70th anniversary of Hanoi's Liberation Day Vietnam - Asia 2023 Smart City Summit Hanoi celebrates 15 years of administrative boundary adjustment 12th Vietnam-France decentrialized cooperation conference 31st Sea Games - Vietnam 2021 Covid-19 Pandemic
Home / Economy / Banking & Finance
Effective gov’t support mitigates Covid-19 impacts on Vietnam financial industry
Ngoc Thuy 16:29, 2020/10/10
Incentives timely issued by the government and the central bank to support customers affected by Covid-19 has prevented the type of contagion that occurred during the global financial crisis in 2008.

With the timely and effective support from the Vietnamese government, the financial industry is not seeing any significant downside compared to the rest of the economy, according to Leader of Financial Services at PwC Vietnam Dinh Hong Hanh.

Nevertheless, the Covid-19 pandemic has tangibly affected the pockets of both retail and corporate consumers of financial services, said Hanh at the launch of PwC’s latest report “Securing your tomorrow, today – The future of financial services”, highlighting significant macro trends affecting the financial industry as a whole and their impacts on individual segments. This report is PwC’s analysis based on a wealth of data of global financial institutions in the past three years.

The report findings indicate that even though the pandemic has heavily disrupted many industries, it had a relatively modest and mixed impact on the financial services industry.

Higher trading revenues due to market volatility have boosted capital markets businesses.

 Source: PwC. 

Insurers have benefited from consumers staying close to home and the subsequent reduced claims frequency in personal lines. As for banks, central bank incentives and government support of businesses and individuals have so far limited damage to bank balance sheets.

In Vietnam, notable incentives have been timely issued by the government and the State Bank of Vietnam (SBV), such as deferred tax payment and extension of deadline for land rental payment under Decree 41, and Circular 1 to restructure the repayment periods, waive and reduce the interest and fees to support customers affected by Covid-19. Such relief has prevented the types of contagion that occurred during the global financial crisis in 2008.

The analysis, however, pointed out that the financial services sector will be hardest hit by so-called second-order effects. That is, the deteriorating credit quality of customers, along with the continued low interest rate environment, as the pandemic and its aftereffects will be felt throughout the real economy over the next several years. 

“There remain lurking concerns as to what would happen when these delayed impacts materialise,” said Hanh.

While the impacts on different segments of financial services might vary, in the wake of Covid-19, financial services are not exempted from inevitable shifts and trends of transformation to ensure business continuity and prioritise productivity. Accelerating trends have already begun, and there emerge new trajectories. 

The move to digital has been accelerated during these disruptive times. The report argues that a combination of near zero interest rates and the rise of digital-only players will create tighter margins across product portfolios, thereby emphasising the need to digitise rapidly, gain cost efficiencies and register real gains in productivity. The shift to a more platform- and ecosystem-based industry, including more digitized client interactions, will create a new set of challenges and opportunities for the industry.

“This is a challenging yet exceptional time. Financial institutions need to re-evaluate and lead the use of technology to develop new capabilities – improve customers’ financial health, inclusion, and protection – at the same time have yourself a sound financial well-being strategy in place,” Hanh asserted.

John Garvey, PwC’s Global Financial Services Leader, stated: “While the financial services industry has stood up well in light of the pandemic, it will likely be hit hardest by second-order effects. The challenge for the financial services industry is in how it is able to navigate this difficult environment while balancing cost cutting and investment. Those that execute best will be the ones to succeed.”

RELATED NEWS
TAG: Vietnam covid-19 coronavirus nCoV pandemic Pwc financial industry tax deferral waiving interest rates
Other news
14:12, 2024/03/23
Finance ministry clears bottlenecks to pave way for stock market upgrade
One of the key measures is to allow securities companies with sufficient capacity to provide services without requiring foreign investors to have 100% of the funds before placing purchase orders for securities.
22:20, 2024/03/20
Over 60% of Vietnamese use QR codes to pay
Vietnam also leads Southeast Asia in terms of new e-wallet users.
20:39, 2024/03/18
Casinos contribute US$370 million to state budget over 5 years
The number of Vietnamese gamblers is falling.
08:22, 2024/03/13
Standard Chartered and IATA partner to launch IATA Pay in Vietnam
IATA Pay in Vietnam is powered by Standard Chartered’s Straight2Bank Pay.
17:50, 2024/03/07
Vietnam’s capital market shows positive signs: Finance Ministry
The government is planning to set up a capital trading platform for innovative start-ups.
14:29, 2024/03/06
Prime Minister urges banks to cut lending rates further
The Government leader has called for the publication of average lending rates to allow individuals and businesses to choose their banks.