The SBV has decreed that banks must all meet global capital adequacy norms (Photo: VNA) Hanoi (VNA) - 2020 is believed to be a do-or-die year for banks since the SBV has decreed thatthey must all meet global capital adequacy norms, according to analysts.
A wave of mergers and acquisitions (M&A) thus appears imminent.
According to Circular No 41/2016/TT-NHNN, banks must have a capital adequacyratio (CAR) of at least 8 percent from January 1, 2020, as stipulated underBASEL II standards.
Basel II is the second edition of the Basel Accords, which are recommendationson banking laws and regulations issued by the Basel Committee on bankingsupervision.
Four years ago, the central bank selected the first 10 commercial banks topilot Basel II standards. But to date only VIB and Vietcombank have joined thepilot scheme successfully while other lenders involved in the plans failed.
Analysts said to meet Basel II standards banks need to increase their capitalbut many, particularly the smaller lenders, have found it difficult to do so.
Last year, 18 out of the country’s 34 banks received approval from theirshareholders to hike their capital, with their combined increase expected to benearly 63 trillion VND (2.74 billion USD).
But only a few of them, mainly large and medium-sized ones, realised theseplans.
Analysts pointed to certain reasons for others’ inability, one of which was theplunging stock market, which has spooked investors.
In raising capital on the stock market, small banks are always at adisadvantage compared to big ones. Their shares are less attractive toinvestors because their dividend yields arelow.
Another difficulty facing the banks is that the Government requires State-ownedcompanies to pull out of non-core businesses including banks.
Foreign financial institutions are cautious about investing because of theunstable global financial situation. Because of this, many prefer to open abranch or establish a subsidiary rather than buy stakes in Vietnamese banks.
Banks that cannot increase their capital to the prescribed level would haveonly one option: to minimise their risk-weighted assets.
This means they would have to reduce credit growth.
Banks in the country still derive their revenues mainly -- 70 and 80 percent --from credit activities.
With revenues and profits down, it would be harder for them to mobilisecapital.
Small banks might have to accept being merged with or acquired by other banks,sparking a new wave of M&As in the industry, analysts said.-VNA
VNA
