SBV to double capital to US$479 million

Central bank wants to better stabilize Vietnam’s troubled banking sector.

The State Bank of Vietnam, the central bank, is likely to double its charter capital on August 15, according to a draft circular. The Fund for National Monetary Policies will also be doubled since the draft states that the fund must be equal to SBV’s charter capital.

SBV will be allowed to use the fund to stabilize Vietnam’s banking sector and monetary market. Besides addressing the threat posed by credit institutions that fail and damage the banking system, SBV can also use the fund to contribute capital to or buy stocks of credit institutions that are put under SBV’s special control due to weak finances.

Deposit Insurance of Vietnam will also be allowed to borrow from the fund to maintain the stability of credit institutions in case other funds are not available for payment.

With the charter capital’s increase, SBV will likely have to double provisions for the Fund for National Monetary Policies to 20% of the annual difference between SBV’s revenues and expenses.

According to the draft, SBV will still maintain 10% of its annual revenue expense difference for the financial provision fund, but will not be allowed to exceed 25% of the central bank’s charter capital.