Low CAR spells doom for state-owned banks

Specifically, recent statistics provided by the National Financial Supervision Commission (NFSC) presented a downward trend in the average CAR of the entire banking system from over 12% in 2016 to around 11% in 2017. Notably, financial statements provided by numerous state-owned financial institutions (FIs) showed an alarmingly low CAR of 9%. Despite the laudable efforts of maintaining credit growth stability (18-19%), nearly 20 FIs failed to reach the targeted CAR at the beginning of 2017 due to unsuccessful attempts of raising charter capital. Nguyen Van Thuy, deputy head of NFSC’s General Supervision Department, asserted, “Regardless of the 40% profit growth, there is little to prevent the pressure on state-owned commercial banks. Besides, in order to fit the Basel II requirements, banks must accelerate the plan to double their current charter capital.” Likewise, Nguyen Xuan Thanh, lecturer at Fulbright University Vietnam, noted, “By the end of 2019, Basel II will take effect, which will likely pose a great threat to state-owned commercial banks that have to double their charter capital in less than two years.” Additionally, a representative of Bao Viet Securities (BVSC) also highlighted that the charter capital augmentation would be the main task of state-owned commercial banks, especially Vietcombank, VietinBank, and BIDV, as well as seeking foreign strategic partners, mergers and acquisitions (M&A) opportunities, and paying dividends in the form of additional shares. However, such solutions must be approved beforehand by the Ministry of Finance as the well-being of the entire economy could be heavily impacted. In spite of…

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