Institutions in transition : a study of Vietnamese banking

Sammanfattning: The ongoing transformation of centrally planned societies into market economies poses many difficult questions regarding large scale institutional reform. How far to go, how fast, and in which order? Until now, the debate has been mainly theoretical. As the reforms progress, however, we need to compare the theoretical predictions with the empirical evidence. Financial intermediation is one sector in which the gap between socialism and capitalism is particular large, and the development of commercial banking has often proved to be a bottleneck in the reform process. Empirical examination of financial reform is therefore urgent. This dissertation explores the development of the Vietnamese state banks during the early 1990s. It highlights the lengthy process of altering the formal model and informal rules governing the bank organizations. The official socialist ideology is the source of many problems. First, it means that state ownership remains, enabling the government to intervene easily in the banks’ operations. The ideology’s informal role is arguably even more important, because it leaves unclear how bankers should act when profit maximization conflicts with social responsibility. Uncertainty will prevail as long as bankers and banking authorities have only partially converted to a new set of norms. Accordingly, the formal financial sector will fail to florish.