Commercial banks and other credit institutions which do not have plans to increase charter capital to regulated higher levels by the end of this year will be closed down – or required to merge or be acquired by a larger institution, according to a message issue by the State Bank of Vietnam on May 11.
The message ordered credit institutions to submit their plans to increase charter capital no later than June 30, or the State Bank will withhold any further approvals for the institution to expand its branch, transaction office or ATM networks, or otherwise expand operations.
Institutions which fail to submit a plan, or with plans that do not receive approval from the central bank, must submit a draft plan for closure or a merger or acquisition by September 30.
The decree requires commercial banks to have charter capital of at least 3 trillion VND (158.7 million USD) by the end of this year.
The figure rises to 15 million USD for branches of foreign banks, 5 trillion VND (264.5 million USD) for development banks, and 3 trillion VND (158.7 million USD) for investment banks, joint venture banks and central people’s credit union, while the requirement is only 500 billion VND ( 26.5 million USD) for finance companies and 150 billion VND (7.9 million USD) for leasing companies.
”If the State Bank strictly implements the decree, there will be only 20 banks surviving with over 3 trillion VND in charter capital by the end of this year,” said a banking expert at a seminar held by the Central Institute for Economic Management late last month.
Vu Dinh Anh, deputy head of the Market and Price Department of the Ministry of Finance, said that, as of March, just nine out of 39 joint-stock commercial banks had charter capital in excess of 3 trillion VND (158.73 million USD).
“It’s obvious that the number of small banks is rather large in such an economy,” Anh said.
Under the decree, commercial banks had been required to register charter capital of at least 1 trillion VND (52.91 million USD) by the end of 2008, but only 28 banks had met the requirement by the deadline. Another 10 banks only managed to increase their capital to 1 trillion VND (52.91 million USD) by the end of 2009, with the central bank granting permission for the delayed compliance.
“It’s more difficult as monetary policy has been tightened since last year and the stock market is gloomy,” complained a representative of a HCM City-based bank who asked that his name be withheld.
But State Bank of Vietnam, Governor Nguyen Van Giau said that the days of delays were over.
“The central bank will punish banks which do not increase charter capital,” Giau said. “We will not over-indulge those banks.”
The State Bank has also ordered its own branches to supervise compliance and report back to the central bank monthly.
Kien Long Bank general director Truong Hoang Luong said that his bank’s plan to increase capital to 3 trillion VND (158.73 million USD) had been in place for a long while and that issues involving the capital contributions of some major share-holders had been addressed.
But smaller banks like Dai A Bank, Ficombank, Viet A Bank, Nam A Bank, Gia Dinh Bank and Western Bank were feeling heavy pressure to meet the deadline.
The leading joint-stock commercial banks in terms of charter capital are Eximbank with 8.8 trillion VND (465.6 million USD), Asia Commercial Bank with 7.8 trillion VND (413.2 million USD), Sacombank with 6.7 trillion VND (355 million USD), SeABank with 5.7 trillion VND (300 million USD), Techcombank with 5.4 trillion VND (285.7 million USD), Dong A Bank with 3.4 trillion VND (180 million USD), Lien Viet Bank with 3.3 trillion VND (174.6 million USD) and VIB Bank with 3 trillion VND./.
The message ordered credit institutions to submit their plans to increase charter capital no later than June 30, or the State Bank will withhold any further approvals for the institution to expand its branch, transaction office or ATM networks, or otherwise expand operations.
Institutions which fail to submit a plan, or with plans that do not receive approval from the central bank, must submit a draft plan for closure or a merger or acquisition by September 30.
The decree requires commercial banks to have charter capital of at least 3 trillion VND (158.7 million USD) by the end of this year.
The figure rises to 15 million USD for branches of foreign banks, 5 trillion VND (264.5 million USD) for development banks, and 3 trillion VND (158.7 million USD) for investment banks, joint venture banks and central people’s credit union, while the requirement is only 500 billion VND ( 26.5 million USD) for finance companies and 150 billion VND (7.9 million USD) for leasing companies.
”If the State Bank strictly implements the decree, there will be only 20 banks surviving with over 3 trillion VND in charter capital by the end of this year,” said a banking expert at a seminar held by the Central Institute for Economic Management late last month.
Vu Dinh Anh, deputy head of the Market and Price Department of the Ministry of Finance, said that, as of March, just nine out of 39 joint-stock commercial banks had charter capital in excess of 3 trillion VND (158.73 million USD).
“It’s obvious that the number of small banks is rather large in such an economy,” Anh said.
Under the decree, commercial banks had been required to register charter capital of at least 1 trillion VND (52.91 million USD) by the end of 2008, but only 28 banks had met the requirement by the deadline. Another 10 banks only managed to increase their capital to 1 trillion VND (52.91 million USD) by the end of 2009, with the central bank granting permission for the delayed compliance.
“It’s more difficult as monetary policy has been tightened since last year and the stock market is gloomy,” complained a representative of a HCM City-based bank who asked that his name be withheld.
But State Bank of Vietnam, Governor Nguyen Van Giau said that the days of delays were over.
“The central bank will punish banks which do not increase charter capital,” Giau said. “We will not over-indulge those banks.”
The State Bank has also ordered its own branches to supervise compliance and report back to the central bank monthly.
Kien Long Bank general director Truong Hoang Luong said that his bank’s plan to increase capital to 3 trillion VND (158.73 million USD) had been in place for a long while and that issues involving the capital contributions of some major share-holders had been addressed.
But smaller banks like Dai A Bank, Ficombank, Viet A Bank, Nam A Bank, Gia Dinh Bank and Western Bank were feeling heavy pressure to meet the deadline.
The leading joint-stock commercial banks in terms of charter capital are Eximbank with 8.8 trillion VND (465.6 million USD), Asia Commercial Bank with 7.8 trillion VND (413.2 million USD), Sacombank with 6.7 trillion VND (355 million USD), SeABank with 5.7 trillion VND (300 million USD), Techcombank with 5.4 trillion VND (285.7 million USD), Dong A Bank with 3.4 trillion VND (180 million USD), Lien Viet Bank with 3.3 trillion VND (174.6 million USD) and VIB Bank with 3 trillion VND./.
