Asia Commercial Bank - Vietnam Founded in June 1993 by a group of local businessmen, ACB is Vietnam''s largest privately owned bank, and is widely regarded as the country''s best private bank with a solid franchise in the small business and consumer markets.  Due to its small size and privately owned status, ACB has been less inclined to focus on Vietnam''s larger, government-backed state-owned enterprises and has largely directed its efforts towards the consumer and small business markets.  Innovation, progressiveness and a motive for profit (not always evident amongst the dominant state-owned banks), has helped ACB grow successfully.     ACB has 19 offices and over 900 staff (of which 75% have post-secondary education), mostly based in HCMC.  It was the first Vietnamese private sector bank to obtain licenses for MasterCard issuance and settlement.  Today, ACB  operates a card center in HCMC which issues both domestic and international credit cards.  ACB has also been retained by Western Union as its money transfer agent and operates four transactions centers with 411 agents and 187 payment points in 52 provinces and towns nationwide. As evidenced by similar banks in other developing markets of the region, this retail focus of ACB''s should place it in good stead as Vietnam''s economy continues to grow.     Project Rationale    As one of IFC''s first investments in the Vietnamese banking sector, this project represents a good opportunity for IFC to assist the emerging private sector.  Successful implementation of this project would provide IFC with an ideal platform to make future investments in the financial sector, and to make an impact on the reform and modernization of Vietnams banking sector, leading to further opening of the sector to private competition.    Furthermore, this project responds to ACBs request for IFC''s participation because of IFC''s global expertise in financial sector development and reputation for promoting best practice in corporate governance.   Established in 1993, after the deregulation of the banking sector and its opening up to private sector participants, ACB has emerged as the leading private sector joint-stock bank in Vietnam.  Given its national reach and presence, ACB represents a unique opportunity for IFC to make an impact on the development of the Vietnamese financial sector.  Through on-going supervision and Board participation, IFC will be able to continue to introduce financial discipline and international best practices, and help build ACB into a first-class modern bank in Vietnam.  IFCs equity investment would promote confidence in private sector joint-stock banks, and encourage the authorities to further open up the financial sector to private and foreign participation.       IFC Role    Governance and managerial capacity are the main constraint for small banks to grow and develop in a sustainable fashion.  In addition to providing equity capital, IFCs key contribution to ACB''s growth is expected to be in the area of corporate governance and credit management capacity as in particular in the fast growing housing finance portfolio.  By taking an equity stake in ACB, IFC will support the modernization, strengthening and proposed listing of the bank. IFCs presence in this project will also provide an opportunity to respond to the State Bank of Vietnam''s request for assistance with the strengthening of private sector commercial banks.     Developmental Impact    The main priority for Vietnams financial sector is to enlarge the participation of private sector banks.  Development of private financial institutions is a precondition for improving the access of private companies to bank financing and is therefore an important factor for promoting sustainable growth. The emergence of large private financial institutions is expected to increase competition in the banking industry and challenge the dominance of the state banks. This project will help one of the best private commercial banks in Vietnam to grow and emerge as a significant player in the domestic financial sector. Indirectly, it will enhance the access of Vietnamese private companies to bank financing, and will introduce more competition in the banking industry.