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Is there a wave of bank mergers to meet BASEL 2 standards?

Is there a wave of bank mergers to meet BASEL 2 standards?

Wednesday 16, 10 2019
As planned, Basel II will be applied to 10 Vietnamese piloted banks earlier this year. However, Recently, the State Bank of Vietnam (SBV) has decided to delay the deadline until the end of 2020 because only two banks meet the Basel II’s needs.
Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. Basel II attempted to accomplish this by establishing risk and capital management requirements to ensure that a bank has adequate capital for the risk the bank exposes itself to through its lending, investment and trading activities. One focus was to maintain sufficient consistency of regulations so to limit competitive inequality amongst internationally active banks.
 
As planned, Basel II will be applied to 10 Vietnamese piloted banks earlier this year. However, Recently, the State Bank of Vietnam (SBV) has decided to delay the deadline until the end of 2020 because only two banks meet the Basel II’s needs.
 
What is the difficulty for banks to reach the Basel International Standard?
 
One of the most important criteria is the clean and quality data system. VPBank spent three years digitizing raw data and collecting from new platforms such as social networking.
 
The next one is Capital Adequacy Ratio (CAR). At present, this ratio of Vietnam banking system is over 12%, but according to the Basel II, this ratio is just over 8%. Therefore banks need to increase their own capital, but this is not easy. For example, VIB had to undergo a capital increase route during the past two years before reporting to SBV about reaching the standard.
 
Vietcombank was the first state-owned commercial bank to meet Basel II standards but with credit growth of over 11% in the first half of 2018, VCB also need to raise its own capital to maintain this standard. The bank now has more than 10% share to sell to strategic partners, but the market price of more than 62,000 VND per share is a strong barrier for this plan.
 
Vietinbank can not raise capital by selling shares, because the state ownership ratio is 64.46%, lower than the allowed level of 65%. Moreover, according to the state budget law, state-owned commercial banks must pay dividends in cash without dividing into shares and not be allowed to issue shares to existing shareholders.
 
"Maybe that bank will have to do mergers and acquisitions with another bank with information technology systems, databases and standardized Basel II systems at stronger levels. This integration will also make the process of meeting the Basel II standards of the Vietnamese banking system be faster and more feasible. "- Mr. Can Van Luc - National Financial and Monetary Policy Advisory Council.
 
By 2020, there will be at least 12 to 15 banks meeting Basel II standards, and by 2025 100% of credit institutions will have to comply with this standard.
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Financial News

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