State Audit Office of Vietnam (SAV) said that some commercial banks invested cross bonds with each other to manipulate the Capital Adequacy Ratio (CAR), making this coefficient of the whole system unreliable.
In the recent National Assembly report, SAV pointed out that some banks applied some tricks to manipulate CAR.
SAV said the CAR of the banking system in 2017 was not reliable. Excluding weak banks and banks bought by the State Bank of Vietnam (SBV) at zero dong, some commercial banks invested in cross-bond with each other to inappropriate improve CAR coefficient. Along with that, many commercial banks classified debts incorrectly, affected profits, and reduced this coefficient.
In banking operations, CAR is an important indicator reflecting the relationship between equity and risk-adjusted assets of commercial banks.
According to the latest statistics from SBV, by the end of February 2019, the minimum CAR of the whole banking system was about 11.8%. In which, this rate at state-owned commercial banks was 9.42%, at joint stock commercial banks was 10.76%, while at joint venture banks and foreign banks was 24.67%.
Since 2017, the manipulation of CAR had set the problem on the calculation plan to give an exact coefficient. This was particularly important in the context of the banking system coming closer to the application of the official Basel II standard in 2020.
This report sent to the National Assembly of SAV also said that in addition to the achievements in 2017, the banking industry still had some shortcomings and limitations. Specifically, some banks had grown credit beyond the SBV’s allowances, such as Bao Viet Joint Stock Commercial Bank (BaoVietBank), Southeast Asia Joint Stock Commercial Bank (SeABank), Nam A Joint Stock Commercial Bank (Nam A Bank), Vietnam Public Joint Stock Commercial Bank (PVcomBank), Vietnam Thuong Tin Joint Stock Commercial Bank (Vietbank) with total outstanding loans exceeding 6.988 trillion dong.
Meanwhile, some other banks also violated the regulations on limit of capital contribution and share purchase in the system. Saigon Thuong Tin Joint Stock CommercialBank (Sacombank) and Kien Long Joint Stock Commercial Bank (Kien Long Bank) owned directly shares of each other; Five credit institutions including Maritime Joint Stock Commercial Bank (MSB), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Construction Commercial One Member Limited Liability Bank (Construction BankCB), Ocean Commercial One Member Limited Liability Bank (Ocean Bank) and Vietnam Bank for Agriculture and Rural Development (Agribank) hold shares of more than two other credit institutions (in 2017).
In bad debt handling activities, SAV said that VAMC had not played a role in buying and handling bad debts, but mainly through re-authorising credit institutions to sell debts. This organisation also did not assess the purchase price (with outstanding debt minus the risk reserve), and did not check and evaluate the borrowers, the truthfulness and accuracy of the records, documents and collateral of debts…
In addition, a number of state-owned commercial banks had been slow to finalise interest rate support programmes, did not yet collect outstanding debts of group two and outstanding debts of group two to repay the State budget.
By the end of 2017, this debt at four state-owned commercial banks was 108 billion dong and $2.2 million. In particular, the value at Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) was over 40 billion dong; Agribank was nearly 31 billion dong; Vietcombank was over one billion dong and Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank) was worth 36 billion dong and $2.2 million.
