Customers at an office of Vietcombank. (Photo: VNA)Currently, the big four, including BIDV, Vietcombank, Agribank andVietinBank, only hold more than 40% of the credit market share of the country’sbanking system, but over the years, especially in the past three years, thebanks have been a key force in supporting the economy to overcome thedifficulties caused by the COVID-19 pandemic and global economic uncertainties.
State-owned banks always take the lead in implementing incentivepolicies of the National Assembly, the Government and the State Bank of Vietnam(SBV) such as lowering interest rates and profits to support businesses, butthey themselves are facing difficulties in terms of capital.
According to Agribank’s Chairman Pham Duc An, at the current creditscale, Agribank is unable to ensure the minimum CAR to get higher credit growthdue to the low charter capital, which caused the bank to have a low creditgrowth in 2022 compared to the average rate of the banking system.
Increasing charter capital for Agribank is very urgent as onlywhen the minimum CAR is ensured for developing credit right from the beginningof 2023, Agribank has the resources to serve the capital needs of the economy,especially in rural areas, An noted, suggesting that the Government shouldadvance 6.75 trillion VND of charter capital for Agribank as an estimated planapproved by the National Assembly.
Nguyen Quoc Hung, General Secretary of the Vietnam BanksAssociation, also proposed the Government submit to the National Assembly toincrease Agribank’s charter capital in order to meet the regulated CAR. AsAgribank’s CAR is close to the allowed limit, the bank’s capital mobilisationand lending will be both restricted without a charter capital hike.
Despite having a proactive advantage over Agribank, the threeremaining State-owned banks still have to wait for the Government’s approval inorder to raise capital as expected. There are many potential risks for thethree banks as their CAR is currently just slightly above the regulatedminimum. Therefore, BIDV’s Chairman Phan Duc Tu requested the Government, theMinistry of Finance and the SBV continue allowing State-owned banks to usetheir after-tax profits after deducting funds in 2022 to increase chartercapital in a move to enhance their financial resources and ensure the CAR.
For Vietcombank, though the bank has taken many measures toincrease charter capital, its CAR is still very modest compared to itsdevelopment needs as well as international standards. The bank’s chairman PhamQuang Dung proposed the Government and the SBV continue to give priority to thecharter capital increase of State-owned banks.
Vietcombank is looking forward to soon being approved by the PrimeMinister to increase its charter capital from the retained profits in 2019 and2020 after deducting funds, which has been agreed by the SBV and the Ministryof Finance to submit to the Prime Minister. In 2023, Vietcombank plans to askthe SBV to submit to the bank’s general meeting of shareholders to further increaseits charter capital from all the remaining accumulated profits in 2021 and theprevious years.
As the Prime Minister, the SBV and the Ministry of Finance have sofar agreed on the proposal in principle, Vietcombank expects to receive supportfrom the Government, the SBV and relevant ministries in the process ofreporting, explaining and applying for approval of the proposal from the NationalAssembly, Vietcombank’s Chairman Pham Quang Dung said.
According to statistics, as of October 2022, the CAR of the State-ownedbanks was only 9.04%, much lower than that of other regional countries, such asthe Philippines (16.29%), Singapore (17.2%), Malaysia (18.3%), Thailand (19.3%)and Indonesia (23.3%). Moreover, many countries in the region have so farapplied Basel III, or a part of Basel III, while banks in Vietnam have mostlyimplemented Basel II. The low CAR will affect the credit supply of theState-owned banks, which will limit their support to businesses, especiallywhen the economy is facing many potential risks. Notably, if the shortcoming isprolonged, it will be difficult for State-owned banks to maintain theirdominant positions in the banking system.
A member of the National Financial and Monetary Policy AdvisoryCouncil also said it is necessary to increase charter capital for State-ownedbanks as sustainable banks will give the best support to the economy. ForAgribank, the priority of increasing capital is even more important because thebank mainly serves rural areas, which are key for the economy.
If Agribank is allowed to increase capital, it will provide alarge amount of cheap capital to the economy, helping millions of customersdevelop their businesses. When customers perform well, banks do businesseffectively, there will be good tax payments to the State.
A banking expert even said if considering the State budget as aninvestment, investing in State-owned banks will get the best return as theyhave been steadily profitable and annually contributed trillions of Vietnamese dong in tax to the State budget./.
VNA
