The Government would continue to encourage banks to pursue M&A deals in the sector to enhance competitiveness and sizes of operation.

A customer at a VPBank's branch in Hanoi. Photo: The Hanoi Times

The move was part of the Government’s project for restructuring credit institutions and addressing bad debts during the 2021-2025 period that was signed off by Deputy Prime Minister Le Minh Khai.

The main objective of the project is to ensure all banks adopting the Basel II standards have a capital adequacy ratio (CAR) of at least 10-11% by 2023, and eventually to 11-12% by 2025.

“This would help Vietnam’s banking sector further narrow the development gap with ASEAN-4 [Singapore, Thailand, Malaysia, and the Philippines],” the Government noted.

To reach these targets, the Government called for banks to take measures to increase charter capital and CAR, along with higher corporate governance capability of international standards.

Based on supervision data and assessment from independent auditing firms, banks, and financial companies would be divided into three groups, including banks with high financial muscles; mid-size banks; and weak banks with high risks.

By 2025, those of large scale should have their respective charter capital of at least VND15 trillion ($647 million), mid-size of VND5 trillion ($215.6 million), and financial companies of VND750 billion ($32.3 million).

Meanwhile, weak banks are required to undergo a restructuring process and raise working capital, along with strict supervision from competent authorities to timely address any potential risks in operation.

The Government expects banks to assess their bad debt situation and the probability of recovering debts. The goal is to ensure the bad debt ratio in the banking sector stays below 3% by late 2025 (excluding that of weak banks).