Vietnam urges banks to merge, become more competitive

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.