Talking at the government press conference in the afternoon of December 2nd 2019, deputy Governor of the State Bank of Vietnam (SBV) Nguyen Thi Hong said that Capital Adequacy Ratio (CAR) is one of the important ratios in financial and banking activities. However, CARs of the four big state-owned banks including Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank) and Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) have “approached the allowed threshold”, according to Circular 41/2016 and Basel II regulations.
If these banks fail to increase capital, according to the SBV’s deputy Governor, “they may be restricted to lending, or even have to stop lending”. “This is a disadvantage when the investment capital in Vietnam depends heavily on bank credit, deputy Governor Hong emphasized.
According to report on investment, management and use of State capital in businesses submitted by the government to the National Assembly at the 8th meeting held recently, by the end of August, the charter capital of the above four banks reached about 139 trillion dong, up by 0.8 percent compared to the end of 2018. The credit in market 1 (residential market) of this group accounted for nearly 48 percent of the whole system.
The government said that the credit expansion of state-owned commercial banks is limited because they have to meet the CAR requirement in the context of the slow charter capital growth, particularly for Agribank and VietinBank.
Hong added that at the 8th session of the National Assembly, the SBV’s Party Committee on behalf of the government Party Committee reported to the Politburo to propose solutions to remove legal difficulties on increasing capital for four big state-owned commercial banks.
The government proposed the National Assembly to amend previously issued resolutions or issue a new resolution in the direction of allowing the use of state budget to increase charter capital for these banks. However, because it was not in the agenda, this content was not included in the National Assembly’s Resolution of the 8th session.
Examining this report later, the Economic Committee asked the government to analyse and point out the reason why the unapproved capital increasing plans of banks affect the credit growth, thereby making solutions to overcome.
