Central bank reviews CAR circular

HA NOI – The State Bank of Viet Nam yesterday announced it would review the capital adequacy ratio (CAR) regulations stated in Circular No13, following outcries in the banking sector.

The statement led to a rally on the stock market earlier today.

The review aims to thoroughly analyse the implementation of the circular, to discuss the CAR's shortcomings, and to balance the regulations.

The deadline for the circular's review has not been disclosed.

Last month, Prime Minister Nguyen Tan Dung told the SBV to analyse speculation concerning the circular and to report their findings and possible solutions before the new regulations come into effect on October 1.

Circular No13 requires commercial banks to raise their CAR by 1 per centage point to a minimum of 9 per cent. Banks are required to select specific types of investment capital according to the circular.

The media has reported that many commercial banks and the Viet Nam Banks Association have asked the central bank to extend the circular's deadline because the banks need more time to restructure their investment portfolios and management.

The circular also restricts banks use of non-term deposits from economic institutions, the State Treasury, the social insurance fund or commercial lending organisations.

Under the current regulation, banks have to keep at least 15 per cent of all deposits as reserves. If Circular No13 comes into effect, economists estimate banks will have to keep another 20 per cent, bringing the total deposit to be held idle in reserves as a provision against risk to 35 per cent. -VNS

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to be updated