All the four commercial banks with the state ownership of over 50% of registered capital are on track to meet the requirements on capital adequacy ratio (CAR) under Basel II standards in 2020, according to Deputy Prime Minister Vuong Dinh Hue.

Deputy Prime Minister Vuong Dinh Hue at the conference. Source: VGP.

By the end of 2020, all commercial banks are required to qualify for Basel II standards, a condition for local lenders to expand their respective credit growth limit and increase registered capital, the government portal quoted Hue as saying at a conference on December 30.

Hue expected the four major state-run banks, namely Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Bank for Investment and Development of Vietnam (BIDV), Joint Stock Commercial Bank for Foreign Trade of Vietnam (VietinBank), and Vietnam Bank for Agriculture and Rural Development (Agribank), to increase their registered capital in 2020.

As of present, the respective CAR of Vietcombank, BIDV, Vietinbank and Aribank is approaching the minimum requirement of around 8% for Basel II, while the total assets and outstanding loans at these four banks account for nearly 50% of the total in the country’s banking system.

In a government press conference in November, Nguyen Thi Hong, deputy governor of the country’s central bank, said without a permission to increase registered capital, these lenders would have to limit or even suspend lending.

This would cause negative impacts on the economy, as a major source for investment capital in Vietnam comes from banks’ credit.

To date, only 16 out of 38 local banks are able to meet the Basel II standards.

Among measures to help boost Vietnam’s economic performance in 2020, Deputy PM Hue said the government would soon adopt a sandbox approach for fintech in banking activities and cashless payment.

Hue was referring to a closed testing environment designed for experimenting new things, so that policy makers could monitor and draft suitable policies. 

Additionally, the government aims to raise the country’s business environment ranking by 10 places and to have one million enterprises by 2020, stated Hue.

Regarding Moody’s recent downgrade outlook rating for Vietnam, Hue said the government expects to enhance efficiency in public debt management, ensure timely debt payment and avoid negative impacts on Vietnam’s credibility.