In only about two more weeks, the rendezvous point of 10 trillion dong in capital increases for the two big banks would pass. Even so, there was no sign of any specific movement.
According to the National Assembly’s Resolution on the Plan to restructure the economy for the 2016-2020 period on November 8, 2016, by 2020, commercial banks must have their own capital (pillar one) following Basel II standards, including at least 12 to 15 commercial banks successfully applying Basel II.
The implementation of Basel II was considered a breakthrough restructuring solution, creating a foundation for safety, healthy development and raising the competitive edge of the Vietnamese banking system in the trend. The direction of international economic integration was becoming more and more extensive nowadays.
However, up to recent days, only 18 banks in Vietnam had been accepted to apply the first pillar according to Basel II standards.
Particularly for group commercial bank with State capital, only Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) completed pillar one through selling shares to foreign partners. About the Vietnam Bank for Agriculture and Rural Development (Agribank) and the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), it was still difficult to meet the standard.
Meanwhile, Decision No. 986/QD-TTg of August 8, 2018, approving the ‘Strategy for Vietnam’s banking industry development to 2025, orientation to 2030′ required that by 2020, Commercial banks with more than 50 percent of charter capital owned by the State must meet the capital adequacy standards of Basel II.
On the other hand, although some members of the group met capital adequacy standards, they were at a fragile threshold.
Deputy Governor, the State Bank of Vietnam, Nguyen Thi Hong, at a meeting in December 2019, said that the capital adequacy ratio (CAR) of this group was very close to the provisions of Circular No. 41 as well as the safe percentage ratio to comply with Basel II standards.
The deputy Governor emphasized that in the absence of capital increase, the commercial banks themselves would have to restrict credit extension, and might even have to stop granting credits. Thereby, it would significantly affect the demand for development investment, especially in the context of Vietnam at present, that the need for investment capital depended much on bank credit.
In the face of this fact, in recent years, banks had made great efforts to build specific plans, such as selling capital to foreign partners; focusing on promoting restructuring; improving business efficiency; restructuring; re-portfolio of risky assets in the direction of reducing the proportion of high-risk assets; issuing secondary bonds to raise tier two capital to improve CAR.
However, the obstacle in raising the capital to meet the new standards and creating a growth space had not really been removed.
Accordingly, to meet the target, in addition to their efforts, these banks would need to be supported by the State by allowing the mechanism to retain dividends or invest more capital from the budget.
After many recommendations from SBV as well as other banks in the group, the bottleneck to increasing charter capital had finally got specific information about the expected increase and the anticipated time from a higher authority.
Specifically, at the beginning of the year at Canh Ty New Lunar Year at a newly-established commercial bank, deputy prime minister Vuong Dinh Hue said at that time, in Q1/2020, the government would increase its charter capital to about 10 trillion dong for Vietcombank and VietinBank. As for Agribank, all profits from the fiscal year 2020 would be used to raise charter capital.
However, the deadline for Q1/2020 was only counted by day. Information about ’10 trillion dong package’ to date had not explicitly appeared, in addition to the above statement.
