Government urges bank mergers, acquisitions

The government encourages banks to voluntarily purchase, sell, consolidate, and merge to expand their scale, spectrum of operation, and competitiveness during the 2021-2025 period, under a new restructuring program.

The information is part of the government’s project on restructuring credit institutions associated with bad debt settlement in the 2021-2025 period, recently signed by Deputy Prime Minister Le Minh Khai.

The project will use advanced methods to pilot Basel II standards, with goals of obtaining the pilot banks’ capital adequacy ratio (CAR) of at least 10-11% by 2023, and 11-12 % by 2025, reaching the development level of ASEAN's four leading countries.

It outlines several solutions for credit institution restructure. Of this, banks are required to execute relevant remedies, such as raising charter capital, CAR, and strengthening governance and operational capacity.

Based on independent auditor monitoring and evaluation, banks and financial institutions will be classified into three groups, including those large-scale and financially-strong, small and medium-sized entities, and weak organizations with multiple potential risks.

In particular, large-scale, financially-strong banks must reach a minimum charter capital of VND15,000 billion ($647 million) by 2025. Small and medium-sized or foreign-invested banks need a minimum of VND5,000 billion ($215.6 million). The requirement will be VND750 billion ($32.3 million) for financial companies, according to the project.

Meanwhile, weak organizations must restructure and enhance charter capital with the consent of relevant authorities, as well as strengthen internal inspection and control to promptly detect, prevent, and manage risks.

This aims to reduce the ratio of bad debts on the balance sheet, unresolved bad debt sold to Vietnam Asset Management Company, and potential debt to less than 3% by the end of 2025 (excluding weak banks).

During the National Assembly's question-and-answer session on Wednesday, State Bank Governor Nguyen Thi Hong stated that there is a plan to deal with "zero-VND banks". These are banks with negative chartered capital that are subject to compulsory purchase by the central bank at the price of zero dong.

In the latest report to the National Assembly's Standing Committee, the government stated that it had undertaken several methods to deal with three banks under compulsory acquisition, including CBBank, OceanBank, GPBank, and Dong A Bank. The measures include seeking partners, negotiating with investors interested in participating in the bank's restructuring, rearranging the operational network, cutting expenses, and establishing safe business practices.