The State Bank of Vietnam (SBV) has announced the decision on implementation of Basel II for three banks including Military Commercial Joint Stock Bank (MB), Vietnam Prosperity Commercial Joint Stock Bank (VPBank) and Tien Phong Commercial Joint Stock Bank (TPBank).
These three banks are responsible for completing the contents, ensuring compliance with the provisions of Circular 41/2016 from May 1st 2019.
Before the VPBank, TPBank and MB, three other banks were successfully recognised to have applied the Basel II, including Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam International Commercial Joint Stock Bank (VIB), and Orient Commercial Joint Stock Bank (OCB).
Under the Basel II standards, the capital adequacy ratio (CAR) of banks needs to reach a minimum of eight percent one percent in arithmetic compared to the Basel I. However, the calculation is more complicated. Report of MB Securities Company assessed that if using the calculation method of the Basel II, CAR of banks (calculated based on the Basel I standards) may drop by one to three percent.
In Vietnam, the Basel II application roadmap set by the SBV includes two phases. In the first phase, the Basel II is piloted at 10 banks from February 2016, including Vietcombank, Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), MB, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Asia Commercial Joint Stock Bank (ACB), VPBank, VIB and Maritime Commercial Joint Stock Bank (Maritime Bank). The target in the second phase is that commercial banks basically have equity level complying with the Basel II standards, of which at least 12-15 banks successfully apply this set of standards.
Initially, the time limit for the pilot phase was set from February 2016 to the end of 2018, and the second phase is until 2020. However, under the high pressure of raising equity capital, the deadline to apply the Basel II standards for the pilot bank group has been postponed to 2020.
By meeting the Basel II standards, newly recognised banks will have a more open policy for credit growth room. Credit growth is currently considered as a bottleneck in development and growth for many units. At the press conference in early 2019, the SBV’s deputy Governor Nguyen Thi Hong affirmed that the agency may approve higher credit growth for banks which meet the Basel II.
