Vietnamplus

A new decree released by the Government will allow State-owned commercial banks to save cash to increase their strength instead of paying dividends to shareholders.

Banks are facing major challenges to carry out their capital increase plans this year due to the impacts of the COVID-19 pandemic.

Domestic banks are expected to face increasing competition, especially as European banks will be able to access the Vietnamese market when the European Union-Vietnam Free Trade Agreement (EVFTA) takes effect.

The Southeast Asia Commercial Joint Stock Bank (SeABank) said it has completed the second pillar of Basel II standards, which is supervisory review.

Some credit institutions (CIs) that have not yet completed their restructuring roadmap will have to speed up the process to meet the State Bank of Vietnam (SBV)’s deadline this year.

Vietnam should loosen restrictions on foreign ownership and encourage entrepreneurship in new and revolutionary industries to attract foreign capital, said experts.

Banks, especially State-owned banks, are expected to increase their capital significantly this year as they are allowed to retain profits or pay dividend in shares instead of cash as previously.

The Government’s plans to increase capital for large State-owned commercial banks in the first quarter of this year could be delayed due to the Covid-19 outbreak, analysts predicted.

The Vietnamese banking sector, now undergoing drastic restructuring, will have more opportunities to improve its financial capacity as well as learn modern business models and management from their European partners after the EU-Vietnam Free Trade Agreement (EVFTA) takes effect, according to insiders.

The Government has finally announced a roadmap to increase charter capital for large State-owned banks in the first quarter of this year.

One of the fastest economic growth rates in the region, the signing of free trade and investment protection deals with the EU, and the Politburo’s first-ever resolution on foreign investment attraction were among the top 10 economic events of Vietnam in 2019.

After proposing the Government amend Decree 91/2015/ND-CP, the State Bank of Vietnam (SBV) will coordinate with the Ministry of Finance to seek the Prime Minister’s approval for increasing capital for banks.

Banking experts are of the view that despite some relaxation for banks that failed to meet Basel II standards, the State Bank of Vietnam (SBV) should stay firm to the Basel II target. ​

The application of Basel II is considered the fundamental restructuring solution creating the foundation for promoting the safety, healthy development and competitiveness of the banking system.

One of the fastest economic growth rates in the region, the signing of free trade and investment protection deals with the EU, and the Politburo’s first-ever resolution on foreign investment attraction were among the top 10 economic events of Vietnam in 2019.

Capital difficulties are putting pressure on some banks struggling to meet the central bank’s Basel II deadline of early next year, but experts suggest the central bank should not delay the process.

Rising medium- and long-term capital demands to meet stricter regulations on credit safety limits and capital adequacy early next year were putting pressure on commercial banks to issue bonds in the final months of the year, experts said.

The Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank, HOSE: HDB) has reported impressive results in the third quarter of this year, with pre-tax profits increasing by a record 51 percent year-on-year to over 1.23 trillion VND (53.4 million USD).

Vietnam’s credit growth is slowing and can fall behind the central bank’s target of 14 percent for 2019, causing concerns that it could make it difficult for businesses to access bank loans during the remaining months of the year.

Banks have been the main player in the corporate bond market so far this year, with eight of the top 10 biggest issuers being financial institutions.