By mid-April 2019, three more banks, Military Bank, TP Bank and VP Bank, had been allowed to apply ahead of time the capital adequacy ratio (CAR) in accordance with State Bank of Vietnam’s (SBV) Circular No 41 (Basel II’s CAR – the standard method).

As such, six commercial banks have applied Circular No 41 ahead of time, namely Vietcombank, VIB, Military Bank, VP Bank, OCB and TP Bank.

These include two banks – TP Bank and OCB – which were not appointed by SBV to pilot the application of Basel II. This, as commented by analysts, show that Vietnam’s commercial banks have taken the initiative in all their operations, from bad debt settlement to information system upgrading and risk management.

OCB, for example, fulfilled all the items of the project on managing risks in accordance with international standards Basel II in late 2017.

Most recently, sources said VietBank, a small-scale bank, has also sent word, intimating that it would ask for SBV’s permission to apply the method of calculating CAR in accordance with Basel II in Q2.

A senior executive of the bank said after two years of implementation, VietBank has fulfilled the building of an IT system, specifically serving data management, and the calculation of regulatory capital and other indexes as shown in Circular No 41.

According to Can Van Luc, a member of the National Advisory Council for Finance & Monetary Policies, Basel II is the goal that many banks are striving for. This is like a meter that measures banks’ financial health and risk management, and improves the images of banks among investors.

The Basel II application also brings other benefits. SBV, for instance, may grant higher credit growth quotas to Basel II banks.

Under the Vietnam’s banking sector development strategy, by 2020, banks must have regulatory capital meeting Basel II standards. By 2025, all banks will apply Basel lI in accordance with the standard version and then begin to apply the advanced version.

With banks’ determination, analysts believe that about 10 banks may be recognized as following Basel II’s CAR requirement in accordance with Circular 41 by the end of 2019.

However, a member of the National Advisory Council for Finance & Monetary Policies commented that while healthy banks are very close to the Basel II target, many other banks are meeting difficulties.

“Even banks with high CAR find it is not easy to observe Basel II’s requirements,” he said.

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