Vietcombank needs to raise capital to meet BASEL II standards. (Photo: VNA) Hanoi (VNS/VNA) -The Government is directing ministries and agencies to raise capital forState-owned commercial banks through the use of dividends or share sales thisyear, Deputy Prime Minister Vuong Dinh Hue said at a recent meeting.
Hue revealed the news after four State-ownedbanks – Vietcombank, Agribank, BIDV and VietinBank – proposed the capital hikeat the meeting on bad debt resolution last week as they are facing difficultiesto fulfill the plan.
Currently, the banks are under greatpressure to hike capital to satisfy the State Bank of Vietnam (SBV)’sregulations to meet Basel II standards in 2020. Under SBV’s Circular, banksmust maintain a capital adequacy ratio (CAR) of at least 8 percent as per BaselII norms, starting in 2020. With the new regulation, the CAR of the banks willfail to reach the minimum level set by the SBV if they fail to increasecapital.
Basel II is the second of the Basel Accords,which are recommendations on banking laws and regulations issued by the BaselCommittee on Banking Supervision.
At the meeting, Nghiem Xuan Thanh, Chairman ofVietcombank, asked the Government and SBV to consider increasing capital ofState-owned banks or allowing the banks to either retain dividends or issueprivate placement shares to foreign investors to ensure both the value of theState capital and the interests of shareholders.
According to Thanh, the divestment of the banksis currently facing difficulties due to complicated regulations.
Besides being large and prestigious institutionsfrom developed countries, foreign qualified buyers are also required to holdthe stake for at least one year, Thanh said, adding it was hindering investorsas the stock prices in the market constantly fluctuate.
Under the current legal regulations, the salesof the banks’ stake must be also in large lots and the sales price must not belower than the market price, Thanh said.
Vietcombank had so far still failed to findpartners from developed economies who agree to pay the bank’s shares at themarket listed price – or nearly four times of the bank’s book value, Thanhsaid, adding that market listed prices of leading banks’ shares in the region,not only in Southeast Asia but also in Asia, only double that of the banks’book value.
It also takes BIDV several years to find astrategic partner, but no one paid as high as the bank’s market listed price ofover 30,000 VND per share.
While facing difficulties in the divestment, thebanks are not allowed to keep profits for the capital hike purpose as theystill have to pay dividends in cash, which are supposed to be paid to the Statebudget. Representatives of State capital at State-owned banks often require tovote for dividend payout to be in cash at the banks’ annual general meetings sothat the State receives money from dividends.
Last year, for example, it was estimated theState budget got nearly 6.1 trillion VND (268.7 million USD) extra from thedividend payout of three State-owned banks – VietinBank, Vietcombank andBIDV.-VNS/VNA
VNA
