 |
| Governor of the State Bank of Vietnam Nguyen Thi Hong speaks at the meeting |
The strategic role of cooperative banks and the urgent need to increase capital
Established in 2013 from the Central People's Credit Fund, the Cooperative Bank plays the role of the focal bank of the system of nearly 1,200 People's Credit Funds, serving 1.9 million customers in 57 provinces and cities across the country. With the mission of regulating capital, providing financial support and ensuring safety for People's Credit Funds, the Cooperative Bank is an important tool to implement the three-agricultural policy, promote the rural economy and limit black credit.
In the period 2015-2024, the QTDPC system recorded strong growth with total outstanding credit reaching 139 trillion VND, accounting for 13.6% of outstanding loans in the agriculture, forestry and fishery sector. However, the charter capital of the Cooperative Bank by the end of 2024 only reached 3,029.55 billion VND, approximately equal to the legal capital of 3,000 billion VND, the lowest in the banking system and only equal to 38.5% of the charter capital of all QTDPCs.
The limited financial capacity of the Cooperative Bank has not kept up with the growth rate of the People's Credit Fund system, with the growth rate of outstanding loans only three-quarters and total assets one-third compared to member funds. The capital adequacy ratio (CAR) of the Cooperative Bank ranges from 9.2-12.1% in 2024, lower than the average of 12.15% of domestic commercial banks and far below regional standards such as Indonesia (23.27%) or Thailand (20.24%). To achieve the CAR target of 13.5% in 2026, the Cooperative Bank needs about VND9,419 billion in equity capital, while it is expected to reach only VND4,416 billion without additional capital. Therefore, the Government considers that the support of 5,000 billion VND from the central budget is urgent for the Cooperative Bank to meet the need for capital regulation, ensure liquidity and support the People's Credit Funds, especially during peak periods such as the Lunar New Year.
This policy is consistent with the major policies of the Party and the State, such as Conclusion 70-KL/TW in 2020 on collective economic development, Resolution 19-NQ/TW in 2022 on agriculture and rural areas and Decision 340/QD-TTg in 2021 on the collective economic development strategy for the period 2021-2030. The Cooperative Bank, with 99.34% of its charter capital from the State, is not only a credit institution but also a tool for implementing microcredit policies, contributing to poverty reduction and socio-economic development.
Speaking at the meeting, SBV Governor Nguyen Thi Hong said that state capital support for cooperative banks is built on a solid legal basis from the 2015 State Budget Law, the 2024 Law on Credit Institutions and the 2023 Law on Cooperatives. According to the State Budget Law, the central budget is responsible for investing and providing capital support to economic organizations, of which cooperative banks are cooperative credit institutions that are eligible for support. The Law on Credit Institutions stipulates that the charter capital of cooperative banks includes state support capital, while the Law on Cooperatives affirms that cooperatives operating in the financial and banking sectors are supported to enhance their financial capacity from the budget.
However, these laws do not clearly stipulate the authority, order and procedures for providing capital support to the Cooperative Bank. Therefore, the Government proposes to apply the provisions of Article 17 of the Law on Management and Use of State Capital Invested in Production and Business at Enterprises (Law 69) and Article 14 of Decree 91/2015/ND-CP (amended and supplemented by Decree 140/2020/ND-CP). These provisions, which apply to joint stock companies and limited liability companies, are applied because the Cooperative Bank has 99.34% state capital and is being managed and supervised similarly to state-owned commercial banks such as Agribank, Vietcombank, VietinBank, and BIDV.
The Government proposed that the National Assembly approve the policy of supporting 5,000 billion VND and assign the Government to direct the implementation, and be responsible to the National Assembly for the accuracy of the data and the scale of support. The arrangement of the budget estimate will comply with the State Budget Law, ensuring effective use of capital.
In the 2021-2023 period, the Cooperative Bank was ranked A in terms of operational efficiency, fulfilling financial targets and having no bad debts, demonstrating its ability to effectively manage state capital. The draft Resolution of the National Assembly also emphasizes the supervisory role of the National Assembly Standing Committee, Committees and the Vietnam Fatherland Front to ensure transparency and accountability in the implementation process.
Legal basis and necessity of capital support policy
The National Assembly's Economic and Financial Committee assessed that state capital support to increase charter capital for cooperative banks is necessary to realize the Party's policies on collective economic development, and is consistent with the National Assembly's resolutions. This policy helps cooperative banks maintain the minimum capital safety ratio, perform the role of capital regulation and ensure operational safety for the system of nearly 1,200 People's Credit Funds, thereby supporting rural economic development and limiting black credit.
Regarding the legal basis, the Law on Credit Institutions 2024 stipulates that the charter capital of cooperative banks includes capital contributed by members, state support capital, reserve fund to supplement charter capital and other legal capital sources. The Law on Cooperatives 2023 affirms that cooperatives operating in the financial and banking sectors are supported to enhance their financial capacity from the state budget. In addition, the Law on State Budget 2015, amended and supplemented by Law No. 59/2020/QH14 and Law No. 56/2024/QH15, allows the use of the central budget to invest and support capital for economic organizations such as cooperative banks.
The Economic and Financial Committee believes that these regulations create a solid legal basis for capital support, but the Government needs to clarify alternative solutions to increase charter capital according to the Law on Credit Institutions, as well as capital use plans, disbursement roadmaps and measures to ensure efficiency, avoiding the situation of additional capital only to meet the capital adequacy ratio (CAR) without being actually absorbed.
The Economic and Financial Committee pointed out that the proposal to support VND5,000 billion from the central budget to increase charter capital for the cooperative bank, as presented in Submission No. 227/TTr-CP dated April 17, 2025, is not within the National Assembly's decision-making authority. According to the 2024 Public Investment Law, this amount of capital is not included in the list of important national projects, so it is under the Government's authority. Furthermore, the order and procedures for supporting state capital stipulated in the State Budget Law and the Public Investment Law also identify the Government as the competent authority to decide on this content.
However, the Economic and Financial Committee noted that the Government's Proposal has not clearly defined the ability to balance and allocate capital. Although the Ministry of Finance said that it could arrange the budget as early as 2025, the National Assembly approved the 2025 budget at the 8th Session under Resolution No. 159/2024/QH15, making it difficult to supplement capital in the short term. Therefore, the Economic and Financial Committee recommended that the National Assembly Standing Committee assign the Government to consider and decide on capital support based on the provisions of the Law on Credit Institutions, the Law on Cooperatives, the Law on State Budget and the Law on Public Investment. The Government needs to clarify the source of capital, the ability to balance the budget and develop a specific capital use plan to ensure feasibility and efficiency.
Source: https://thoibaonganhang.vn/chinh-phu-de-xuat-ho-tro-5000-ty-dong-von-ngan-sach-de-tang-von-dieu-le-cho-nhhtx-163406.html
Comment (0)