An expert from the Vietnam Banking Association believes that some five commercial banks will not be able to increase their chartered capital to three trillion dong in 2010 as instructed.

The State Bank of Vietnam (SBV) has urged commercial banks to speed up the process of increasing chartered capital to three trillion dong many times. SBV stresses that banks lacking this capital will not be allowed to exist after December 31.

Truong Hoang Luong, General Director of Kien Long Bank, commented on the SBV decision by saying that a bigger bank does not mean a safer bank. The quality of services and the safety in operations can be shown in indices, while indices do not depend on the size of the bank.

Asia Commercial Bank (ACB) does not need to increase its chartered capital in 2010, because the bank already has much higher than the required level. ACB’s General Director Ly Xuan Hai agrees with Luong, however, that having high levels of chartered capital should not be considered a “must-have.”

“It is quite normal to have big and small banks in the market. Both have markets of their own. If there are no small banks, then how can we have big banks?” Hai queried. He recalled when ACB only had several hundreds of millions of dong in chartered capital, but the bank has developed strongly to become a big bank.

Truong Dinh Song, Deputy Head of the Legal Department of the Vietnam Banking Association, reported that, to date, 10 out of 23 banks have submitted plans to increase chartered capital to SBV. This means that 13 other banks still have no plan. Five are thought to be unable to increase chartered capital and meet the terms of Decree 141.

“This is a blunder of Decree 141. Imagine all the banks in Vietnam have the same minimum chartered capital. This does not fit their corporate governance capability,” Song complained.

According to Song, forcing commercial banks to raise chartered capital to 3 trillion dong , means that banks must bear a duty that is double their capability. Banks need to be put in the right position. Rural banks should be put in rural areas, and yet they have been forced to become urban banks.

Song remarked that, in other countries, there are regional banks, state’s banks and national banks. In Vietnam, all banks are urban, and all are ‘multifunctional and modern’, while they are still not capable of becoming modern banks.

Searching for capital

Some banks have wisely moved to increase their chartered capital gradually and obtain the three trillion dong by the end of 2010. SHB Bank began implementing its plan to increase chartered capital immediately after Decree 141 was enacted. In early June 2010, SHB offered to sell 150 million shares to the public to increase chartered capital from 2000 billion dong to 3500 billion dong. Prior to that, SHB successfully sold 15 million convertible shares worth 1500 billion dong.

Kien Long Bank on June 11 successfully issued 1000 billion worth of stocks to existing shareholders to increase its chartered capital to 2000 billion dong. It plans to issue another 1000 billion dong in stocks by the end of 2010 to raise its capital to 3 trillion dong.

Meanwhile, other commercial banks are mired in difficulties. They cannot persuade investors to inject money at this moment, when the golden age of bank stocks is over. Previously, every legal entity and individual could make 15 percent and 10 percent capital contribution to a bank. Under the new laws, the figures have been lowered to 10 and five percent.

“What will happen if all the 23 commercial banks issue shares on the market to increase capital? The bank share prices will go down and the difficulties will expand,” Song concluded.

Rol.vn - Source: Vietnam Net