Is the banking system healthy?

17-Oct-2020 Intellasia | VnEconomy | 6:02 AM Print This Post

The government has submitted a report to the National Assembly (NA) about the implementation of the NA’s Resolution on topical supervision and question and answer activities in the 14th term and some resolutions in the NA’s 13th term related to the banking industry.

Supplementing financial health for the Big4 banks

The report assessed that state-owned banks with more than 50 percent of state ownership (not including the three banks compulsorily acquired by the State) continued to play the important role in the system of credit institutions (CIs), actively participate in supporting and handling of weak CIs.

By the end of August 2020, the charter capital of four state-owned banks (Big4) including Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank), Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) and Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) reached 145.2 trillion dong, accounting for 23.1 percent of the entire system, up by 6.3 percent compared to the end of 2016. The total assets of this group were 5.334,4 trillion dong, accounting for 41.3 percent of the whole system, up by 40.2 percent compared to the end of 2016.

In order to strengthen the financial capacity of banks, ensure compliance with the regulations on minimum capital adequacy ratio (CAR) under the Basel II capital standards (standard method), the State Bank of Vietnam (SBV) has actively directed these banks to synchronously carry out measures to offset the capital shortage.

Based on the very urgent need to increase capital of state-owned commercial banks, on the basis of agreement with relevant industries (Ministry of Finance, Ministry of Planning and Investment, and Ministry of Justice), the SBV has reported the competent authorities on the plan to increase charter capital for state-owned commercial banks.

Particularly, the content related to the capital increase of Agribank from the state budget was approved by the NA and included in the Resolution no.122/2020/QH14 of the 9th session of the 14th NA. The SBV is currently coordinating with the Ministry of Finance to fully carry out procedures for supplementing charter capital for Agribank from the state budget in accordance with the Law on management and use of state capital invested in production and business at enterprises and Decree 91/2015/ND-CP.

At the same time, the SBV is directing state-owned commercial banks to develop a capital increase plan for the 2021 2026 period, which identifies the need to increase capital and propose solutions for increasing capital, including the state capital source.

According to the SBV, banks have focused on comprehensively consolidating and reorganising the financial and governance aspects, bad debt handling, strengthening control measures to improve credit quality, business efficiency and enhancing competitiveness. As of August 2020, the charter capital of private joint stock banks was 290.1 trillion dong, accounting for 46.1 percent of the entire system, up by 44.4 percent compared to the end of 2016; while the total assets were 5.467,7 trillion dong, accounting for 42.3 percent of the entire system, up by 59.7 percent compared to the end of 2016.

For the three banks that were compulsorily acquired by the SBV and Dong A Commercial Joint Stock Bank (DAB), on the basis of the guidelines and orientations of the competent authorities and legal basis, the SBV has focused on directing these three banks and DAB to build and complete the restructuring plan/ recovery plan, proactively an actively seek partners, negotiate with domestic and foreign investors that expect to join the restructuring process.

In addition, the SBV has actively directed the above three banks to rearrange operation networks, reduce costs, carry out safe business operations, etc. on a drastic, cautious and tight principle. On that basis, the SBV has reported to the competent authorities the plan to deal with the three above banks and DAB.

Thanks to the implementation of drastic and synchronous solutions, the restructuring of CI system and bad debt settlement have achieved positive results. Specifically, the scale of the system of CIs has continued to increase, reaching 12,930 trillion dong in total assets by late August 2020, up by 52.1 percent compared to the end of 2016.

The financial capacity of CIs has also been strengthened with charter capital of the entire system reaching 629.1 trillion dong, up by 28.8 percent compared to the end of 2016. The equity of the system was 1.007,7 trillion dong, up by 69.4$ compared to the end of 2016.

Up to now, most banks have met international practices on capital adequacy according to the Basel II standards. The awareness in risk management and information transparency has also been paid more attention.

However, there is still a cross-ownership case in the system of Asia Commercial Joint Stock Bank (ACB) and Hoa Phat A Chau Real Estate Joint Stock Company. In which, the ownership rate of ACB at Hoa Phat A Chau company is 2.86 percent and the ownership rate of the company at ACB is 0.042%.


Category: Finance, Vietnam

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