Draft Regulation to Impose Strict Measures on Vietnam’s Commercial Joint-Stock Banks

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Oct. 8 – The State Bank of Vietnam released a new draft regulation that would impose stricter measures for establishing commercial joint-stock banks.

This serves the purpose of regulating the stability of the local banking system.

New banks are now required to have a charter capital of VND3 trillion while existing joint-stock banks must have at least VND1 trillion in charter capital by the year's end.

“ The message is clear. That is, to limit weak banks from joining the local market amid increasing concerns about the spreading global-economic turmoil,” Vo Tri Thanh, director of the Department for Trade Policy and International Economic Integration Studies under the Central Institute for Economic management (CIEM), told Vietnam News.

In addition, a new bank should have a minimum of 100 shareholders with each institutional founding shareholder placing equity of at least VND500 billion.

An institution that wants to partner with a new bank must have successfully operated its own business for three consecutive years before application.

“Such capital regulations are really strict, but good,” said Nguyen Thanh Toai, Deputy General Director of Asia Commercial Bank told Vietnam News.

Following current rules, each bank that to become a founding shareholder of a new bank must have total assets of VND10 trillion, chartered capital of VND1 trillion and less than 2 percent of bad debts.

The country's current banking system includes five state-owned commercial banks, six joint – venture banks, 36 joint-stock commercial banks, 44 branches of foreign banks, 10 financial companies, 13 financial leasing companies and 998 people’s credit funds.