State-owned Vietcombank and Vietnam International Bank (VIB) will be granted higher credit growth rates than those of other commercial banks from the beginning of 2019, said Governor of the State Bank Le Minh Hung.

The statement was released after the State Bank of Viet Nam (SBV) agreed to allow the two major banks of Việt Nam to officially apply the Basel II minimum capital adequacy ratio requirement standards on Wednesday, more than one year earlier than the deadline initially set by the central bank.

The deadline was set by SBV in Circular No 41/2016/TT-NHNN on regulating capital adequacy ratios for banks, with the initial deadline of January 1, 2020.

Basel II is the second edition of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on banking supervision. Basel II comprises minimum capital requirements, supervisory review and market discipline. It aims to enhance competition and transparency in the banking system and make banks more resistant to market changes.

“We will have different levels of credit growth for different banks,” said Hung. “Banks meeting Circular 41, such as VIB and Vietcombank, will have different rates that will be higher than the rest.”

The central bank released a roadmap and a concrete plan for Basel II implementation in Viet Nam in 2013 following the Government’s project on restructuring credit institutions in the 2011-15 period, under which 10 commercial banks were selected to pilot the Basel II standards, including Vietcombank and VIB.

To date, Vietcombank and VIB are the only two banks to join the pilot scheme successfully. They have been assigned credit growth rates of 15 per cent and 14 per cent, respectively.

Hưng said he appreciated the first two banks to apply the standards ahead of time, marking the banking sector’s efforts in recent years to meet international standards in Viet Nam.

Hưng said he expected the two banks would continue to focus their resources on implementing the SBV’s regulations and improving governance and administration efficiency.

With determination to achieve the goals set by the National Assembly and the Government, Hưng urged other banks to complete dossiers and register with the central bank to apply the Basel II standards before the deadline.

“The SBV will always support banks to operate safely and efficiently adhere to international standards,” said Hưng.

VIB Director General Han Ngoc Vu suggested the SBV should have policies to incentivise commercial banks to quickly apply the Basel II standards following the circular.

Vu said his bank had started internally monitoring the adequacy of capital following the standards in Circular 41 on April 30 this year. On July 31, it sent a letter to the SBV Governor asking to apply the circular.

“The application of Circular 41 is seen as beneficial to every bank and the banking system as a whole in terms of risk management, operation and making the system more transparent,” said Vu. “The SBV should require commercial banks to quickly apply Circular 41 on capital adequacy rights in 2019 and implement the banking restructuring scheme associated with resolving bad debt.”

He suggested there should be incentives that encourage banks to apply Basel II standards on credit growth targets.

According to Vu, banks should be assigned a "dynamic" target whereby they manage their credit growth rates themselves in line with their ability to meet capital requirements and standards as set out by the circular.

He also proposed an incentive mechanism for network extension. Banks that apply Basel II soon will be permitted to expand to 15 branches in the inner city of Hanoi or HCM City from the 10 they are currently allowed, provided they meet capital requirements set by Circular 21 on the operation networks of commercial banks.

"I think the management of growth indicators, including credit growth and operational networks, will reduce administrative management, encouraging banks to raise capital and attracting investors,” said Vu.

It will also resolve all non-performing loans (NPLs) at VAMC, contributing to the completion of the banking restructuring programme approved by the National Assembly and the Government.

Governor Hung said the SBV would consider licencing network expansions for banks that meet Circular 41’s requirements in a timely manner.

“The SBV will encourage banks to adopt Basel II, but also demand high standards,” said Hung. “If banks are found to violate the circular, the SBV will have to sanction these banks.”

“We take this approach because we want to create positive conditions for banks but we must also show responsibility for the SBV,” added the Governor. — VNS