Some banks can't meet higher capital requirement

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A Vietnam Bank Association analyst predicted that five commercial banks will not be able to raise enough funds this year to meet the higher capital requirements set by the government.

Commercial banks have been asked to raise their capital to at least VND3 trillion (US$158.7 million) by the end of this year, triple the current minimum. The central bank said the measure is aimed at ensuring the safety of financial institutions.

Only ten out of 23 banks that need to increase their capital have submitted plans to the central bank, said Truong Dinh Song, deputy head of VBA's law department in a Vietnam Economic Times report Tuesday .

Five of the remaining banks are unlikely to meet the new requirement, Song said, without giving their names. If the forecast is correct, these banks may be forced to merge.

Song said it's wrong to impose the new capital requirement because "it's not reasonable for all banks to have the same capital levels irrespective of their management capabilities."

The new requirement means that several small banks will be forced to "carry a much heavier load than they can," he said, warning that it could lead them to a crisis.

Ly Xuan Hai, general director of Asia Commercial Bank, said there must be banks of all sizes in a market.  Each of them has it's own market segment, he added. 

Large banks all begin as small banks, he said, noting that it took a long time for his bank to grow into the large bank it is now.

Experts also said it would not be easy for banks to raise capital by issuing shares this year as the stock market is stagnant.

Song warned that if all 23 banks issue shares at once, bank stocks will fall sharply, making it even harder for banks to increase their capital.

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