The central bank has urged commercial banks to speed up the process of increasing chartered capital, because the Decree No 141 clearly stipulates that commercial banks must have at least three trillion dong by December 31, 2010. Also stated in the decree, the State Bank has the power to revoke the operation licenses of the credit institutions which have the chartered capital lower than the stipulated level.

Kien Long Bank, based in Kien Giang province, is operating with the chartered capital of one trillion dong and the network of 63 branches and transaction offices in 16 cities and provinces. Tran Hung Thinh, Chairman of Kien Long, said that the bank has made the applications for increasing capital to two trillion dong, and very soon it will be submitting the documents asking for the permission to increase capital to three trillion dong. “We are racing against time to fulfill the process of increasing capital to the required level,” Thinh said.

Some 30 commercial banks have chartered capital of less than three trillion dong, like Kien Long, and are also racing against the clock to increase capital, or they will see their banks get dissolved or merged into other banks.

If banks cannot show a strategy for increasing chartered capital to the required level by June 30, 2010, they will have to draw up by the plan to terminate their legal status in accordance to the current laws by September 30, 2010. Based on the plans, local branches of the State Bank of Vietnam will report to the Governor of the State Bank about the situation of the banks and suggest solutions to deal with the banks.

Deputy General Director of a joint stock bank, said that his bank, which covers the operation in just several provinces and cities, has the number of clients just equal to 1/10 of the number of clients of a state owned bank, and does not carry out high-risk activities (trading gold or foreign currencies), has become ‘short of breath’ when having to increase chartered capital as required.

There are many reasons that make banks go slowly in the process of increasing chartered capital but the most important is that bank shares once dropped by 50-70 percent in market prices because of which banks could not persuade investors to inject more money in the banks. In principle, banks can call for capital from other legal entities, including from state owned general corporations and economic groups.

However, in many cases, the state owned enterprises cannot pour more capital into the banks because of current regulations that the total investment capital in non-forte business fields must not be higher than 30 percent of their total capital.

Thoi bao Kinh te Vietnam quoted Vu Dinh Anh, Deputy Head of the Market and Price Research Institute under the Ministry of Finance as saying that by March 2010, 21 out of 39 joint stock banks had less than two trillion dong, 30 out of 39 banks had the capital below three trillion dong. Only nine out of 39 banks had had the chartered capital of above three trillion dong.

Source: Thoi bao Kinh te Vietnam