Before the seventh session of the 14th National Assembly (NA), the Auditor general of the State Audit of Vietnam Ho Duc Phoc sent to NA deputies a report on the 2018 auditing results of financial statements, and activities related to the management and use of state capital and assets in 2017.
Notably, the State Audit assessed that the Capital Adequacy Ratio (CAR) of the entire banking system was not reliable. Excluding weak banks and banks which were acquired by the State Bank of Vietnam (SBV) at zero dong, some commercial banks made investments in the bonds of each other, making “virtual improvement” of CAR. Many banks incorrectly classified their debts and that affected profits and reduced CAR.
Statistics published on the SBV’s website showed that as of late January 2018, the minimum CAR of the entire banking system was 12.37 percent (no reference available as of December 31st 2017). By the end of February 2019, the CAR of the system was 11.8%, in which CAR of state-owned banks was 9.42 percent and CAR of private joint stock banks was 10.76%. Compared to the end of 2018, the CAR of the system and of the two groups of banks all declined as of the end of February 2019.
Data gathering reports of 20 banks which were presented at their 2019 annual general meeting (AGM) pointed out that 16 out of 20 banks announced their CAR and some banks assessed that their CAR in 2018 improved compared to the previous years.
Four remaining banks including Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), Orient Commercial Joint Stock Bank (OCB), Viet A Commercial Joint Stock Bank (VietABank) and Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) did not mention their specific CAR, or only provided a general report mentioning that their CAR complied with the SBV’s regulation. Particularly, in 2018, OCB was one of the first three banks recognised by the State Bank of Vietnam to complete the implementation of the Basel II international standards.
Among 16 banks which announced CAR in 2018, Kien Long Commercial Joint Stock Bank (KienlongBank) took the lead with minimum Car of 16.62%. The bank is a small-scaled one with charter capital of 3.237 trillion dong and a total assets of 42.310 trillion dong. Vietnam Technological and Commercial Joint Stock Bank ranked the second with CAR reaching 14.3 percent by the end of 2018.
In 2018, five banks saw CAR at around 12.1 percent12.8 percent and four banks saw CAR at 11.2 percent11.88%. It is known that for the case of Vietnam Prosperity Commercial Joint Stock Bank (VPBank), the CAR in 2018 was reached 12.3%, and 11.2 percent if applying the Basel II standards. Vietnam International Commercial Joint Stock Bank (VIB) recorded CAR in 2018 at 12.88 percent (the lowest in three years from 2016 to 2018), and 10.2 percent if applying the Basel II standards.
In 2018, the CAR of the consolidated Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) was 11.9%, while it was 10.71 percent for the parent bank. Similarly, the CAR of the consolidated Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) was 10.3%, and it was 9.02 percent for the parent bank.
The SBV is completing the draft circular regulating the safety ratios and limits in the operation of commercial banks and foreign bank branches to replace Circular 36/2014. In which, the risk weight is adjusted up to ensure credit control and restriction for sectors with high potential risks. Particularly, the SBV proposes to increase the risk weight of the personal loans to meet the needs of live with outstanding principal of three billion dong or more to 150%, threefold higher than the current regulation.
Answering the question of shareholders at the 2019 AGM, leader of HCM City Development Commercial Joint Stock Bank (HDBank) said that the SBV has just released the draft and not yet officially issued the circular and no specific issuance time has been announced.
However, according to the personal view of HDBank’s leader, the issuance time may be at the end of 2019 or early 2020. When the draft circular is applied, it will surely affect banks; because when the risk weight is raised, the CAR will fall and the development scale will be limited if banks do not increase charter capital and equity.
