Vietnam will extend the deadline for banks to raise registered capital by one year to ease pressure on banks having difficulty meeting higher requirements.
Prime Minister Nguyen Tan Dung has approved the proposal requiring local lenders to raise registered capital levels to 3 trillion dong ($153.9 million), by Dec. 31, 2011, the State Bank of Vietnam said on its web site Tuesday.
Some of the nation's banks have had difficulty raising capital amid a 20 percent decline in the country's benchmark stock index since the central bank's mandate was issued four years ago. A reduction in state-owned companies' stakes in banks has also hurt lenders' ability to raise capital, Duong Quoc Anh, chief inspector of the central bank, said in the statement.
"Numerous lenders were trying to raise capital at the same time, making bank stocks no longer attractive to both foreign and domestic investors," Anh said.
The government issued a decree on Nov. 22, 2006, requiring banks to raise their registered capital to 3 trillion dong by Dec. 31, 2010. The deadline extension spurred speculation that the move may help bring interest rates down and boost the country's stock market.
"Because banks no longer have the pressure to scale up, they won't have to increase interest rates to attract deposits. Consequently, interest rates will fall," said Tong Minh Tuan, deputy head of research at Hanoi-based BIDV Securities Co. "Lower rates will bring down borrowing costs for companies, boosting their stocks and bolstering money flow into the market."
The VN Index dropped 0.1 percent to 489.65 Tuesday at the 11 a.m. close of the Ho Chi Minh City Stock Exchange, after jumping 3.6 percent yesterday, the biggest advance since Jan. 4.