The SBV (State Bank of Vietnam) has reportedly received agreement from authorities on a proposal that will allow large state-owned commercial banks to retain their dividends or pay them in shares to increase capital.
In January, four Vietnamese state-owned banks – BIDV, VietinBank, Agribank and Vietcombank – had asked the government for permission to either retain their profits or pay dividends in shares rather than cash until 2020, to allow them to raise the capital needed to meet Basel II standards.
Banks in Vietnam have until 1 January 2020 to meet the Basel II CAR (capital adequacy ratio) of 8 percent.
But raising capital has been a struggle in recent years. Moody’s has said most Vietnamese banks will lack sufficient capital to meet the Basel II requirements, so raising capital would be a key focus for banks in 2019.
Vietnam’s banks have also been urging the government to lift foreign ownership limits to help them raise more capital.
Fitch Ratings estimates the Vietnamese banking system could face a capital shortfall of almost USD 20 billion, equal to 9 percent of GDP.
Under the SBV proposal, the BIDV, VietinBank, Agribank and Vietcombank will be allowed to retain dividends to increase their charter capital. The dividends would typically be paid towards the state budget.
The proposal still needs approval from the National Assembly, and will require existing regulations to be revised or for new resolution to be issued.