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Official Gazette

Monday, August 15, 2022

Nation strives for effective restructuring of credit institution system

Updated: 08:00’ - 05/07/2022
By 2025, Vietnam will have two or three commercial banks joining the top 100 powerful commercial banks in Asia, according to Prime Minister Decision 689/QD-TTg, approving the Scheme on restructuring of credit institutions associated with non-performing loan settlement for the 2021-25 period.

The Scheme is expected to create a thorough change in restructuring of the credit institution system associated with non-performing loan settlement. It sets forth the target that by 2025 the total number of credit institutions will be reduced, weak banks will be permitted to terminate their operation, no more banks will fall into the group of weak ones, and the credit institution system will develop in a more sustainable manner.

By the end of 2025, it is targeted to apply Basel II standards by the advanced approach to commercial banks where the State holds dominant shares and joint-stock commercial banks with good governance that have completed the application of Basel II standards by the standardized approach.

Meanwhile, the capital adequacy ratio (CAR) of commercial banks will reach at least 10-11 percent by 2023, and at least 11-12 percent by 2025.

Credit institutions will be required to secure their law-specified charter capital by 2025. As for operating credit institutions, the charter capital of at least VND 15 trillion is required for the group of large-scale domestic commercial banks with financial potential and competitiveness, or VND 5 trillion for small- and medium-sized commercial banks and foreign-invested commercial banks.

For financial companies and financial leasing companies, the minimum charter capital is VND 750 billion and VND 450 billion, respectively.

For weak credit institutions and those subject to special control or having to implement the restructuring plans approved by competent authorities, capital increase plans must be approved by such competent authorities.

Besides, the rates of on-balance-sheet bad debts, bad debts sold to the Vietnam Asset Management Company (VAMC) that remain unsettled or irrecoverable, or debts likely to become bad debts of credit institutions must be kept at below 3 percent.

The Scheme also encourages the acquisition, consolidation and merger of credit institutions on a voluntary basis to scale up and expand their operation and improve their competitiveness.- (VLLF)

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