The Government’s recent decision on the restructuring of credit institutions ensures that State-owned banks listed on the market no longer have to worry about dividend payout in cash. (Photo: vietnambiz.vn)Hanoi (VNA) - The Government’s recent decisionon the restructuring of credit institutions ensures that State-owned bankslisted on the market no longer have to worry about dividend payout in cash,experts said.
UnderDecision 1058/QD-TTg issued last week, the Government required the Ministry ofFinance, in conjunction with the State Bank of Vietnam and the Ministry ofPlanning and Investment, to help State-owned banks increase their chartered capital in the 2016-20 period so that the banks can meet Basel II capitalstandards by 2020.
Vietcombank,Vietinbank and BIDV are the three listed banks in which the State holds morethan 50 percent of the chartered capital. Currently, the banks do not meet theminimum Basel II requirement of 8 percent for capital adequacy.
However,the three banks have failed to increase their chartered capital despite repeatedefforts over the past few years. Raising their capital was tough for thesebanks as they could not use their profits for the purpose; profits would go forcash dividend payout, as required by the Ministry of Finance.
Lastyear, though at the annual general meetings (AGM) of Vietinbank and BIDV,dividend payout in shares was approved so that money could be used for capitalincrease, the Ministry of Finance insisted that the banks pay dividend in cash.
Thebanks had no choice but to follow the ministry’s orders, which helped the Statebudget earn a revenue of around 4 trillion VND (175.4 million USD).
Ifthis continues, as per a proposal circulated during the AGM season in April,the three banks will contribute a total of 6 trillion VND to the State budgetthrough dividend payout in cash in 2017.
However,because of the Government’s new regulations, banking expert Phan Minh Ngoc saidthe Ministry of Finance would not insist on cash dividend payout for the next fewyears. Of course, the banks could choose to pay dividends in cash if they makeprofits higher than the approved chartered capital increase.
Accordingto the National Assembly resolution on the 2016-20 economic restructuring plan,commercial banks will have equity capital under Basel II standards, in which atleast 12 to 15 commercial banks have applied Basel II successfully (above thestandard method) by 2020. Meanwhile, a Vietcombank Securities Company reportstates that the success or failure of the application of these new standardsdepends primarily on the three State-owned listed banks.
BaselII is a new, higher level for Vietnamese banks in accordance with Basel Accordsstandards set by the Basel Committee on Banking Supervision (BCBS). Theapplication is flexible to different countries but the overall spirit istighter regulations on banking operations.
Industryinsiders said that the Basel II application in Vietnam would be a challenge forlocal banks, however, it was a must as it is believed to be the best solutionto make Vietnamese banks healthier.-VNA
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