HANOI, VIETNAM - Vietnam has given European banking giants HSBC and Standard Chartered the green light to set up wholly-owned subsidiaries in the country, an official statement said.

The two firms can operate locally as commercial banks for 99 years, a State Bank of Vietnam statement said, adding the move expressed the country's "strong commitment to the World Trade Organisation."

Vietnam pledged to gradually open its banking sector when it joined the WTO in 2007, but foreign banks have often complained it was doing so too slowly.

HSBC's Vietnam chief executive Thomas Tobin said in a statement that the decision over wholly-owned subsidiaries would help consolidate his bank's position in the local market.

"We continue to increase our participation in Vietnam's economy and financial markets. This is a clear sign of the Government's ... recognition of the importance of a strong financial sector," he said.

HSBC already operates in Vietnam, but setting up a fully owned local bank will allow it to open more branches and offer more products, a spokesman for the bank said.

HSBC recently received permission to increase its stake in one of Vietnam's largest private banks, Techcombank, from 14.4 percent to 20 percent.

Standard Chartered Bank is already a strategic partner of Vietnam's Asia Commercial Bank (ACB) and recently increased its stake in the firm to 15 percent, the European bank said.

Vietnam was once widely hailed as Asia's next economic tiger, but has been battered by a surge in inflation, a ballooning trade gap, tumbling share prices and worries about the banking sector and its currency, the dong.