Vietnam urges banks to merge, become more competitive

By Minh Son June 8, 2022 | 08:31 pm PT

An employee counts banknotes at a bank in Hanoi. Photo by VnExpress/Giang Huy

The Vietnamese government is urging banks to merge and increase their scale toward becoming more competitive. It wants to make Vietnam an ASEAN leader in the banking sector.

The government wants banks to have a capital adequacy ratio of at least 10-11 percent by 2023, and 11-12 percent by 2025, according to a recent plan to restructure credit organizations and handle bad debts during the 2021-2025 period.

The capital adequacy ratio is a measure of how much capital a bank has available to handle a certain amount of loss before facing the risks of becoming insolvent.

The government has said it wants Vietnam’s banking sector to become a top four leader in the ASEAN bloc. It has asked banks to make plans to increase their charter capital and improve their management.

Big banks should have a minimum charter capital of VND15 trillion by 2025, and small and medium banks, VND5 trillion, it said.

The government also wants banks to have a bad debt ratio of under 3 percent by 2025.

Vietnam has 31 domestic commercial banks, with the biggest in terms of charter capital being state-owned lenders BIDV, Vietinbank and Vietcombank, according to the State Bank of Vietnam.