The bank has sharply increased its charter capital; it is still difficult for businesses to access credit

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On-balance sheet bad debt of the banking system by the end of July 2022 was 1.7%. Photo: Internet

A plan to raise capital for the "Big 4" is being submitted

A report has just been sent to the National Assembly's Economic Committee, the SBV said that the SBV has directed four state-owned commercial banks to implement plans to supplement charter capital to improve financial capacity.

Accordingly, by the end of July 2022, the charter capital of the "Big 4" group is that Agribank, Vietcombank, VietinBank, BIDV reached VND180.3 trillion; total assets reached VND7,060.3 trillion; capital mobilization market reached VND5,618.2 trillion; outstanding loans to market reached VND5,151.4 trillion.

Agribank has been granted an additional VND3,500 billion of charter capital. VietinBank paid stock dividends to increase its charter capital by VND10,824 billion after the plan was approved by the Prime Minister. Vietcombank has been approved by the Prime Minister to invest in additional state capital through the issuance of shares to pay dividends from the remaining profit in 2019; the total additional charter capital is VND10,237 billion. BIDV has been approved by the Prime Minister to invest in additional state capital through paying dividends from the remaining profit for the 2018-2020 period; the total additional charter capital is VND10,365 billion.

Therefore, the State Bank is currently coordinating with relevant ministries and branches to consider and submit to the competent authorities for approval of the plan to increase charter capital for Agribank from the state budget.

Regarding the increase of charter capital of BIDV, Vietcombank, VietinBank, the State Bank of Vietnam said that it has sent a written request to the Ministry of Finance to consider and comment on the distribution of profits in 2021 as a basis for submission to the competent authorities for considering the increase of charter capital for these banks.

According to the report of the State Bank of Vietnam, the charter capital of state-owned commercial banks increased much slower than that of joint-stock commercial banks, affecting the role of market leader, key role, and leading role of the whole system.

Regarding the group of joint-stock commercial banks, according to the SBV, the banks of this group basically followed the approved plan, focusing on consolidating and comprehensively correcting all aspects of finance, governance, handling bad debts, strengthening control measures to improve credit quality, business efficiency and competitiveness, and enhance transparency in operations.

In 2022, the State Bank of Vietnam issued a written approval to increase charter capital for 15 joint-stock commercial banks, in which, the increase in the charter capital of these banks was mainly from the bank's equity (retained earnings and reserves).

As a result, by the end of July 2022, the charter capital of joint stock commercial banks reached VND416.9 trillion; total assets reached VND7,488.2 trillion; capital mobilization from market reached VND5,513.4 trillion; outstanding loans to market reached VND4,686.6 trillion.

For weak banks with compulsory purchase, the State Bank has been directing these banks to urgently complete the restructuring plan, and continue to coordinate with relevant ministries and agencies in implementing the order and procedures as prescribed by law.

Enterprises still have many difficulties in accessing capital

Regarding the credit quality of the banking system, the State Bank's report said that from 2012 to the end of July 2022, the whole system of credit institutions handled about VND1,449.8 trillion of bad debt; In the first 7 months of 2022 alone, about VND88.1 trillion of bad debts were handled.

The credit institutions handled themselves at a high level (accounting for 82.6% of the total bad debts handled). The self-handling of bad debts is mainly done through the use of risk provisions and debt repayment by customers. Particularly for bad debt handling according to Resolution 42, accumulated from August 15, 2017 to July 31, 2022, the whole system of credit institutions has handled VND399.7 trillion of bad debts.

In addition, by the end of June 2022, the ratio of short-term funds used for medium and long-term loans of the entire credit institution system was 25.08%. According to the State Bank of Vietnam, credit institutions basically meet this regulation, except for some weak and specially controlled credit institutions.

According to the report of the State Bank, enterprises still have many difficulties in accessing bank credit despite enjoying many supportive policies of the banking industry.

The reason is that businesses are heavily affected by the prolonged Covid-19 pandemic, causing business results to decline, a large number of businesses have to stop operating, potentially posing a risk of bad debt for the system. New business plans to restore production and business to depend on many factors of the market, market development policies of industries but are not sustainable.

For small and medium-sized enterprises, the difficulty in accessing bank credit is even more difficult due to internal reasons of small and medium-sized enterprises such as collateral assets have low value, transparency of business activities is limited, poor management level. Mechanisms to support access to capital through guarantees of the Credit Guarantee Fund and the Small and Medium Enterprise Development Fund have not met expectations.