According to Circular 41/2016/TT-NHNN regulating the capital adequacy ratio for foreign banks and branches, all banks must comply with Basel II regulations by January 1, 2020. Although there are still eight months to reach the deadline, the number of banks meeting Basel II standards is constantly increasing.
At Asia Joint Stock Commercial Bank (ACB)’s Annual general Meeting of Shareholders, its chair Tran Hung Huy said that the State Bank of Vietnam (SBV) issued Decision 845 to approve ACB to apply Basel II standards on April 22. Thus, within less than one week, the SBV has recognised four banks to meet Basel II standards.
More banks will be qualified
Before ACB, on April 17, the SBV also recognised three banks, Tien Phong Joint Stock Commercial Bank (TPBank), Military Joint Stock Commercial Bank (MB) and Vietnam Prosperity Joint Stock Commercial Bank (VPBank), to achieve Basel II standards. With the decisions issued, the SBV said that banks recognised to meet Basel II standards in April will begin to comply with the provisions of Circular 41 from May 1, 2019. This also means that all activities of these banks will comply with Basel II standards from May 1, 2019.
At the end of 2018, the SBV also recognised Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam International Joint Stock Commercial Bank (VIB), and Orient Joint Stock Commercial Bank (OCB). Thus, adding TPBank, MB, VPBank and ACB, the number of banks approved for Basel II application has risen to seven.
However, this number has not stopped there because some banks are taking final steps to be recognised for meeting Basel II standards. Specifically, at the annual general meeting of shareholders, Nguyen Huu Dang, general director of Hochiminh City Development Joint Stock Commercial Bank (HDBank), said HDBank has applied for application of Basel II standard ahead of time from January 2019. With the current progress, by the end of the second quarter of 2019 at the latest, the SBV will approve it to apply Basel II standards ahead of time.
A leader of Maritime Joint Stock Commercial Bank (Maritime Bank) also said that the bank has successfully piloted the SBV’s regulations on calculating the capital adequacy ratio (Circular 41) on the entire system. To date, Maritime Bank has submitted to the SBV for approval of the compliance with Circular 41 before maturity.
At Vietnam Thuong Tin Joint Stock Commercial Bank (Vietbank), general director Nguyen Thanh Nhung said that it was expected that in the second quarter of 2019, the bank would propose to SBV to apply Basel II standard.
Reportedly, the year of 2019 annual shareholder meeting is taking place, some banks also said that they were finalising the final steps to propose to SBV to apply Basel II standard.
Basel II is an international set of standards that not only includes risk quantification through indicators and models, but also includes improving risk management organisational structure, perfecting risk policies, enhancing risk culture and market transparency.
Compliance with Basel II means a bank is acknowledged to meet higher risk management principles, safer and more sustainable operations.
According to financial expert Nguyen Tri Hieu, the most obvious benefit that Basel II brings to Vietnamese banks is to strengthen the fair and transparent competition of the system, strengthen the bank’s resistance against market’s instability and volatilily.
Immediately after being recognised by Basel II, Nguyen Hung, general director of TPBank, said that in order to achieve this success, TPBank had actively researched and implemented Basel II. This bank actively participated in the contents of SBV and Banking Inspection and Supervision Agency to carry out Basel II such as: calculating quantitative impacts, making periodic reports, Basel II deployment, participate in training programmes organised by SBV and professional consultancy organisations over the past three years.
“Meeting Basel II standards will help TPBank have more advantages in implementing new business models, bringing more benefits to customers,” Hung said.
For VPBank, a leader of this bank said, one of the challenges that many banks face when deploying Basel II was to meet the minimum capital requirements. In this respect, VPBank had consistently responded well over the past years, with capital adequacy ratios (CAR) always much higher than eight percent under Basel II standards.
However, the capital adequacy ratio is only one condition that must be followed, and the bigger benefit the bank has when fully complying with Basel II is to apply those standards to business operations. Along with that is the risk management model with three protection rings. Instead of focusing solely on business goals, over the past three years, the bank has focused on balancing business goals and risk management.
“With the approval of SBV to comply with Circular 41, VPBank has built a solid risk management framework,” said VPBank’s leaders. At the same time, due to one of the three pillars of Basel II is information transparency; VPBank’s corporate governance activities will also be more transparent, improving operational efficiency on market principles. Finally, a solid risk management framework and transparent operations will create a foundation for the bank to expand their business in the future in a sustainable and effective way.
At MB, the bank’s representative said that risk management is a key foundation at the strategic stages of the bank and in the group of four strategic moves in the period 2017-2021, in which the implementation and application of Basel II is the core.
“The application results from Basel II implementation has helped risk management activities not only at identifying and providing solutions to mitigate risks but also expressed in business administration efficiency, ensuring a solid and safe foundation for the bank “, MB’s representative shared.
