A transaction office of Vietcombank (Photo: Vietcombank) Hanoi (VNS/VNA) - Prosperous businessperformance and positive bank share price trends in the stock market areexpected to help some commercial banks meet their capital increase deadline asrequired by the State Bank of Vietnam (SBV).
According to the National Financial SupervisoryCommission, many banks are under great pressure to hike capital to satisfy theSBV’s regulations on meeting Basel II standards by the end of 2020.
Under the SBV’s Circular No 41/2016/TT-NHNN, banksmust maintain a capital adequacy ratio (CAR) of at least 8 percent as per BaselII norms, starting in 2020.
With the new regulation, which replaced Circular13/2010/TT-NHNN, the CAR of many banks will fail to reach the minimum level setby the SBV if they fail to increase capital.
The CAR is expressed as a percentage of the bank’scapital to its risk-weighted assets and is one of the main metrics used todetermine the stability and efficiency of financial systems. The higher thebank’s capital adequacy ratio, the higher the degree of protection of depositor’sassets.
According to the NFSC’s report, the average CAR ofthe banking sector has been consistently falling since 2017.
It dropped from 11.6 percent at the end of 2016 to11.1 percent at the end of last year. The ratio continued to go further down by0.25 percentage points to 10.85 percent by the end of February 2018, of which,State-owned commercial banks decreased by 0.16 percentage points and jointstock commercial banks reduced by 0.44 percentage points.
Analysts say this is because banks’ assets havegrown much more rapidly than their equity.
In 2016, the sector’s total assets went up by 16percent but charter capital up by only 6.11 percent.
Last year, all big State-owned commercial banks,including VietinBank, Vietcombank and BIDV, had total assets exceeding 1quadrillion VND (43.85 billion USD) after rising by 9.3 percent while theirequity grew by only 4.6 percent.
Experts warned that when BASEL II standards areapplied, banks’ CAR will plunge due to an increase in the quantum of their riskyassets.
Meanwhile, the group of State-owned banks has anaverage CAR of 9.69 percent, close to the stipulated minimum. It will plungebelow 8 percent when BASEL II standards are applied.
Therefore, most banks planned to increase theircharter capital in recent years.
The stock market surged significantly, helpingbanks to raise charter capital through share sales and dividend payouts by shares; accordingto the National Financial Supervisory Commission.
To capitalise on the growth of the stock market,many banks have rushed to issue shares for capital increase.
The Military Bank (MB) and VPBank, for example,recently received the SBV’s approval to raise their charter capital.Accordingly, the VPBank will increase its charter capital from 15.7 trillionVND (694.7 million USD) to 25.299 trillion VND, while the MB’s charter capitalwill likewise raise from 18.15 trillion VND to 21.6 trillion VND.-VNS/VNA
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