In more than two months, commercial banks would have to meet Basel II standards. However, many banks were currently having difficulty raising charter capital.
Until then, the race of capital increase of the whole Vietnamese banking system was currently becoming exceedingly fierce, especially when Circular 41 on the capital adequacy ratio for banks and foreign bank branches would have taken effect since 1/1/2020.
According to updated data of the State Bank of Vietnam (SBV), recently, there had been 17 commercial banks registering to apply Circular 41 ahead of schedule. In which, 10 banks, including Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Vietnam Maritime JointStock Commercial Bank (MSB), HCM City Development Joint Stock Commercial Bank (HDBank), Vietnam International Commercial Joint Stock Bank (VIB), Orient Commercial Joint Stock Bank (OCB), Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), Military Commercial Joint Stock Bank (MB), Asia Commercial Joint Stock Bank (ACB) had been granted ‘certificates’ to apply Basel II.
In the ‘journey’ to increase charter capital, VIB was a typical example. The bank had successfully expanded its charter capital from 7.834 trillion dong to 9.245 trillion dong, equivalent to an increase of 18 percent. Following that, OCB also raised its chartered capital from 6.599 trillion dong to 7.898 trillion dong.
Southeast Asia Commercial Joint Stock Bank (SeABank) had also just completed the offering of shares to existing shareholders to increase its capital from 7.688 trillion dong to 9.369 trillion dong in September.
According to the roadmap set by the government, by 2020, commercial banks would have basically had their own capital to meet the standards of Basel II, in which at least 12 to 15 banks would apply successfully. That increase in charter capital would help banks increase their financial capacity, create favourable conditions for expanding their operation network, investing in facilities and technology, diversifying products and services. Furthermore, to meet the approaching Basel II standard was the most important mission
Thus, the remaining period was less than two months, the increase of charter capital was becoming urgent, which was challenging.
According to Tran Thi Thu Hang, representative of the Banking Supervision and Inspection Agency of SBV, some banks were in the process of special control and had difficulty in raising capital, so the ability to comply Basel II roadmap properly would be difficult. Therefore, when amending Circular 36, SBV added the provisions of Circular 41, giving banks more time to carry out Circular 41. However, there would be no extension or time refund. Currently, there would be strict provisions, requiring higher risk factors for these banks.
According to a banking and finance expert, Nguyen Tri Hieu, Circular 41 stipulated a minimum capital adequacy ratio of eight percent, which was close to Basel II risk management regulations. However, Circular 41 was only a part of Basel II, because the rules and criteria in this Treaty were much broader and more complex.
Hieu stated that many banks would still have difficulty in applying Base II in 2020. Apart from several banks recognised by SBV to be able to apply Basel II, up to a quarter of joint-stock commercial banks could not apply Basel II at the end of 2020.
Banks must have data about their risk assets over the years, which would tell the bank about the risk level of each loan or each type of credit. Many banks had not consistently stored data for many years, changing the nature of debt each year, such as real estate loans sometimes counted as business, sometimes calculated as consumption. That was such a problem that Vietnamese banks were facing, Nguyen Tri Hieu said.
According to SBV, as of January 1, 2020, all banks and foreign bank branches must comply with the capital adequacy ratio by the standard method in Circular 41. From 2021, banks would apply the internal capital adequacy and assessment process (ICAAP), according to Basel II. Since 2023, several banks would have involved capital adequacy standards under the primary improvement method (FIRB) of Basel II.
