Illustrative photo. (Source: VNA)
Hanoi (VNA) – Currently, more than 20 commercial banks are adopting the standard version of Basel II, of which 12 have completed all three Basel II pillars ahead the deadline, namely VIB, Vietcombank, SeABank, VPBank, TPBank, MSB, VietCapitalBank, Shinhan Vietnam, SHB, LienVietPost Bank, HDBank, and Viet Capital Bank.
A few of them have even started switching to the advanced version and are gearing up to apply higher standards of Basel III, laying a basis for a more effective risk and capital management.
Basel II is the second edition of the Basel Accords, which are recommendations on banking law and regulations issued by the Basel Committee on banking supervision, aiming to enhance competition and transparency in the banking system and make banks more resistant to market changes.
Three pillars of Basel II were minimum capital requirements, the Internal Capital Adequacy Assessment Process (ICAAP), and market transparency and discipline.
According to experts, Basel II application is considered a radical reform to create a foundation for the domestic banking system to grow safely and healthily and improve the competitiveness of the system under the context of the country’s deep international economic integration.
SHB completed the adoption of all three pillars of Basel II by starting applying the ICAAP – the last pillar – late last month. While applying the ICAAP, SHB has not only calculated the amount of capital needed significant risks and developed stress-testing models to assess capital adequacy for the next three years in both normal and unfavourable conditions, said general director Nguyen Van Le.
A bank leader said the adoption of Basel II has not only helped his bank enhance transparency of its internal regulations but also benefited clients, particularly corporations.
Basel II requires banks to apply different risk indicators for different customer segments and types of products and collateral, which determine the banks’ level of capital. To optimise equity, the banks tend to prioritise providing credit and reducing interest rates for corporate borrowers with efficient and transparent performance, optimal debt ratios, and high credit rating.
It thereby encourages the borrowers to improve their management and operation systems themselves to stay in line with the lenders’ international standards.
Le said that SHB plans to invest and develop Basel II with an advanced approach and is taking steps to apply Basel III. This lays a foundation for the bank to continue building a sustainable and comprehensive business strategy, he noted, adding that it is also a framework for effective risk management and capital use, thereby providing safe, reliable and transparent financial and non-financial products for customers.
Basel III, a new international regulatory accord for governing banks’ capital requirement developed in the wake of the 2007-2009 financial crisis, was issued in 2010 to improve on Basel II, and its implementation deadline is January 1, 2023.
Meant to help banks deal with financial crises, achieve sustainable growth and minimise potential systematic losses in the future, Basel III has raised standards and requirements, mainly for equity capital and management of credit securitisation.
VIB is the first bank in Vietnam piloting a system measuring the Net Stable Funding Ratio (NFSR) – one of the Basel III indexes. (Photo: VietnamPlus)
According to VIB general director Han Ngoc Vu, the bank has become the first in Vietnam piloting a system measuring the Net Stable Funding Ratio (NFSR) – one of the Basel III indexes.
Under Basel III, a healthy and sustainably developing bank must have a NFSR higher than 100 percent, Vu said, the VIB’s was 120 percent at the end of October 2020, equivalent to Singapore’s DBS Bank and the Commonwealth Bank of Australia (CBA).
An official from MSB also unveiled that the bank is developing standards for the internal application of Basel III. It will begin measuring and managing operational and market risks under Basel III standards, and applying the advanced version of Basel II and International Financial Reporting Standard (IFRS) 9./.
