On March 1, the Military Bank (MB) announced the information that its credit rating was upgraded by Fitch Ratings.
Accordingly, Fitch raised MB’s credit rating but kept the rating of Asia Commercial Bank (ACB), Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Bank for Industry and Trade (Vietinbank), and Vietnam Bank for Agriculture and Rural Development (Agribank) unchanged.
As a result, Vietnamese commercial banks now have different levels, aspects and assessment criteria that are periodically ranked and re-evaluated by international organisations.
Annually, these organisations update rating results, either in groups or individually. The market also looks at the performance of banks in such assessment aspect.
Basel 2 is currently the highest and most common standards that Vietnamese commercial banks are aiming at.
Basel 2 requirements have been set in Vietnam for many years now and 10 pilot members were identified since 2015.
Officially, Orient Commercial Bank (OCB) is the only bank to have announced the completion of Basel 2.
A leader of Vietnam Prosperity Bank (VPBank) recently said that the bank has applied Basel 2 standards in operations over the last one year, but still hesitated to announce because if the announcement may cause misunderstanding among customers and investors as Basel 2 standards are not on the same scale as the current system, and the convexity of data can be misleading.
For example, banks now have the Capital Adequacy Ratio (CAR) at 12 percent, much higher than the minimum ratio of nine percent as prescribed by the State Bank. Based on Basel 2, that percentage is reduced to about 10-10.5 percent, which could be mistaken as “inferior” to other non-applicable members if it is publicised.
Or a leader of Vietnam Technical and Commercial Bank (Techcombank) also said the bank successfully carried out Basel 2 model since the end of 2016 and has started to run since 2017, especially after the final settlement of bad debts that have been sold to Vietnam Asset Management Company (VAMC) since mid-2017.
Clearing all the bad debt at VAMC and data inclusion is a challenge for most commercial banks now before taking into account the comprehensive implementation of Basel 2. Currently, only some members such as Vietcombank, Techcombank, MB, etc. have completed this.
For Vietcombank, the model has been ready, projects have been prepared, and the bank is the first member to clear out bad debt at VAMC, but it still needs to continue strengthening the CAR.
The obstacle to ensure the compliance of CAR following Basel 2 standards is also the common practice at state-owned commercial banks (Vietcombank, BIDV, Vietinbank and Agribank) because this group has not been able to raise chartered capital over the last three years, while still having to strengthen the credit expansion, serving the annual economic growth target.
Leader of Vietcombank said the plan to issue shares to foreign investors to raise capital is expected to be carried out in the first half of this year.
Recently, the market also noted that Korean investors are promoting investment plans, thereby opening up the possibility that BIDV may also increase capital.
Vietinbank’s measure will have to wait till the annual general meeting in this April. Meanwhile, Agribank has not equitised, so it will have to wait to see whether the State Budget will provide additional capital or not.
The aforementioned banks are members in the group of the first 10 Vietnamese commercial banks to pilot Basel 2 two years ago. But so far, besides limiting the increase in capital in some cases, some members have had large change in health situation compared to the previous period. Even there must have mechanism to support restructuring.
It is expected that until 2020 Vietnam can have a broader and more comprehensive assessments about final results of members who can fully carry out Basel 2.
