Transactions at Vietcombank in Hanoi (Photo: nhipcaudautu.vn)Hanoi (VNA) – Thebanking system is expected to further develop this year, as 16 banks have announcedplans to increase capital by a total of nearly 37 trillion VND (1.62 billionUSD).
Vietcombank plans to increase charter capital from 35.977 trillion VND tonearly 39.6 trillion VND this year through the issue of an additional 360 millionshares, equivalent to 10 percent of its capital.
The shares will be sold either to the public or offered to no more than 10investors (including existing shareholders) in a private placement due latethis year.
BIDV also approved a plan to increase charter capital by 4.445 trillion VND to 38.63trillion VND. The plan will be conducted via the issuance of 2016dividend-paying stocks worth nearly 2.39 trillion VND, shares for investorsworth over 1 trillion VND and others for employees, known as Employee StockOwnership Plan (ESOP) valued at over 1 trillion VND.
The same trend was also seen at Military Bank, VP Bank, Techcombank and Nam ABank with capital hike plans ranged between 1 trillion VND and 5 trillion VND.
According to the banks, the capital hike is aimed to enhance their competitiveedge and meet requirements of Basel II, which is due to take effect in Vietnamin September 2017 in a pilot programme for ten banks.
With the capital hike plans, some are concerned about a wave of increasingillegal bank capital as in the 2008-10 period.
In 2006, in order to improve bank financial status and stability, theGovernment issued Decree No. 141/2006/NĐ-CP issuing the list of legal capitallevels of credit institutions. Under the decree, minimum legal capital forcommercial banks must be 1 trillion VND in 2008 and 3 trillion VND by December31, 2010.
However, the capital increase caused difficulties, due to the stagnant stockmarket and some banks failure to follow through.
Therefore, to meet the regulations, they increased financial capital illegallythrough cross-ownership to avoid being acquired or merged.
However, experts said that such an increase of financial capital at this timeis unfeasible.
Banking expert Can Van Luc told online newspaper bizlive.vn that theincrease of illegal capital is now almost impossible as the State Bank of Vietnam(SBV) monitors and controls the issue very strictly. In particular, the SBV isalso very active in introducing measures to combat the increase of financialcapital, helping transparency of information and prevent cross-ownership in thebanking system.
In addition, Luc said, through the occurrences in the 2008-10 period, banksthemselves recognise the risk of raising financial capital illegally and do notdare to do so.
However, he recommended the Government and the central bank to help commercialbanks increase capital to meet the Basel II requirements.
The Government can allow banks to keep roughly 50-60 percent of dividends forcapital increase as some other countries do, Luc suggested.
Besides, he said, it is also necessary to speed up the restructuring of ailingbanks and recover bad debts to remove the bottleneck in the lending capitalflow.
If the recovery of bad debts is sped up, banks can reduce their provision for riskyloans and have more funds to add to their charter capital, Luc said.-VNA
VNA
