Military Commercial Joint Stock Bank (MB) has officially received approval of the State Bank of Vietnam (SBV) to apply Circular 41/2016/TT-NHNN regulating the capital adequacy ratio (CAR) of banks and foreign bank branches, effective from May 1st 2019. According to this approval, MB is the pioneer bank to meet the Basel II standards in Vietnam market.
The Basel II is the second version of the Basel Treaty, using the concept of “three pillars” including (1) minimum capital requirements, (2) supervisory review, and (3) information disclosure in banking governance.
In Vietnam, two important documents issued by the SBV to guide the implementation of the Basel II standards are Circular 41/2016/TT-NHNN which regulates the CAR of banks and foreign bank branches and Circular 13/2018/TT-NHNN which regulates the internal control system of banks and foreign bank branches,
The Basel II Treaty is an international standard which the system of Vietnamese commercial banks is step by step implementing to enhance safety and operational efficiency.
The SBV’s approval affirms that MB’s risk management has met rigorous international standards in the financial sector, rising to parity with the governance quality with regional developed countries and becoming one of the leading private joint stock banks in Vietnam. The bank is not only active in doing business but also safe in operation and meeting advanced management standards.
From the perspective of modern governance, the successful development of a financial institution is always seen together with a strong risk management foundation. With more than 25 years of establishment and development, MB has become a highly reputable brand in the financial market of Vietnam, been rated by international organisations and rating agencies such as Moody/Fitch and the SBV as having good management capacity, prestige and playing a leading role in the market.
The results from the Basel II application has enable MB’s risk management to not only identify and provide risk mitigation solutions but also bring effectiveness in business administration, ensure a solid and safe foundation for MB in implementing new business models and improve the capacity to forecast potential risks, creating a basis for the preservation and sustainable development of organisational values.
That success is associated with the fact that MB has always been aware and focused on implementing solutions towards full compliance with the Basel II. Typically, the bank’s governance model has continuously been strengthened with clear separation, clear decentralisation of functions and tasks of units according to the model of three security rings to ensure no overlap, improvement of the responsibility to identify, evaluate, monitor and control risks at all stages. At the same time, MB’s system of documents and regulations has been reviewed and completed to meet the Basel II requirements and regulations of the SBV (under Circular 13/2018/TT-NHNN and Circular 41/2016/TT-NHNN).
The risk measurement tools and model of the bank have been built synchronously for key risks, such as the credit risk measurement project has intensively been implemented under the advanced standards of Basel II. The results of the projects have continuously been applied to business activities to improve credit performance.
In addition, the tools to measure operational risks, market risks, liquidity risks, interest rate risks on bank books, etc. have continuously been upgraded and applied for issuing accurate forecast and minimising risks.
Data management and technology application in risk management is considered a key task of banking operation in general and risk management in particular in the 4.0 era. The application of technology in risk management helps link business with management, realising the function of risk management in all activities of banks.
Particularly, the formation of an automatic calculation software for CAR, in addition to ensuring governance complying with regulations, also strongly supports MB’s management, capital allocation and data management.
Above all, MB has always given prominence to building a risk management culture. This helps MB have a proactive risk management system which is perceived and implemented responsibly during task completion.
