Vietnamese banks intensify capital raising activities as Basel II deadline looms

Lenders have been using retained earnings to lift CAR.

Vietnamese banks have been using retained earnings in an effort to raise chartered capital as the deadline for Basel II standards draws near, according to a report from VN Express.

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Banks are required to keep their capital adequacy ratio (CAR) from falling below the minimum level of at least 8% set by the State Bank of Vietnam, in compliance with Basel II standards. The requirement will kick into effect by 2020 when Basel II norms are applied to the banking system.

CAR is the percentage of a bank’s capital to its risk weighted assets and is often used as a metric to determine the stability of the financial system.

Just last month, the Vietnam Prosperity Joint Stock Commercial Bank (VPBank) and Military Commercial Joint Stock Bank (MBBank) received the green light from the central bank to raise their charter capital.

VPBank could raise it from the current $685.31m (VND15.7t) to $1.10b (VND25.3t) whilst MBBank was allowed to raise its charter capital to more than $942.84m (VND21.6t).

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Saigon Hanoi Commercial Joint Stock Bank beat the rest of the pack after issuing nearly 84m shares as dividend payouts and raising its capital to $523.80m (VND12t) earlier this year. Technobank has also moved to seek shareholder approval to increase its capital from $510.71m (VND11.7t) to $1.53b (VND35t).