This morning (April 26), the Standing Committee of the National Assembly continued its session to review the proposed policy on providing state capital support to increase the charter capital of the Co-operative Bank of Vietnam (Co-opBank) from the state budget. Previously, the Government proposed allocating VND 5,000 billion from the central budget to enhance Co-opBank’s charter capital in order to strengthen its financial capacity and ensure the operational safety of the network of nearly 1,200 People’s Credit Funds (PCFs). This policy not only reinforces Co-opBank’s role in supporting agriculture and rural development but also contributes to realizing the Party’s policy on developing the collective economy and curbing illegal lending practices.
Governor of the State Bank of Vietnam, Nguyen Thi Hong speaks at the meeting
The strategic role of Co-opBank and the urgent need to increase capital
Transformed from the Central People’s Credit Fund into the Co-opBank in 2013, Co-opBank serves as the central bank for the network of nearly 1,200 PCFs, reaching 1.9 million customers across 57 provinces and cities nationwide. With its mission to facilitate capital intermediation, provide financial support, and ensure the safety of PCFs, Co-opBank plays a vital role in implementing the “Tam Nong” policy (agriculture, farmers, and rural development), promoting rural economic growth, and curbing illegal lending activities..
In the period 2015-2024, the PCF 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 Co-opBank 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 PCFs.
Co-opBank’s limited financial capacity has not kept pace with the growth of the PCF system, with its loan portfolio expanding at only three-quarters the rate and its total assets amounting to just one-third of those of its member PCFs. Co-opBank’s capital adequacy ratio (CAR) fluctuated between 9.2% and 12.1% in 2024, falling below the domestic commercial banks’ average of 12.15% and significantly trailing regional benchmarks such as Indonesia (23.27%) and Thailand (20.24%). To meet the CAR target of 13.5% by 2026, Co-opBank requires approximately VND 9,419 billion in equity capital, whereas projections indicate it would reach only VND 4,416 billion without additional capital injections. Therefore, the Government has determined that urgent support of VND 5,000 billion from the central budget is necessary for Co-opBank to fulfill its role in capital intermediation, maintain liquidity, and support PCFs, particularly during peak periods such as the Lunar New Year season.
This policy aligns with the major directives of the Party and the State, such as Conclusion No. 70-KL/TW (2020) on the development of the collective economy, Resolution No. 19-NQ/TW (2022) on agriculture, rural areas, and farmers, and Decision No. 340/QĐ-TTg (2021) approving the development strategy for the collective economy for the 2021–2030 period. With 99.34% of its charter capital contributed by the State, Co-opBank is not merely a credit institution but also a key instrument for implementing microcredit policies, contributing to poverty reduction and the promotion of socio-economic development.
Speaking at the meeting, Governor of the State Bank of Vietnam, Mrs. Nguyen Thi Hong, emphasized that the provision of state capital support to Co-opBank is grounded in a solid legal framework, including the Law on State Budget (2015), the Law on Credit Institutions (2024), and the Law on Cooperatives (2023). Under the Law on State Budget, the central budget is mandated to invest in and provide capital support to economic organizations, with Co-opBank — as a cooperative credit institution — eligible for such support. The Law on Credit Institutions stipulates that Co-opBank’s charter capital includes state capital contributions, while the Law on Cooperatives affirms that cooperatives operating in finance and banking are eligible for financial capacity enhancement through budgetary support.
However, these laws do not clearly define the authority, procedures, and process for providing capital support to Co-opBank. 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 No. 69) and Article 14 of Decree No. 91/2015/ND-CP (as amended and supplemented by Decree No. 140/2020/ND-CP). Although originally designed for joint stock companies and limited liability companies, these provisions are applied in this case because Co-opBank, with 99.34% state ownership, is managed and supervised in a manner similar to state-owned commercial banks such as Agribank, Vietcombank, VietinBank, and BIDV.
The Government proposes that the National Assembly approve the policy of supporting VND 5,000 billion and authorize the Government to organize the implementation, bearing responsibility before the National Assembly for the accuracy of data and the scale of the support. The allocation of budget estimates will comply with the Law on State Budget and ensure the effective use of funds.
During the 2021–2023 period, Co-opBank was classified as Grade A in terms of operational performance, successfully meeting financial targets and maintaining zero non-performing loans, demonstrating effective management of state capital. The draft Resolution of the National Assembly also emphasizes the supervisory roles of the National Assembly’s Standing Committee, its specialized Committees, and the Vietnam Fatherland Front to ensure transparency and accountability throughout the implementation process.
Legal basis and necessity of capital support policy
The National Assembly’s Economic and Financial Committees assessed that providing state capital support to increase Co-opBank’s charter capital is necessary to realize the Party’s policies on developing the collective economy and is consistent with the National Assembly’s resolutions. This policy will help Co-opBank maintain the minimum capital adequacy ratio, fulfill its role in capital intermediation, and ensure the operational safety of the network of nearly 1,200 PCFs, thereby supporting rural economic development and curbing illegal lending practices.
Overview of the meeting
In terms of legal basis, the Law on Credit Institutions (2024) stipulates that Co-opBank’s charter capital consists of contributions from its members, state capital support, the charter capital reserve fund, and other lawful sources. The Law on Cooperatives (2023) affirms that cooperatives operating in the finance and banking sectors are eligible for financial capacity enhancement through state budget support. In addition, the Law on State Budget (2015), as amended and supplemented by Law No. 59/2020/QH14 and Law No. 56/2024/QH15, permits the use of the central budget to invest in and provide capital support to economic organizations such as Co-opBank.
The Economic and Financial Committees noted that these regulations provide a solid legal foundation for the provision of capital support. However, the Government is required to clarify alternative solutions for increasing charter capital in accordance with the Law on Credit Institutions, as well as to detail the capital utilization plan, disbursement schedule, and measures to ensure effective use of the funds. This is to avoid a situation where capital is supplemented merely to meet the minimum capital adequacy ratio (CAR) without being effectively absorbed in practice.
The Economic and Financial Committees pointed out that the proposal to allocate VND 5,000 billion from the central budget to increase Co-opBank’s charter capital, as presented in Submission No. 227/TTr-CP dated April 17, 2025, does not fall under the National Assembly’s decision-making authority. According to the Law on Public Investment (2024), this level of funding does not qualify as a national key project and thus falls under the authority of the Government. Moreover, the procedures and processes for providing state capital support, as prescribed by the Law on State Budget and the Law on Public Investment, also confirm that the Government holds the decision-making authority for this matter.
However, the Economic and Financial Committees noted that the Government’s Submission has not clearly identified the capacity for budget balancing and capital allocation. Although the Ministry of Finance indicated that budget estimates could potentially be arranged as early as 2025, the National Assembly has already approved the 2025 state budget estimates during its 8th Session under Resolution No. 159/2024/QH15, making it difficult to allocate additional capital in the short term. Therefore, the Committees recommend that the Standing Committee of the National Assembly assign the Government to review and decide on the provision of capital support in accordance with the Law on Credit Institutions, the Law on Cooperatives, the Law on State Budget, and the Law on Public Investment. The Government must clarify funding sources, assess the feasibility of budget balancing, and develop a detailed capital utilization plan to ensure practicality and effectiveness.
Source: Tran Huong/ the Banking Times
