Banks seek time to comply

HA NOI — The Viet Nam Banking Association has asked the State Bank of Viet Nam to extend the deadline for commercial banks to comply with new regulations on capital adequacy ratios and other risk provision measures.

The banks have claimed that they need more time to restructrure their investment portfolios.

The capital adequacy ratio (CAR) reflects the capacity of the bank to meet time liabilities and manage credit and operational risks. It ensures that the bank has the capital to cushion potential losses, protecting depositors and creditors.

Under Circular No 13/2010/TT-NHNN issued by the State Bank in May 20, commercial banks are required to raise their CARs to a minimum of 9 per cent – an increase of 1 percentage point – effective October 1.

By late last week, however, 14 commercial banks had complained to the Viet Nam Banking Association (VNBA) that it would be very difficult for them to meet the target on time because of the current economic situation and the differing performances of credit institutions.

"It is not easy for small banks and a number of banks which depends on State budget funds," wrote the VNBA in a letter this week to the State Bank.

The VNBA has not released the names of the banks. However, partly-equitised Vietcombank sold 5 million shares to Eximbank in July to improve its equity and help increase its CAR.

Circular No13 also restricts commercial banks from using the non-term deposits made by economic institutions, the State, the social insurance fund or other organisations for commercial lending.

The VNBA said that such a regulation was unreasonable because these deposits accounted for about 15-20 per cent of total deposits. With another 20 per cent of total deposits required to be held in reserve for risk provision, this meant that at least 35 per cent of all deposits were kept idle and could not be put to profitable use by the banks, clearly an untenable position.

Finally, the regulation also sets a 250-per-cent risk coefficient for all loans secured by securities or real estate. The VNBA, in its letter, asked the central bank to clarify the types of loans in question rather than set a common, across-the-board standard.

Real estate with existing structures is a far different risk than property yet to be developed, so the coefficient should not be the same, the VNBA argued. — VNS