Early birds catch worm in bank capital law changes

Many Vietnamese banks are yet to raise their chartered capital to the levels required by law

The decree stated all banks were to have achieved a minimum chartered capital of VND3 trillion ($150 million) by the end of 2010. However, in late December 2010, the Vietnamese government gave a 12-month extension.

Although authorities have now extended the banks’ deadline to raise chartered capital, at least five local banks had already done so by the end of last year.

Among these were the local commercial banks HDBank, VietBank, DaiA Bank, Tien Phong Bank and Standard Chartered Bank. 

According to Tien Phong Bank, raising required chartered capital levels from VND2 trillion ($100 million) to VND3 trillion ($150 million) would provide additional funds for improving infrastructure, opening more branches nationwide and extending an increased number of loans to customers.

Tien Phong Bank’s capital raising was completed by the end of December, 2010 via issuing 100 million shares to existing shareholders.

According to Louis Taylor, general director of Standard Chartered Bank Vietnam, the bank had completed raising its chartered capital to VND3 trillion to meet the State Bank’s requirements.

“It does mean that the bank has the ability to grow our loan portfolio as we employ the new capital to help clients further their businesses,” said Taylor.

Meanwhile, Phan Dao Vu, general director of Bao Viet Bank revealed that the lender planned to lift its chartered capital up to requirement in 2011. “Our largest shareholder, Bao Viet Corporation, needs the approval of the government to invest more into banks,” said Vu.

Bao Viet Corporation is a state-owned enterprise and Nguyen Van Giau, the State Bank governor, said that the government had opted not to allow state-owned corporations to invest more cash in banks.

In a related move, on December 29, 2010, CMC Corporation, a local leading IT-telecom company announced its plan to withdraw their investment into BaoViet Bank.

CMC Corporation’s board of directors decided to sell their holding in the bank “at an appropriate time”. The corporation currently holds a 9.9 per cent stake in Bao Viet Bank’s VND1.5 trillion chartered capital.

Nguyen Thi Kim Thanh, head of Banking Development Institute said that end of 2011 would be the deadline for banks to meet capital requirement and “early birds get the worm”.

“Banks that have completed raising their capital prior to the deadline will have more cash for business. That is the advantage,” said Thanh.