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What will happen if banks do not have required capital?
Under the current regulations, all commercial banks must have a minimum chartered capital of three trillion dong by the end of 2010, which means that banks have only two weeks more to complete their capital increases. A question has been raised as to how the banks, which cannot raise their chartered capital before the deadline of December 31, will be treated.
It’s easy to use capital, but difficult to raise capital
To date, all commercial banks have submitted to the State Bank the plans to increase chartered capital to three trillion dong by the end of 2010. However, analysts still have doubts that the plans can be fulfilled. It is clear that some banks will not be able to find enough capital before the deadline.
By early December 2010, 23 banks still had not been able to find enough capital. An official from the State Securities Council revealed that the council has granted licenses to banks to sell stakes to raise funds, it is clear that many banks will still not be able to increase capital before the deadline, especially the banks that were issued licenses in November. It is estimated that there are at least 19 banks of this predicament.
Some banks have luckily wrapped up the process of increasing capital, including Dai Tin and Phuong Nam. Meanwhile, other banks are still busy issuing more shares to increase capital. Especially, some banks even “dream” of having two trillion dong only, instead of three trillion dong as requested, and still find the 2-trillion dong goal unattainable.
After the share sale in November, Nam Viet successfully sold 82 million shares which has helped it raise the chartered capital to 1.82 trillion dong. Gia Dinh Bank has increased its capital to two trillion dong since November 11, 2010, and Kien Long now also has two trillion dong in chartered capital.
Some other banks have just got the licenses to sell stakes to the public, including Tien Phong Bank which plans to sell 100 million shares at 10,000 dong per share, and Western Bank.
Meanwhile, though Bac A, De Nhat, and Vietbank have been approved by the State Bank for their plan to increase capital, they still do not have detailed plans. Analysts have every reason to doubt about the feasibility of increasing capital, especially when the stock market remains gloomy.
There is a persisting problem that while banks need more money to increase capital, their shareholders are trying to withdraw their investments. Bao Viet Bank’s shareholders have not made payments for the shares they registered to purchase. Meanwhile, a large shareholder of Navibank – Vinatex – the big textile and garment group, has decided to bid farewell to the bank. Prior to that, Vinatex, which held 11 percent of stakes at Gia Dinh Bank, also decided to withdraw its investments from the bank.
What will happen?
In fact, right in 2006, commercial banks already understood that they had to raise chartered capital to three trillion dong by the end of 2010. This means that they had a long time to prepare for this. Meanwhile, the State Bank stated many times that it will not make compromises and those banks, which cannot increase capital as requested will be “punished”.
However, a lawyer has pointed out that while the central bank threatens to punish violating banks, it does not clearly stipulate how it will punish.
Therefore, analysts think that the State Bank will “keep silent” to the banks which cannot increase capital to the required level. In the past, the central bank once also threatened that it would punish the banks which could not increase capital from one trillion dong to two trillion dong by the end of 2009. However, none of the banks suffered punishment.
Le Khac
vietnamnet
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