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    Applying Basel III in Vietnam

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    Lostinblue Tran
    This document discusses Vietnam's implementation of the Basel III international banking standards. While some Vietnamese banks already meet the minimum 8% Capital Adequacy Ratio required by Basel III, full implementation faces challenges. Vietnamese CAR calculations differ from international standards, and Tier 2 capital is limited. Adopting Basel II may be costly and affect bank profits, so Vietnam is pursuing its own strategy of bank consolidation. The State Bank of Vietnam has issued regulations on asset classification and loan loss provisions, but credit assessment and non-performing loan recognition remain issues. Full implementation of Basel II by Vietnam's 2015 deadline may be difficult given these outstanding issues.

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    Applying Basel III in Vietnam

    Uploaded by

    Lostinblue Tran
    228 views9 pages
    This document discusses Vietnam's implementation of the Basel III international banking standards. While some Vietnamese banks already meet the minimum 8% Capital Adequacy Ratio required by Basel III, full implementation faces challenges. Vietnamese CAR calculations differ from international standards, and Tier 2 capital is limited. Adopting Basel II may be costly and affect bank profits, so Vietnam is pursuing its own strategy of bank consolidation. The State Bank of Vietnam has issued regulations on asset classification and loan loss provisions, but credit assessment and non-performing loan recognition remain issues. Full implementation of Basel II by Vietnam's 2015 deadline may be difficult given these outstanding issues.

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    This document discusses Vietnam's implementation of the Basel III international banking standards. While some Vietnamese banks already meet the minimum 8% Capital Adequacy Ratio required by Basel III, full implementation faces challenges. Vietnamese CAR calculations differ from international standards, and Tier 2 capital is limited. Adopting Basel II may be costly and affect bank profits, so Vietnam is pursuing its own strategy of bank consolidation. The State Bank of Vietnam has issued regulations on asset classification and loan loss provisions, but credit assessment and non-performing loan recognition remain issues. Full implementation of Basel II by Vietnam's 2015 deadline may be difficult given these outstanding issues.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    228 views9 pages

    Applying Basel III in Vietnam

    Uploaded by

    Lostinblue Tran
    This document discusses Vietnam's implementation of the Basel III international banking standards. While some Vietnamese banks already meet the minimum 8% Capital Adequacy Ratio required by Basel III, full implementation faces challenges. Vietnamese CAR calculations differ from international standards, and Tier 2 capital is limited. Adopting Basel II may be costly and affect bank profits, so Vietnam is pursuing its own strategy of bank consolidation. The State Bank of Vietnam has issued regulations on asset classification and loan loss provisions, but credit assessment and non-performing loan recognition remain issues. Full implementation of Basel II by Vietnam's 2015 deadline may be difficult given these outstanding issues.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 9

    Applying Basel III in

    Vietnam
    Mixed opinions about the
    possibility of implementation
    of basel III

    Support
    Vietnam banks already met a minimum of
    8% Capital Adequacy Ratio (CAR) under the
    new internaltional banking rules, or BaseIII.
    In Vietnam, CAR is calculated mostly based
    on Tier 1 capital and most local banks CARs
    already satisfied a minimum of 8% by end
    of 2009 and are expected to hit 9% in line
    with Circular 13 issued by the State Bank of
    Vietnam

    CAR 2009 of some Vietnam banks (Source:


    SME Securities)

    Bank CAR
    ACB 9.97%
    CTG 8.06%
    EIB
    30.56%
    SHB 15-20%
    STB 11.41%
    VCB 8.11%

    Challenges
    CAR of banks in Vietnam are calculated
    according to Vietnam accounting
    standards. => different with the
    international accounting standards.
    Tier 2 capital of the bank Vietnam is
    still limited.
    Incomplete application of basel II
    => Unlikelihood to implement soon or at
    the same time with other countries.

    Applying Basel II in Vietnam


    Basel II requires high cost, adversely
    affecting the profitability of banks
    => Different approach to Basel II our
    own strategy: small banks have
    consolidated or merged to reduce risk,
    focusing on expanding the size and
    type of service which direct the bank
    merge with bigger and joint ventures,
    associated with foreign banks.

    Issuance of Decisions and


    Circulars
    On 19 April 2005, the State Bank of Vietnam
    issued Decision No 493/QD-NHNN on Asset
    Classification and Loan Loss Provision,
    Decision 493/2005/QD-NHNN which requires
    the provisioning to be mainly based on the
    overdue status of loans and not on the
    realistic expectation of repayments. Bank
    inspectors are currently only checking the
    compliance with regulations rather than
    assessing realistic repayments.

    Decision No. 457/2005/QD-NHNN dated April 19,


    2005 of the SBV Governor promulgating the
    Regulations on Prudent Ratios in Operations of
    Credit Institutions (Decision 457).
    In general, regulations of the SBV are in line with
    Basel on large exposures except for the maximum
    limit of total exposures to a closely related group
    of borrowers. In accordance with Basel, 25 percent
    of a banks capital is the maximum limit for total
    exposures for a closely related group of borrowers
    while Decision 457 allows the limit to 60%.

    Unmet standards
    Only with the advanced
    measurement methods, the majority
    of Vietnam's commercial banks did
    not meet the qualitative and
    quantitative standards set by
    Banking Supervision Committee of
    the BIS proposed,

    Deadline for Basel II in 2015


    Vietnam is not a member of the Basel Committee on
    Banking Supervision and is hence not bound by the
    implementation timeline for Basel II.
    Weak credit assessment processes led to a sharp
    rise in non-performing assets in the banking sector.
    Credit loss provisions for these loans remain largely
    unrecognized in the financial statements of
    domestic banks.
    Reported NPL ( non-performing loans) figures range
    from 1% to 3%, said SBV governor Nguyen Van Binh,
    but noted that the real figure is actually closer to
    9%. => deadline may not be met.

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