VietNamNet Bridge - Eleven banks were upgraded from rural banks with a small operating scale into urban banks with a larger scale. In order to become urban banks, they had to raise chartered capital within a short period. 

The 11 rural banks which turned into urban banks include An Binh,  Me Kong, Western bank, Ocean Bank, Saigon – Hanoi, Nam Viet, GP Bank, Kien Long, Dai Tin, Dai A and PG Bank. The banks, which initially had only several billions in chartered capital, became urban banks overnight with capital of trillions of dong.

However, of the 11 banks, only three, namely An Binh (ABB), Saigon – Hanoi (SHB) and Kien Long Bank, can keep their initially planned operation plans and legal status.

Meanwhile, three others were put under the State Bank’s special control due to their bad operation and have been taken over by the State Bank. 

With capital contribution by PetroVietnam, the giant in the oil and gas sector, the Hai Hung and Ninh Binh rural banks quickly raised their charter capital and turned into Ocean Bank and GP Bank. 

Meanwhile, Dai Tin Bank (Trust Bank), which later was renamed the Vietnam Construction Bank (VNCB), also increased its capital from VND200 billion to VND500 billion.

Analysts commented that since the rural small banks were ‘forced to grow up quickly’ by increasing the chartered capital to VND500 billion, then VND1 trillion and VND3 trillion, the banks have suffered from “shortness of breath’, which is believed the main reason behind a lot of problems discovered recently. 

Ocean Bank, GP Bank and VNCB could not ‘save themselves’ after losing trillions of capital. They have been finally bought by the State Bank at zero dong. 

The information about the health of the three banks after the takeover has not been updated by the State Bank.

The other banks in the same group, including Me Kong Bank, Western Bank, Nam Viet Bank, NCB, Dai A and PG bank, have to struggle hard to survive by restructuring or merging with other banks.

Analysts pointed out that it was the pressure of becoming bigger which misled the commercial banks and caused problems.

PG Bank, for example, was established with just VND5 billion worth of charter capital, and raised its capital to VND135 billion by the end of 2005. In 2007, its capital rose to VND1 trillion. The figures soared to VND2 trillion in 2009 and VND3 trillion in 2010.

With its initial development plan, the bank’s capital was about VND1.2 trillion only. However, the bank was forced to have VND3 trillion in chartered capital by 2010. Because of this, the board of directors had to try to increase lending at any cost and then fell into a deadlock.

VNE