Ratings Cut Not a Problem, Vietnam Banks Say    
Industry News

Source : Monsters and Critics.com

Hanoi - Two Vietnamese banks said Friday that their recent downgrading by Fitch Ratings was caused by temporary factors stemming from the global financial crisis and new regulatory requirements.

The international ratings agency announced Wednesday that it was downgrading the investment ratings of Asia Commercial Bank (ACB) and Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) from D to D/E.

Fitch said both banks would likely fail to meet a new capital adequacy ratio minimum of 9 per cent, which Vietnam's central bank has instituted effective October 1.

But ACB vice president Dam Van Tuan said that while ACB might not meet the deadline, it was raising new capital to comply. The new capital adequacy ratio was a national effort to improve banks' capitalization and should be viewed as an improvement rather than a deterioration, he said.

'The banks are raising capital in order to have a higher buffer,' Tuan said. 'If the central bank postponed the effective date of the new regulation, we could easily comply.'

Vietcombank deputy general director Nguyen Thu Ha said the Fitch rating was correct but reflected difficulties the bank had encountered as a result of the global financial crisis, the local website Vneconomy.com reported.

Vietcombank was increasing its capital to cope with the problems Fitch cited, she said.

Fitch's report said loans at both banks had expanded rapidly in 2009 and into the first half of 2010.

At Vietcombank, the agency cited a high non-performing loan ratio of more than 4 per cent. It said the bank had extended loans to the troubled national shipping conglomerate Vinashin worth 16 per cent of its equity.

The government fired Vinashin's director in July and is reorganizing the company to cope with excessive debt and cash-flow problems. Last week, the government asked commercial banks to suspend demands for payment from Vinashin.

At ACB, the non-performing loan ratio was 0.37 per cent, Fitch said, but the bank's foreign currency loans grew 125 per cent year-on-year through the end of June.

In May, Vietnam's State Bank raised commercial banks' capital adequacy ratio from 8 per cent. The move was intended to bring down excessive credit growth caused by last year's government stimulus programme, which subsidized loans to businesses to counteract the global financial crisis.

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