The Bank for Investment and Development of Viet Nam (BIDV) has recently issued 7-year and 12 year-bonds worth a total of VND580 billion (US$24.68 million) to increase capital.

The interest rate on 7-year bonds, which totalled VND500 billion, is floating and determined by the reference interest rate (the 12-month saving deposit rate of Agribank, Vietcombank, BIDV and VietinBank) plus 0.8 per cent per year.

Twelve-year bonds have a fixed interest rate of 7.7 per cent in the first seven years. After that time, the rate will rise to 8.2 per cent providing BIDV doesn’t repurchase the bonds.

These are all non-convertible bonds unsecured by property.

BIDV has so far this year made four bond issues totalling VND1.01 trillion ($42.97 million). The proceeds will be used to supplement BIDV’s capital and improve its financial capacity

Increasing capital is one of the most urgent tasks for banks at the moment, especially State-owned banks like BIDV, because if they cannot do so before 2020, their capital adequacy ratio (CAR) will fall below the minimum level stipulated by the State Bank of Viet Nam (SBV) and under Basel II norms – a set of banking laws and regulations issued by the Basel Committee on banking supervision to enhance competition and transparency in the banking system and make banks more resistant to market changes.

However, raising capital has not been easy as banks are struggling to find foreign investors while they are not allowed to hold on to dividends to increase capital, so some banks have decided to issue bonds. — VNS