Finance matters: Labourers work at a construction site for a high-rise building in Hanoi. The country’s state-owned banks are concerned that their charter capital is too low to adequately support the needs of the economy. — AFP
HANOI: Vietnam’s four biggest state-owned banks are in urgent need of a capital increase in 2023 as their charter capital is too low, with some unable to ensure the regulated minimum capital adequacy ratio (CAR), according to industry insiders.
Currently, the big four – BIDV, Vietcombank, Agribank, and VietinBank – control more than 40% of the country’s credit market share, but over the years, particularly the last three years, the banks have been a key force in assisting the economy to overcome the difficulties caused by the Covid-19 pandemic and global economic uncertainties.
State-owned banks always take the lead in implementing incentive policies of the National Assembly, government and State Bank of Vietnam (SBV), such as lowering interest rates and profits to support businesses, but they themselves are facing difficulties in terms of capital.
According to Agribank’s chairman, Pham Duc An, at the current credit scale, Agribank is unable to ensure the minimum CAR to obtain higher credit growth due to the bank’s low charter capital, resulting in the bank having a low credit growth rate in 2022 compared to the banking system’s average rate.
“Increasing charter capital for Agribank is very urgent, as only when the minimum CAR is ensured for developing credit right from the beginning of 2023 will Agribank have the resources to serve the capital needs of the economy, especially in rural areas,” said An.
He suggested that the government should advance 6.75 trillion Vietnamese dong (RM1.2bil) in charter capital to Agribank as an estimated plan approved by the National Assembly.
Nguyen Quoc Hung, general secretary of the Vietnam Banks Association, also proposed the government submit a bill to the National Assembly to increase Agribank’s charter capital in order for it to meet the regulated CAR. As Agribank’s CAR is close to the allowed limit, the bank’s capital mobilisation and lending will both be restricted without a charter capital hike.
Despite having a proactive advantage over Agribank, the three remaining state-owned banks still have to wait for the government’s approval in order to raise capital as expected.
There are many potential risks for the three banks, as their CAR is currently just slightly above the regulated minimum.
BIDV’s chairman Phan Duc Tu requested the government, the Finance Ministry and the SBV continue allowing state-owned banks to use their after-tax profits after deducting funds in 2022 to increase charter capital in a move to enhance their financial resources and ensure the CAR.
For Vietcombank, though the bank has taken many measures to increase its charter capital, its CAR is still modest compared to its development needs as well as international standards.
The bank’s chairman Pham Quang Dung proposed that the government and the SBV continue to give priority to the charter capital increase of state-owned banks.
Vietcombank is looking forward to soon being approved by the Prime Minister to increase its charter capital from the retained profits in 2019 and 2020 after deducting funds, which has been agreed by the SBV and Finance Ministry to submit to the Prime Minister.
In 2023, Vietcombank plans to get the central bank to submit a request to the bank’s general meeting of shareholders to further increase its charter capital from all the remaining accumulated profits from 2021 and the previous years. — Viet Nam News/ANN
