Local banks pushed to cash in during 2008

Governmental decree No.141 covering chartered capital levels of credit institutions in Vietnam forces all joint stocks, joint venture and foreign invested banks to have a chartered  capital of VND1 trillion by 2008 and VND3 trillion by 2010. Those institutions that do not satisfy the demands of the roadmap may lose their license.  

State-owned commercial banks also have to reach a chartered capital level of VND3 trillion by 2008. Joint stock commercial banks may face difficulties in mobilizing capital as their state-owned counterparts will receive additional funding from the government.  However, in response to the decree a number of joint stock banks plan to increase their current level of chartered capital to VND1 trilion by the end of this year.

The G-Bank, formerly the Ninh Binh bank, plans to increase its chartered capital of VND500 billion to VND1 trillion next year as part of its change of focus from rural to urban areas.  

The country largest joint stock commercial Sacombank has also registered additional shares issue to raise its registered capital to VND2 trillion, well on its way to meet the 2010 target.  

VP Bank, the country sixth largest joint stock bank, which recently sold shares to Singapore OCBC, plans to increase its capital to VND2 trillion next year and VND3 trillion by 2008. Le Dac Son, general director of VPBank, said the increase was necessary for  the banks to strengthen their financial capability and survive the new economic climate.  

Kieu Huu Dung, director of bank and non-credit institutions department under the central bank, said locating new capital sources was not a problem for the local bank as the financial market is opening further to both local and foreign investors.  

The roadmap is quite feasible as half of the banks can [already] satisfy the [decree] demand for the first phase of increasing chartered capital.  However, merging will be a harder decision [made] by some banks facing difficulties in mobilizing capital from investors, said Dung.

The problem is whether the government allows openings for foreign investors to contribute [capital] into local banks in the future, he added.

Source: Vietnam Investment Review No.  790/December 4-10, 2006