The banking industry of Vietnam has undergone a significant reform process since the start of reform processes from 1988 to 1990. The reform process oversaw the transformation of the banking system from a mono-tier banking system to a two-tier banking system that separates commercial banking from central banking. Previously, the country’s economy was supported by a mono-tier banking system that comprised of the State Bank of Vietnam. With the reforms, commercial activities have been devolved from the regulation by the Central Bank. In addition to the decentralization of the banking system, the state has introduced several liberalization measures such as the interest rate structure, the development of money markets, and unification of refinancing rates and establishment of a flexible exchange rate mechanism (Barré, 2006).
The major reform strategies used by the state was new entry strategy where they established a liberalized process that allowed the emergence of new private banking system and rehabilitation strategy which required the re-structuring of the state owned commercial banks and a controlled entry of new banks. As a result, commercial banks in Vietnam comprise of four state owned banks, thirty joint stock banks, foreign bank branches, credit cooperatives and finance companies (HSBC, 2006).
The incorporation of Vietnam to the World Trade Organization in 2007 resulted in the banking industry in Vietnam facing some challenges such as reviewing policies on banking so as to be able to comply with the regulations of the World Trade Organization (Hao, 2008). Though challenges were encountered and still are, recent development activities in the banking industry indicates how the reform process is accelerating suggesting that in the near future the banking industry shall achieve harmonization with global standards as this can be seen in the setting of foreign banks in the country and foreigners allowed to own up to 30 percent of the stakes in the banks.
With the growth of the banking industry in Vietnam, it has led to many people looking for employment in the different banks as the banks are trying to find people who are well trained to manage their banking activities. With the occurrence of these phenomena, it has called for banks within the banking industry to develop on their human resource management areas so as to be able to combat the challenges that arise when it comes to dealing with the human force at the work places (Barré, 2006). Banks need to develop policies and strategies with which they can use to deal with the challenges that arise at the work place. This has led to the development of human resource departments in organizations something that was ignored previously during the mono-tier banking system as the bank focused on making profits.