Vietnamese Banks Go Offshore for Finance to Meet Basel II

Diep Nguyen

08:59 16/07/2019

BizLIVE -

The banking system faces substantial capital needs in the run-up to the adoption of Basel II standards, scheduled for 1 January 2020, which, by Fitch’s estimates, could be as much as USD20 billion.

Vietnamese Banks Go Offshore for Finance to Meet Basel II
In recent months, the trend of mobilizing more capital to meet the requirements of Basel II is surging in Vietnamese banking system. When the domestic investors can not pump up all the money needed, many Vietnam banks are finding the ways to attract capital from foreign investors. 
In the latest research report, Fitch economists also showed their opinions about the matter. Up until now, Vietnamese banks' issuances have been in local currency. However, the banking system faces substantial capital needs in the run-up to the adoption of Basel II standards, scheduled for 1 January 2020, which, by Fitch’s estimates, could be as much as USD20 billion. 
The country's immature capital market is unlikely to be able to support such large capital demand. This is further hindered by a 30% foreign-ownership limit, meaning that common equity is unlikely to form a large part of additional regulatory capital raised. However, offshore issuance is likely to be confined to better-managed state-owned and private commercial banks.
MB is not an exception in this trend of mobilizing capital. In one recent interview with foreign media, MB CEO Luu Trung Thai stated that his bank plans to sell off shore bonds to attract foreign capital. According to Thai, his bank aims at not only one foreign investor but many of them and foreign investors are not necessary strategic investors. 
The bank, better known as MBBank, will issue around 123 million new shares and use 38.9 million treasury shares for the stake sale, CEO Luu Trung Thai told Reuters on telephone.
The sale is part of the bank’s move to raise its operating capital and expand its operations over the next three years, including investing in digital banking services.
MBBank may organise a roadshow for the stake sale later this year, Thai said to Reuters.
TPBank is also joining the trend. However, media reports indicating that Tien Phong Commercial Joint Stock Bank (not rated) - a small privately owned bank - is considering the country's first offshore Tier 2 bond offering by a bank via a US-dollar denominated issuance.

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