's banking sector has undergone significantreforms and transformations Prior to 1986, Vietnam had a centrally planned economy,with the government controlling the banking system However, since the country'stransition to a market-oriented economy, the banking sector has seen significantliberalization and growth

The banking sector is a key component of the financial sector and includesinstitutions such as commercial banks, investment banks, and central banks Theseinstitutions provide a range of financial services to individuals, businesses, andgovernments, including deposit-taking, lending, payment services, and financialadvisory services Other components of the financial sector include insurancecompanies, securities firms, and asset management firms State-owned banks, joint-stock banks, foreign banks, and non-bank credit institutions are the four primarycategories of institutions in the banking sector The banking sector in Vietnam isdominated by state-owned banks, with four significant state-owned banks accountingfor more than half of total banking assets The second largest group is joint-stockbanks, which account for around 30% of total assets, followed by foreign banks andnon-bank credit organizations

According to McKinsey’s Global Banking Annual Review (2022), the bankingindustry has grown rapidly in recent years, with total assets increasing by an average of13% per year between 2011 and 2020 However, the sector continues to facechallenges, including a high level of non-performing loans, low capital adequacyratios, and poor risk management practices

By using Porter's Five Forces model, there are some outstanding points aboutthe banking industry in Vietnam, including:

- New entrants: The banking industry in Vietnam is predominately made

up of state-owned banks, which have substantial advantages in terms of access tocapital, support from the government, and a built-in clientele New entrants,particularly international banks eager to enter the market, continue to pose a moderatedanger Although the regulatory environment for new entrants is generally favorable,the fierce competition and the requirement for sizable investments in infrastructure andtechnology may discourage new players from entering the market

- Power of Suppliers: Technology, equipment, and other input suppliers areamong the suppliers of the Vietnamese banking sector Due to the abundance ofavailable providers, they have less negotiating strength The sector is, however, heavilyregulated and necessitates adherence to a number of standards, which may restrict thenumber of providers that can adapt to customers’ requirements

- Power of Customers: Customers have a considerable amount ofnegotiating power in the Vietnamese banking sector Despite the substantial marketshare held by the large state-owned banks, customers have a variety of options,including foreign banks and non-bank financial institutions Additionally, customersnow have more power to compare and switch between providers thanks to the growinguse of digital banking and fintech services

- Threat of Substitutes: In Vietnam's banking sector, the threat ofreplacements is moderate (Banking and Financial News, 2012) Although theytypically concentrate on particular market segments, non-bank financial institutionslike insurance companies and microfinance institutions offer some competition.However, as they provide new ways for customers to access financial services withoutusing conventional banks, the growing use of digital banking and fintech services poses

a potential threat to traditional banks

- Existing competitors: There are several firms seeking for market share inVietnam's highly competitive banking sector The market is dominated by the four

major state-owned banks, but there are also a lot of joint-stock banks, foreign banks,and non-bank financial institutions These competitors are intense players and are thetop-tier in the market with severe price rivalry and an emphasis on forging long-lastingrelationships with clients to define the advantages Consolidation, mergers, andacquisitions are also on the rise, which may result in fewer market participants.

In addition, the government has passed legislation to encourage increasedcompetition and openness in the sector Overall, the banking sector in Vietnam is likely

to expand further, owing to reasons such as a young and growing population, risingurbanization, and robust economic growth Consolidation, mergers, and acquisitionsare also on the rise, which may result in fewer market participants

2.2 A general summary of HSBC banking services

Global banking and financial services provider HSBC Bank, or simply HSBC, isheadquartered in London, United Kingdom With operations in more than 60 countriesand territories, it is one of the biggest banks in the world The bank's primaryconcentration was on funding trade between Europe and Asia when it was established

in 1865 as the Hongkong and Shanghai Banking Corporation HSBC Bank has asignificant presence in Vietnam, with a network of branches and offices nationwide.HSBC provides its customers with a variety of financial services in Vietnam, includingpersonal banking, commercial banking, corporate banking, investment banking, andwealth management

In terms of financial performance, HSBC Vietnam has experienced rapidexpansion in recent years According to the bank's 2021 annual report, its pre-tax profit

in Vietnam climbed 47% year on year to USD 201 million, owing to growth in itslending and fee-based operations Vietnam's total assets climbed by 10% year on year

to USD 7.5 billion, while client deposits increased by 8% to USD 5.5 billion

There are various types of services that HSBC is providing to its clients:

- Personal Banking: Current and savings accounts, credit cards, personal loans,mortgages, insurance, and investments are just a few of the personal banking servicesthat HSBC offers With a significant emphasis on digital banking, the bank provides itsclients with online and mobile banking services

- B2B banking: Small and medium-sized businesses (SMEs) and corporateclients can make use of a variety of business banking services from HSBC, includingworking capital financing, trade financing, cash management, and foreign exchangeservices Relationship managers at the bank are devoted professionals who engagedirectly with customers to comprehend their demands as businesses and offerspecialized solutions

- Investment Banking: Mergers and acquisitions (M&A) consultancy, equity,and debt capital markets, and structured financing are all offered by HSBC asinvestment banking services The bank offers a worldwide network of investmentbanking experts who collaborate closely with customers to complete difficult deals andoffer strategic guidance

- Wealth management: High-net-worth people (HNWIs) and worth individuals (UHNWIs) can use HSBC's wealth management services, whichinclude estate planning, asset management, and investment advising The wealthmanagement department of the bank places a big emphasis on sustainability andresponsible investing

ultra-high-net Global Markets: The global markets business of HSBC offers institutionalclients a variety of financial market services, such as foreign currency, fixed income,equities, commodities, and structured products The bank has a worldwide network oftraders and sales specialists that offer market information and carry out trades onclients' behalf

In conclusion, HSBC provides its clients with a full range of financial services,meeting the demands of private clients as well as corporate and institutional clients Itsdedication to innovation and ethical business practices is evidenced by its strong focus

on sustainable development and digital banking

Chapter 3 PENETRATION OF HSBC BANK IN VIETNAM’S MARKET

3.1 Policy when HSBC penetrates in Vietnam market

3.1.1 Policy related to banking sector:

3.1.1.1 FTA policy that Vietnam involve in

From the early years after gaining independence, the Vietnamese governmenthas been trying to develop its economic sector by negotiating and signing the FreeTrade Agreement (FTA) Since Vietnam signed its first FTA in 1993, Vietnam hasjoined a total of 15 free trade agreements and 3 other FTAs are now under negotiationsuch as EU- Vietnam Free Trade Agreement (EVFTA), Comprehensive and ProgressiveAgreement for Trans-Pacific Partnership (CPTPP), (UK Practical Law, 2023)

By joining these FTAs, Vietnamese businesses are allowed to expand theirmarkets, access regional and global markets, as well as gain more favorable access tothe services markets of partner countries The Vietnamese market has access toabundant capital from foreign business entities in direct and indirect forms Someforeign financial institutions choose to buy shares of domestic commercial banks toparticipate in the operation and business of the bank Others choose to open a branchwith 100% foreign capital in Vietnam (Tạp chí Tài Chính, 2019)

3.1.1.2 FTAs’ impact on banking sector

When joining the WTO, Vietnam is obliged to commit to banking services Thiscommitment of 60-page documents illustrate how Vietnam grants access for foreignservice providers Besides, it includes additional conditions such as limitation onforeign ownership

In fact, Vietnam is required to open the market at the minimum level that is committed in FTAs Nevertheless, Vietnam is worthy of opening the market wider than what has been committed in international treaties Therefore, there is the existence of the difference between the market opening level and the actual market opening For thefinancial and banking service, Vietnam’s actual openness level is equal to the committed level (Thu Huong et al., 2022)

- EU-Vietnam Free Trade Agreement (EVFTA)

EVFTA is a comprehensive, high-quality agreement that balances benefits forboth Vietnam and the EU in accordance with the provisions of the World TradeOrganization (WTO) which also noted the difference in development level between thetwo sides

In 2017, there were 24 out of 28 EU countries have invested in Vietnam withabout 2,000 valid projects, with a total registered capital of over US $21.5 billion;focusing on industry, construction and a number of service sectors, including financial

- banking services In the financial and banking sectors, more and more investors fromthe EU, mainly 100% foreign owned banks such as Standard Chartered, HSBC orforeign bank branches such as Deutsche Bank; investment funds from EU alreadypresent in Vietnam (Thu Huong et al., 2022)

In EVFTA, EU businesses/foreign banks are allowed to open commercialpresence in any form However, there are still some restrictions on the foreign bank, if

it is a foreign-invested joint venture, it must not exceed 50% If it is operated under a

format of a branch, it is not allowed to open a new office outside the branch's headoffice

Within the first 5 years after the EVFTA came into effect, Vietnam committed toallowing EU credit institutions to buy up to 49% of shares in two Vietnamesecommercial banks (currently up to 30%), except for 4 state-owned joint stockcommercial banks, namely BIDV, Vietinbank, Vietcombank and Agribank (Báo đầu tư,2019) This is a win-win relationship when it opens up opportunities for banks fromEurope to participate in operating Vietnamese commercial banks to indirectly provideservices and also an opportunity for domestic banks to attract foreign investment toincrease equity and learn more business, experience in managing companies andapplying technology to business

- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

CPTPP is one of the two new generation FTAs that Vietnam has signed up tonow The CPTPP has the highest level of commitment to liberalization with the widestscope of coverage, focusing on promoting liberalization not only in the field of trade ingoods but also in services and investment

According to chapter 11 of the CPTPP agreement about the financial services(Commitments in Services and Investment under CPTPP Agreement, 2018) Vietnamhas to make commitments such as national treatment, most-favored nation (MFN),market access, to other member countries in the CPTPP In detail, Vietnam iscommitted to treat all credit institutions and business entities of the CPTPP countries

no less favorably than domestic financial institutions Credit institutions from CPTPPmember countries are entitled to all the treatment and incentives that Vietnam offers toany other country, if any In term of service provided, if a domestic company inVietnam are allowed to provide any financial services, services providers from otherCPTPP countries can provide that services in Vietnam, and Vietnam must allow

financial institutions in other member countries to provide any new financial servicesthat the country allows its financial institutions to provide, without passing laws oramending existing laws.

In other words, the commitments in the CPTPP agreement is like a betterversion of the commitments after Vietnam's accession to the WTO for CPTPP membercountries CPTPP is better in that it creates conditions for credit institutions in CPTPPmember countries to have more freedom in doing business, it removes manyrestrictions in service provision, and reduces risks in the business environment for themember countries thereby promoting investment and business expansion in this bloc

- ASEAN Economic Community (AEC)

ASEAN Economic community is a regional economic group of ASEANmember countries established on December 31, 2015 The ASEAN EconomicCommunity aims to form a stable, prosperous, and competitive ASEAN EconomicArea, in which goods, services, and investment will flow more freely Vietnam andother countries in the area will have to open up, remove restrictions on banks,insurance and capital markets Accordingly, Vietnam and ASEAN countries committed

to liberalizing all four modes, including: (1) Providing services across borders; (2)Consumption outside the territory; (3) Commercial presence; (4) Presence of naturalpersons The goal of this community is to strengthen cooperation and economicdevelopment among ASEAN countries, namely to establish a single market andcommon production base, to build a competitive economic region, to develop balancedeconomy, and to integrate into the global economy

ASEAN countries will remove restrictions on the insurance, banking and sector capital markets to create an equal market for domestic and foreign companies.For the securities sector, according to Decree No 60/2015/ND-CP (VietnameseGovernment, 2015), the Vietnamese government has extended the ownership rate forforeign investors on the stock market in the direction of not restricting the foreignownership ratio at a public company (compared to the old limit of 49%) Meanwhile,

sub-the foreign ownership limit in sub-the banking and insurance sectors remains at 30% forbanks and 49% for insurance However, according to the commitment of serviceliberalization, countries must open all financial services sectors by 2015 to increaseforeign investors' participation in financial markets

The AEC's free flow of investment capital will have a positive impact on thedevelopment of Vietnam's financial system not only in width but also in depth For thestock market, the presence of foreign investors, stock investment funds, and largefinancial groups will contribute to the professionalization of the Vietnamese stockmarket, thereby accumulating more experience, improving corporate governance,analytical capabilities, and investment standards for domestic enterprises The free flow

of capital has greatly increased the scale of the banking and insurance markets,becoming a channel for corporate financing, meeting the capital needs of the economy

3.1.1.3 Vietnamese policy that impact banking sector

- Changes in Vietnam's policies before and after joining WTO

In general, after being involved in the WTO, Vietnam recorded remarkabledevelopment signs, especially in terms of international integration and foreigninvestment attraction From the below figure, it can be seen that the considerablegrowth in the amount of registered capital for social development investment, fromnearly $20,000 million in 2010 to more than $35,000 million in 2019 Besides, thenumber of projects implemented together with disbursed capital (the real numbersshowing foreign investors' interest in the Vietnamese market) also tend to increasegradually over time Besides, in 2020 Vietnam ranked 19th among countries attractingthe most FDI globally As of October 2022, a total of 35,895 FDI projects from morethan 140 countries and territories have invested in our country (Báo Thanh niên, 2021)

Source: General Statistics Office Figure 1: Number of FDI project and the total of Registered capital (million USD)The WTO accession event has brought many influences on Vietnam's policy, especially those related to the banking industry in general or foreign banks in particular Specifically, those changes can include the following:

Before accessing WTO, foreign banks were quite limited in terms of businessscope and activities Accordingly, foreign banks could only participate in theVietnamese market in three forms: branches of foreign banks, joint-venture banks andrepresentative offices On the subject of branches of foreign banks, there is a limitation

of licensed maximum operation and legal capital, which was 20 years and 15 millionUSD, respectively Regarding Joint-venture banks, the firm can be licensed to operatefor up to 30 years The capital required less than foreign-bank branches, which was

only 10 million USD Besides, there was a 5-year licensed operation for therepresentative office After the WTO accession commitment, in addition to 3 forms toenter the Vietnamese market like above, foreign banks are allowed to set up foreigncredit institutions with 100% foreign capital However, this type is still subject to somelimitations, for example, a bank in the parent country must have a total asset of morethan 20 billion USD in the year that the bank opens a credit institution in Vietnam Inaddition, types such as foreign-bank branches and joint-venture banks are extendingthe license operation period up to 99 years instead of 20 years as before Regardinglegal capital, the government only requires 10 billion to be established in Vietnam forboth forms In fact, by allowing 100% foreign-own banks, there was a significantincrease in the number of foreign banks established after the year 2008 (Table.1) Thus,

it can be seen that after joining the WTO, Vietnam's policies have encouraged andattracted investment and business development of large foreign banks Accordingly, it

is possible to enhance worldwide competition and cooperation in the banking sectoramong countries (Nguyen Chien Thang, 2017)

No Bank Bank Name Date of register

1 ANZ Vietnam Co.,Ltd ANZVL 09/10/2008

2 Hong Leong Vietnam Co.,Ltd HLBVN 29/12/2008

4 Shinhan Vietnam Co.,Ltd SHBVN 29/12/2008

5 Standard Chartered Vietnam

Co.,Ltd

SCBVL 08/09/2008

6 Public Bank Vietnam Co.,Ltd PBVN 24/03/2016

7 CIMB Vietnam Co.,Ltd CIMB 31/08/2016

8 Woori Vietnam Co.,Ltd Woori 31/10/2016

9 UOB Vietnam Co.,Ltd UOB 21/09/2017

Source: Author’s collectsTable 1: The list of foreign-owned banks in Vietnam Regarding capital mobilization, both before and after participating in the WTO,foreign banks are entitled to contribute capital through the acquisition of shares in thejoint stock commercial bank in Vietnam However, before joining the WTO, thenumber of shares cannot exceed 30% of the charter capital for both domestic-banklegal person and the foreign party After taking part in WTO, foreign investors areallowed to contribute a maximum up to 50% of the charter capital Moreover, foreignbanks are able to join and access the local market by becoming a strategic partner ofVietnamese banks (WTO Center, 2023) This not only opens up several opportunities topenetrate the Vietnamese market for foreign banks, but also expands the list ofinvestors for domestic banks Therefore, domestic banks can take advantage oftechnology and better risk management

The types of foreign banking services that can be provided in Vietnam are alsoexpanded After WTO accession commitment, owing to its obligation in GATS, themost favored nation (MFN) was applied In general, according to the MFN principle,the Vietnamese government has an obligation to treat businesses in the market fairly Inother words, if the policies are given preferential treatment for enterprises from acertain country, the member countries of the WTO must also enjoy the samepreferences, except for exemptions For instance, when joining the US-VietnamBilateral Trade Agreement, there is a provision that Vietnam must have certainpreferences for US banks According to the WTO's MFN principle, such preferences

must also be applied to the remaining member countries Additionally, the principle canalso be understood in the sense that if a domestic bank can provide service A, then aforeign bank can also provide service A Thus, the list of services can provide becauseforeign banks are much richer In fact, they can offer most types of banking servicessuch as money market instruments, lending, deposit taking, provision of paymentservices, foreign exchange trading, financial advisory and information (Vietnam StateBank, 2007)

In summary, since the WTO accession, Vietnam's economy has reached a certaindegree of openness, including the expansion of the number of licensed operation years,capital contribution and types of banking services

- Comparison Vietnamese policy in banking sector with some ASEAN countries

Country Investment method/Capital contribution Number of branchesVietnam No restriction: foreign banks may join

the market in various ways

(representative offices, wholly

the market in various ways

Restrict the number of

(representative offices, wholly

foreign-owned banks, )

branches open

Source: WTO I Tip ServiceTable 2: Comparison openness level between Vietnam and other countriesFrom the table above, it can be seen that Vietnamese policy has a relatively highopenness compared to countries such as Singapore, Malaysia and Thailand Whileother countries tend to be limited in capital contribution or number of branches offoreign banks or both, Vietnam is "quite" open, with no limitations or restrictions onthese two issues This, again, emphasizes the policy of encouraging and attractingforeign investors and banks to Vietnam (Thu Huong et al., 2022)

Besides, from an expert's point of view, when compared with the policies ofother countries in the same region, it is obvious that Vietnam's policy has a high degree

of openness Experts say that Vietnam leads the table when it comes to freedom inregulations on joint ventures and limits on foreign-owned shares In contrast,neighboring large countries such as China, Thailand, Malaysia, Indonesia and othercountries in the region are only ranked at medium level in this regard (Nguyen ChienThang, 2017)

3.1.2 Impact of trade policy on HSBC Bank:

With the obvious change in policy after joining the WTO and the influence fromthe Foreign Trade Agreements that Vietnam has signed with countries around theworld, the banking industry in general has had certain changes HSBC, a major bank inthe industry, will certainly not be out of that trend In fact, the great changes from theabove factors have opened up many opportunities and challenges for HSBC Vietnam

3.1.2.1 Positive impact

Thanks to WTO accession, the openness of Vietnam's economy has beensignificantly improved Therefore, 2 years after Vietnam allowed the establishment of a100% foreign-owned bank and 1 year after WTO assessment commitment, HSBCWholly foreign-owned bank was licensed in 2008 (HSBC Vietnam) It was the first100% foreign-owned bank and at the same time opened its branches and trading offices

in Vietnam, which maintained the advantage of the pioneer

Restrictions on foreign banks will be loosened in terms of ownership rate forforeign investors at domestic banks since Vietnam involved in WTO HSBC has takenadvantage of this to maximize its holdings in financial companies in Vietnam, namelyTechcombank and Bao Viet Specifically, in the early years of its establishment inVietnam, 2008, HSBC bought 20% of Techcombank shares and 10% of Baoviet'sshares (Vneconomy, 2008), (Tạp chí Tài chính, 2012) Accordingly, HSBC has easieraccess to the Vietnam market by leveraging the network of customers and distributionchannels of its industry partners to increase its influence and market awareness inVietnam

The distinctions in terms of capital mobilization, products and services will also

be eliminated after 2010 Particularly, before 2010 foreign banks could not acceptdeposits in foreign currencies However, with the increasing openness of the economy,from 2010 onward, foreign banks can accept both foreign currency and VND deposits

In addition, the policies also created favorable conditions, raising the ceiling depositinterest rate to the same level as that of domestic banks at 8.5%/year for VND and5%/year for foreign currencies (Vu Dinh Anh, 2011) Hence, HSBC's inherentadvantages such as providing non-traditional products and services and an extremelyhigh amount of charter capital will be HSBC's huge competitive advantage overdomestic commercial banks

Vietnam is constantly signing free trade agreements, promising to open up itsmarket through new financial services, which is a huge opportunity in financialtechnology fields such as fintech or cryptocurrency HSBC has strong resources and

experience in its parent company In fact, the company cut down on the time ofapproval process for new receivables finance customers Usually, the process wouldtake about one to two months By utilizing the new technology (Digital RF), HSBC canoperate the activity more efficiently, which only consumes under 48 hours (TradeLedger Limited, 2022) This will be HSBC's advantage over domestic commercialbanks.

Vietnam has increased the negotiation and signing of FTAs Since then, prudentregulations for foreign banks in Vietnam such as restrictions on capital contribution andservices provided have also been removed Plus, FDI inflows have been continuouslypoured into Vietnam Indeed, the number of newly registered businesses reached thehighest number as of 2023, more than 146.5 thousand, an increase of 38.8% compared

to last year (Trang thông tin điện tử đầu tư nước ngoài, 2021) As a result, HSBC willhave more foreign business customers as well as domestic business customers whowant to penetrate into Vietnam

3.1.2.2 Negative impacts

The competitiveness of Vietnamese commercial banks is gradually improving

In 2022, 12 banks increased their credit ratings It is worth noting that Vietnam is theonly country in the Asia Pacific region and one of the four global countries rated byMoody's (Vietnamplus, 2022) The capabilities of Vietnamese commercial banks aregradually improving In addition, many banks are actively implementing Basel III withstricter standards, although Basel II is currently the highest requirement set by nationalbanks (Tạp chí thương gia, 2022) This has also brought certain advantages tocommercial banks In order to improve operational efficiency, besides applyinginternational standards, many banks also said that they are promoting digitaltransformation Banks also said that they are continuing to upgrade technology,strengthen supervision to promptly warn and prevent arising risks This also means thatthe rising competitiveness among Vietnamese commercial banks may force foreignbanks like HSBC to continuously grow and improve their services