The Government’s recent decision on the restructuring of credit institutions ensures that State-owned banks listed on the market no longer have to worry about dividend payout in cash. (Photo: vietnambiz.vn)
Hanoi (VNA) – The Government’s recent decision
on the restructuring of credit institutions ensures that State-owned banks
listed on the market no longer have to worry about dividend payout in cash,
experts said.
Under
Decision 1058/QD-TTg issued last week, the Government required the Ministry of
Finance, in conjunction with the State Bank of Vietnam and the Ministry of
Planning and Investment, to help State-owned banks increase their chartered capital in the 2016-20 period so that the banks can meet Basel II capital
standards by 2020.
Vietcombank,
Vietinbank and BIDV are the three listed banks in which the State holds more
than 50 percent of the chartered capital. Currently, the banks do not meet the
minimum Basel II requirement of 8 percent for capital adequacy.
However,
the three banks have failed to increase their chartered capital despite repeated
efforts over the past few years. Raising their capital was tough for these
banks as they could not use their profits for the purpose; profits would go for
cash dividend payout, as required by the Ministry of Finance.
Last
year, though at the annual general meetings (AGM) of Vietinbank and BIDV,
dividend payout in shares was approved so that money could be used for capital
increase, the Ministry of Finance insisted that the banks pay dividend in cash.
The
banks had no choice but to follow the ministry’s orders, which helped the State
budget earn a revenue of around 4 trillion VND (175.4 million USD).
If
this continues, as per a proposal circulated during the AGM season in April,
the three banks will contribute a total of 6 trillion VND to the State budget
through dividend payout in cash in 2017.
However,
because of the Government’s new regulations, banking expert Phan Minh Ngoc said
the Ministry of Finance would not insist on cash dividend payout for the next few
years. Of course, the banks could choose to pay dividends in cash if they make
profits higher than the approved chartered capital increase.
According
to the National Assembly resolution on the 2016-20 economic restructuring plan,
commercial banks will have equity capital under Basel II standards, in which at
least 12 to 15 commercial banks have applied Basel II successfully (above the
standard method) by 2020. Meanwhile, a Vietcombank Securities Company report
states that the success or failure of the application of these new standards
depends primarily on the three State-owned listed banks.
Basel
II is a new, higher level for Vietnamese banks in accordance with Basel Accords
standards set by the Basel Committee on Banking Supervision (BCBS). The
application is flexible to different countries but the overall spirit is
tighter regulations on banking operations.
Industry
insiders said that the Basel II application in Vietnam would be a challenge for
local banks, however, it was a must as it is believed to be the best solution
to make Vietnamese banks healthier.-VNA