Under the authorization of the Prime Minister, on behalf of the Government, in the afternoon of May 22, 2023, SBV Governor Nguyen Thi Hong reported to the National Assembly on a number of the key contents in the Government’s Report to the National Assembly on an additional investment of the charter capital for Vietnam Bank for Agriculture and Rural Development (Agribank), in line with Resolution No. 43 of the National Assembly.
According to the Government, an additional investment of the charter capital for Agribank is necessary because of following reasons:
First, according to the Development Strategy of Vietnam Banking Sector to 2025, with orientations to 2030, and the Scheme on restructuring the system of credit institutions in association with the handling of bad debts in the 2021 - 2025 period, the state-owned commercial banks would continue to play a leading role in terms of sizes, market shares, the abilities to regulate the market, actively participating in the restructuring of poor-performing credit institutions. Therefore, the state-owned commercial banks need to be strengthened in terms of financial capacity. Increasing the charter capital of Agribank would enhance its principal role, especially as a bank operating mainly in the fields of agriculture and rural development.
Second, the additional investment in the charter capital would help Agribank to ensure compliance with the required capital adequacy ratio of above 8%, and maintain stably this ratio as required (Article 130 of the Law on Credit Institutions and Article 6 of Circular No. 41 of the SBV), heading towards compliance with Basel 2 standards.
Third, the additional investment of state capital would help Agribank to improve its credit ratings, contributing to the business expansion, increasing Agribank’s values, creating favorable conditions for the equitization process, and increasing the added value before the equitization takes place.
Fourth, increasing the charter capital is an important foundation for Agribank to expand its operations, especially its credit operations, contributing actively to the process of implementing the monetary policy and the management of the economic policies of the Government.
Talking about the legal grounds, the SBV Governor shared that, the additional investment of the charter capital for Agribank would be implemented in line with the provisions as stated at Paragraph 1 of Article 10 and Article 13 of the Law No. 69 on the use and management of state capital investments in production and business operations at enterprises; Paragraph 4 of Article 5, Article 7, Article 8 and Article 9 of Decree No. 91/2015/ND-CP of the Government on the state capital investments in enterprises, the use and management of capital and assets in enterprises (as amended and supplemented).
Besides, Agribank has also developed a plan for the charter capital increase for the 3-year period of 2021 to 2023, in order to ensure compliance with the requirements as stated in the Law No. 69 and Decree No. 91.
About the authority to decide on the additional investment of the charter capital in a state-owned enterprise, the SBV Governor proposed that Agribank receive an additional investment of the charter capital with the amount of VND 17,100 billion for the 2021 - 2023 period.
According to Paragraph 1 and Paragraph 3 of Article 14 of the Law No. 69, the National Assembly has the authority to decide on the policy for the investment; based on the National Assembly’s approval, the Prime Minister would issue a decision on the additional investment of the charter capital for Agribank; Agribank would then take responsibility for using and managing the additional capital investment, ensuring the prudence and effectiveness.
Regarding the investment plan for the additional charter capital of Agribank, the SBV Governor informed that, based on the financial situation and the business results of Agribank in the 2016 - 2021 period, most of the key financial indicators had positive growths over the years. In addition, Agribank has also successfully controlled the credit quality with the NPL ratio constantly kept below 2% as required by the SBV. Agribank has also proactively implemented synchronously the solutions to improve its capital adequacy ratio.
Based on current situation of the equity capital and the capital demands of Agribank, Agribank had proposed to receive an additional investment of the charter capital from the state budget.
About the source for the additional investment of the charter capital for Agribank, the Government has agreed to submit to the National Assembly the plan to use the following capital sources:
First, an amount of VND 6,753 billion has already been included in the central government’s budget estimates for 2023, which had been approved by the National Assembly in Resolution No. 70 dated November 11, 2022.
Second, an amount of VND 10,347 billion to be allocated from the state budget in accordance with the provisions of law, and would be rolled over for implementation to 2024.
Assessing the possible socio-economic implications, the SBV Governor shared that, with the additional increase of its charter capital, Agribank would use for business operations on the principles of ensuring prudence and efficiency; increasing contributions to the state budget; investing in infrastructure, especially technological infrastructure; expanding credit operations to support the economy, especially in the agriculture and rural development sector; meeting the capital adequacy ratio of at least 8% as required; increasing the business value of Agribank; therefore, creating favorable conditions for the equitization process and increasing the added value before the equitization takes place; ensuring to maintain and promote Agribank's key role in the investments for agricultural development; contributing to poverty reduction, as well as to the implementation of the monetary policy and the economic policies of the Government.
SBV Governor Nguyen Thi Hong also asserted that, the additional investment in the charter capital of Agribank would not affect the balance between the Government’s budget revenues and expenditures in 2023.
Based on the above-mentioned reasons, the Government had submitted to the National Assembly for the general policy consideration and decision of a possible inclusion in the Resolution of the 5th Session of the 15th National Assembly of the following contents:
First, approving of the policy on the additional investment of the charter capital for Agribank in the 2021 - 2023 period; the investment amount would be equivalent with Agribank’s remaining profits actually paid into the state budget in the 2021 - 2023 period, but not exceeding VND 17,100 billion.
Second, an amount of VND 6,753 billion of the additional investment of Agribank’s charter capital would be allocated from the central government’s budget estimates for 2023, which had been approved by the National Assembly in Resolution No. 70; and another amount of VND 10,347 billion would be allocated from the 2024 state budget in line with the provisions of the Law on State Budget.
Third, the specific steps and procedures for implementing the decision on the additional investment of the charter capital for Agribank shall comply with the provisions of Law No. 69 and the Law on State Budget.
LK