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Vietnam’s banks nearing Basel II standards

VietNamNet Bridge - While banks in other countries are following standards of Basel III, Vietnam has only two banks expected to be recognized as meeting Basel II standards in the time to come.

VietNamNet Bridge - While banks in other countries are following standards of Basel III, Vietnam has only two banks expected to be recognized as meeting Basel II standards in the time to come.


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Three years ago, the State Bank of Vietnam (SBV) announced the trial application of the capital and risk management method in accordance with Basel II standards. 

VnExpress quoted its sources as reporting that the two first banks to be recognized as meeting Basel II standards are Vietcombank and VIB. The state is holding a controlling stake in the former, while the latter is a joint stock bank.

Some other banks confirmed they have registered to apply Basel II standards in risk management and are awaiting approval.

The Basel Committee on Banking Supervision was established in 1974 to set up management standards which would help prevent the massive collapse of banks.

For Vietnam’s banking system, Basel II standards have become an important requirement in risk management and safety of the system. However, the application for Basel II in Vietnam remains slow.

For Vietnam’s banking system, Basel II standards have become an important requirement in risk management and safety of the system. However, the application for Basel II in Vietnam remains slow.

According to Bao Viet Securities Company (BVSC), by early 2016, when SBV began applying Basel II on a trial basis, Vietnamese banks could only satisfy Basel I standards. 

Banks in other regional countries such as Thailand, Singapore and Indonesia had met Basel II and were applying Basel 2.5 and Basel III.

Basel II has some new points compared with Basel I. 

Basel I used a “one size fits all” approach to determine a bank's capital requirements. In Basel II, the theory doesn’t exist. While Basel I aims to consolidate the stability of banking system, Basel II aims to heighten quality, stability and apply stricter requirements in risk management.

The roadmap for Basel II in Vietnam as figured out by SBV includes two phases. In the first phase, the standards have been applied at 10 banks since February 2016 (Vietcombank, VietinBank, BIDV, MB, Sacombank, Techcombank, ACB, VPBank, VIB and Maritime Bank).

In the second phase, most banks will have regulatory capital in accordance with Basel II, and at least 12-15 banks will successfully apply all requirements in Basel II.

Initially, the first phase was scheduled from February 2016 to the end of 2018, while the second phase would continue until 2020. However, as banks complained that they were facing difficulties in raising charter capital, the implementation time has been delayed to 2020.

One of the most important requirements in Basel II is the required capital adequacy ratio (CAR). CAR is calculated by the total of tier 1 and tier 2 capital on risk weighted assets. The quickest way to improve the ratio is to increase capital.


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