MONEY TALK FINANCE COLUMN
Lawrence Young (FCSI) is the Senior Associate
for Holborn Asset Management Group (HCMC
office). Originally from the UK, Lawrence has
been a finance professional for 30 years having
worked across Europe and Asia as a stockbroker,
Eurobond trader and interbank money broker.
His areas of expertise lie in offshore tax efficient
saving structures, higher education fee planning,
inheritance tax planning, pension planning, life
and health insurance, global investment property,
offshore company formation and offshore
banking.
Email [email protected] if
you would like him to answer your questions on
these topics.12 08/
THE FIRST THING MOST PEOPLE
do when moving into a new country is to
look for a bank account that suits them
and offers the services they require. For
some, that requirement can be tricky to
navigate.
At the beginning of July, several
big changes were applied to expats
looking to bank in Vietnam. Some have
reported it as a relaxation of banking
regulations while others have reported
it as a tightening of banking rules. It is
most definitely the latter, not the former.
But it also heavily depends on your
perspective.
Here are the main points that have
come out of the new banking directive
and need to be considered if you plan
to move to Vietnam or are already a
resident here:
- You will need to provide certain
documentation as would be expected to
open an account in Vietnam and to use
bankcards. - Expats will need to provide
documents confirming their residential
status in Vietnam for at least 12 months
and only then will you be eligible to
open a bank account. The basics are
required, such as a valid passport for
identification, but you will need a valid
visa for 1 year or longer and has been
issued in the last 12 months. Or one of
the following valid documents with a
validity of 1 year or longer, issued in the
last 12 months: a temporary residence
confirmation issued by the police, a
temporary resident card, a permanent
residency card or a work permit.
The State Bank of Vietnam also
recently modified the conditions for
expats to hold savings and deposits with
banks in Vietnam, which does make it
accessible but not to all.
For term deposits from July 5, 2019,
expats with a valid document proving
residential status in Vietnam with at
least 6 months validity will be eligible
to open Term Deposit Accounts with a
term not greater than the remaining of
its validity. Any existing Term Deposits
opened before July 5, 2019 can and will
be continued until their maturity.
However, there are and always have
been offshore savings solutions and in
many ways these might be beneficial for
tax purposes. Many offshore accounts
are not subject to taxes depending on
the individual’s nationality. Private
banking offshore has become more and
more difficult with restrictions on anti-
money laundering rules adopted around
the world. But for regular monthly
savings structures it is still quite simple
to open and manage an account in a
well-regulated jurisdiction such as the
Isle of Man, Luxembourg and Singapore.
Since the recent changes, I have
been inundated with calls asking for
clarification and how to take advantage
of offshore structures. Many may find
it surprising that you don’t have to be a
millionaire to open an offshore savings
structure. An offshore account can be
opened with as little as USD250 per
month as a regular monthly premium.
But once you have met all of the
above and opened your bank account,
how will you bank? The world is
changing to an ever-increasing digital
world. According to PWC’s 2018 Global
Digital Banking Survey, there has
been a 5% increase in online banking
transactions made from mobile devices,
15% in total of users. That can be further
substantiated by the State Bank of
Vietnam who concluded in an additional
survey that mobile users increased by
81% when making financial transactions
in 2017. The trend is continuing as
people become more comfortable with
mobile security measures.But, what about the actual security
of your money? In Vietnam there exists
a deposit insurance protection scheme
but it is very limited in size. Currently,
if a bank or credit institution goes
into default and bankruptcy, the DIV
(Deposit Insurance of Vietnam) will
cover VND75 million as protected.
To put that into perspective at today’s
exchange rate that is around USD3,264.
Whereas in the UK (even if they leave
Europe) it is currently and will remain
GBP85,000 (about VND2.5 billion so a
bit of a difference) protected. Europe has
a currency equivalent of EUR100,000.
The US has USD250,000 in FDIC
insured banks. Substantially offering
more peace of mind.
It has been known for banks to go
into default in Vietnam in recent years.
However, that has changed in 2017
with a bill passing that allows for any
insolvent bank to now go fully bust. In
other countries, there has been support
through bailouts, rightly or wrongly,
when banks get into trouble but that will
not be the case going forward for the
Vietnam banking sector.
The big questions are: What
jurisdiction do you trust the most?
What banking system can you rely on
and what protection are you afforded? I
know where my money goes but to find
out you will have to contact me directly.
The risk against reward suggests
that offshore banking and savings
structures are absolutely the better
option for short, medium and longer
term investment savings strategies, as
the same level of returns and better can
be achieved, but with a much higher
level of protection afforded to you.
Vietnam banks for everyday banking are
satisfactory for paying bills but again,
Vietnam is in its early stages of growth
and reform. Weighing the best options when it comes to
where to stash your cash