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Small banks out on financial climb
The nation’s small commercial banks are struggling to raise their charter capital to 1 trillion VND (59.17 million USD) by the end of the year to meet new State Bank of Vietnam requirements or face closure.
Many of these banks have only recently transformed themselves from small rural credit institutions to urban commercial joint-stock banks and face nearly insurmountable hurdles raising additional capital during the global financial crisis.
Under Decree No 141, issued by the central bank in 2006, all commercial joint stock banks must have at least 1 trillion VND in charter capital by December 31, 2008, and 3 trillion VND by December 31, 2010.
As of early this month, according to State Bank data, nine banks had yet to comply with the requirement, including De Nhat Bank, Gia Dinh Bank, Pacific Bank, My Xuyen Bank, PG Bank, Kien Long Bank, Vietnam Thuong Tin Bank, Dai Tin Bank and Dai A Bank.
Collectively, the banks need to raise about 4 trillion VND in additional capital over the next 40 days, considered a tall order in times of tightening credit and shrinking pools of capital globally.
A number of banks, nevertheless, have sought to raise capital by selling shares to strategic partners, to existing shareholders or even to employees.
PG Bank will fulfill its goal to meet the new charter capital requirements with support from its two leading shareholders, the Vietnam National Petroleum Corporation (Petrolimex) and Saigon Securities Inc.
Kien Long Bank has plans to sell 42 million shares, with 40 million offered to existing shareholders and 2 million to bank employees, while Dai A Bank is preparing to sell shares to its existing shareholders.
But, cautioned Nguyen Huy Duong, a market analyst with Hoa Binh Securities, “issuing more shares to strategic partners, existing shareholders, and staff is a mission impossible for these banks at this time.”
Vu Duc Nghia, deputy director of Bien Viet Securities, agreed with Duong.
Finding foreign strategic partners might also be problematic at a time when many banking giants were suffering and Vietnam had begun to allow foreign banks to set up wholly-foreign invested banks.
Finally, a few financial industry observers said that mergers might be the only key to survival for some of these small banks.
Theoretically at least, nine of the current banks struggling to raise capital could recombine into four banks meeting the minimum capital requirement of 1 trillion VND.
VNA
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