Banks can choose their own approach; while Vietnam's capital adequacy rules apply to all banks.
Fourth , there are shortcomings in the regulations on risk coefficients of assets in the formula for calculating the minimum capital safety ratio in Article 5.
(i) In Clause 5.1 on zero-risk assets, for loans using financed capital and investment trusts under contracts, in which credit institutions only receive trust fees without bearing risks, the State Bank should consider adding this item to assets with a zero-risk coefficient.
Regarding assets with a risk coefficient of 250% as prescribed in Clause 5.6, including loans for securities investment, loans to securities companies and loans for real estate business purposes. Although securities and real estate investment and trading activities are high-risk investment activities, it is not really reasonable to prescribe a single high risk coefficient for all loans in these fields. For example, loans for advances on securities sales have a different level of risk than loans for securities mortgages; the risk level of real estate business loans also distinguishes between real estate that has been formed and real estate that will be formed in the future.
This application will increase the total risky assets of banks significantly, especially in real estate loans because real estate loans account for about 12.4% of outstanding loans of the credit institution system, securities trading loans account for 0.7% of outstanding loans of the credit institution system. Thus, instead of requiring commercial banks to improve the quality of securities and real estate lending activities, it seems that Circular 13 focuses on restricting these two activities, even with forms with low risk levels. With a financial market on the rise like in Vietnam today, this measure is not appropriate and only has the effect of limiting risks in the short term without ensuring sustainable development in the long term.
(ii) Circular 13 does not classify assets in detail and does not take into account the difference between separate risk levels. For receivables, the risk coefficient is determined based on the type of collateral (valuable papers, real estate) and the subject (central government, local government, affiliated companies, other credit institutions) without detailing the risk according to the creditworthiness of the partner or the characteristics of the credit, so it does not accurately reflect the risk level of the credits. Credits that are classified in group 1 can also be classified in the same group.
a risk coefficient for loans that are classified as group 2, 3, 4, 5, while the debt group of the loan reflects very closely the risk level of that loan. This indicates that banks with the same capital adequacy ratio may be facing different types of risks, with different levels. This may create an incentive for banks in their efforts to increase the CAR ratio to grant credit based on the requirement of collateral (only as a secondary source of repayment) but accept customers with low credit quality, thereby increasing the risk that the bank must bear without ensuring an increase in the safety level.
(iii) Regarding guarantees, in practice, the proportion of guarantees that must be performed on behalf of customers is relatively low in the total guarantee obligations. Therefore, setting the conversion factor at 100% as in Article 5 is not appropriate, limiting the development of guarantee activities. Other off-balance sheet commitments such as all foreign currency transaction contracts have a risk factor of 100%, while some commitments have a very low risk level, such as foreign currency transactions with the State Bank. This will limit the development of the market for new products and services.
(iv) In Clause 1.1, Article 12 stipulates the list of assets that are due for payment within 7 days (points d, e, g, h, l) but does not stipulate bonds issued by the Bank for Social Policies. So which asset list will these bonds be included in?
Fifth, the Circular has not closely followed the Basel Committee's guidelines on banking safety. In fact, the regulation on the credit/mobilized capital ratio in Circular 13 has been abolished in Circular 22/2011/TTNHNN. However, Decision No. 254/QD-TTg approving the Project "Restructuring the system of credit institutions in the period 2011-2015" emphasized "controlling credit growth in accordance with capital sources in terms of scale and term structure; gradually reducing the ratio of outstanding credit compared to mobilized capital to no more than 90% by 2015". This is a correct and necessary viewpoint to limit risks in banking activities. In addition, if the Circular stipulates a minimum limit on the ratio of Equity Capital to Total Assets, it will be more reasonable and consistent with the Basel Committee's recommendations. In fact, when the ratio of equity capital to total assets (including on-balance sheet assets and off-balance sheet assets) decreases sharply, it means that the bank's risk is increasing. In Vietnam, this is quite evident when studying the relationship between equity capital and risky assets and equity capital and total bank assets. Specifically, if considered across the entire system, the CAR ratio (equity capital/risky assets) reaches over 9% (meeting the regulations of Circular No.
13). However, if based on the recommendations of Basel III, the safety of the commercial banking system in terms of capital needs to be re-evaluated. Obviously, the ratio of equity capital/total assets has shown signs of decreasing if considered from 2008 onwards, even though the ratio of equity capital/risky assets has shown signs of improvement. This is shown by the fact that total bank assets have increased rapidly compared to the growth rate of equity capital.
2.3.2. Survey on the level of application of risk management system according to Basel convention in Vietnam's commercial banking system
2.3.2.1. Survey analysis based on the use of credit rating results
a. Credit rating by other organizations
The 2009 Vietnam Bank Rating Report was first published by a private company - Vietnam Credit Information and Enterprise Rating Company Limited (Vietnam Credit) on December 9 in Hanoi. The report provides the Vietnam Credit Index (VCI - Vietnam Credit Index) based on the analysis and evaluation of financial and non-financial indicators of banks in Vietnam.
According to Vietnam Credit, the ranking is based on a synthesis of 18 key indicators such as capital adequacy ratio, liquidity, business efficiency, management capacity and experience, brand, quality and diversification of assets and services, etc. of banks. The main data source is taken from audited financial statements of banks from 2008 and earlier.
Ranking of Vietnamese banks (see Appendix 7)
b. Moody's credit rating for ACB
Moody's assessment principles, Moody's is an organization that conducts credit rating assessments according to their own rating system. They assess a country or organization based on information obtained through mass media sources and direct contact with the rated organizations if they meet certain conditions and standards. Thus, the fact that an organization is rated by Moody's itself proves that the organization has met certain standards in its operations. This credit rating can increase and decrease when internal and external conditions change. In particular, Moody's has a basic policy when rating a business's credit rating: that is, the credit rating of a business operating in the domestic market is not higher than the national credit rating. Only very rarely and with
Only special enterprises can have a credit rating higher than the national credit rating.
Asia Commercial Joint Stock Bank (ACB) is the leading retail joint stock commercial bank in Vietnam. According to the ranking of a domestic organization, Vietnam Credit, based on many important criteria, only ACB is ranked A. In the international arena, a Vietnamese bank is rated by a reputable foreign credit rating organization such as Moody's, that bank has also achieved a number of criteria according to international standards, including Basel standards. To better understand the level of application of international standards in the operations of the commercial banking system in Vietnam, we consider Moody's assessment of ACB (representing Vietnamese commercial banks) as follows:
Moody's adjustments to ACB in this review (May 17, 2012)
- ACB's previous credit rating for savings mobilization and long-term bonds in VND was Ba3 and Vietnam's national credit rating for VND was B1. Currently, ACB's LT DC rating has been lowered to B1, equal to Vietnam's national credit rating.
- Previously, the credit rating of ACB's savings mobilization and long-term bonds in VND (LT DC) was Ba3, higher than Vietnam's national credit rating of B1. This is a rather special case and partly reflects Moody's high appreciation for ACB. Now, Moody's has adjusted ACB's LT DC to B1, equal to Vietnam's national credit rating, to be consistent with Moody's general policy as stated in 1.
- One of the important reasons for Moody's to adjust ACB's DC rating is that the amount of government bonds and treasury bills held by ACB has increased, making ACB more closely tied to the debt quality of the Vietnamese Government. We believe that every enterprise, especially commercial banks, operating in Vietnam is under the management of the Vietnamese Government and closely tied to the quality of the Vietnamese economy, sharing benefits with the growth of the Vietnamese economy as well as having to work with the Government to overcome and overcome the difficulties arising in the economy. Moody's setting ACB's credit rating at the ceiling level is the national credit rating for us, which is a good recognition of ACB's operational quality. This has been recognized by Moody's as ACB's sustainable brand and intrinsic strength in the operating environment.
Moody's has considered adjusting ACB's separate financial strength rating (BFSR) from D- to E+.
Previously, ACB's BF R was D-. At that time, ACB was the only Vietnamese bank to be rated D-, the highest among Vietnamese commercial banks rated by Moody's. Now Moody's has adjusted it down to E+ to match the adjusted LT DC rating from Ba3 to B1 (for the reasons mentioned above). With a BF R of E+, ACB is still in the group of banks with the highest BF R in Vietnam.
Moody's assessment of ACB, In this assessment, Moody's continues to recognize ACB's strengths and strengths as a leading large bank: The 5th largest bank in the entire Vietnamese banking system and the largest private bank; Strong profitability, good operating efficiency, strong liquidity; Good credit risk approval and control system; Continuously improved risk management and internal control system; Received support for transfer skills from strategic shareholder Tandard Chartered Bank (holding 15% of charter capital).
c. Internal credit rating system
Currently, according to the author's preliminary statistics, Vietnamese commercial banks are in the process of building, completing and putting into use internal credit rating standard systems. On the part of state-owned commercial banks, 3/5 state-owned commercial banks (accounting for 0%) have completed the internal credit rating system including the Bank for Foreign Trade of Vietnam, the Vietnam Bank for Industry and Trade and the Bank for Investment and Development of Vietnam. The internal credit rating systems of these banks are relatively similar in many classification and scoring criteria. This will create convenience when wanting to build common standards for scoring the entire system.
Particularly for joint stock commercial banks, currently only a few large-scale joint stock commercial banks focus on building an internal credit rating system, including Vietnam Technological and Commercial Bank, Asia Commercial Joint Stock Bank, Saigon Thuong Tin Commercial Joint Stock Bank, the proportion of banks that have built this system only accounts for about 30 - 40% of the total 3 joint stock commercial banks operating in Vietnam.
One thing that is easily seen in the internal credit rating system of banks is that the scoring criteria are more qualitative than quantitative and the results of this scoring are intended to serve more for appraisal purposes.
lending decisions rather than serving the bank's risk management, while if compared with the internal credit rating system of joint venture banks operating in Vietnam such as Viet Thai Bank (Vinasiam), they will directly link the assessment results with risk provisions and minimum capital safety standards.
d. Capital adequacy ratio at current banks
The capital adequacy ratio of Vietnamese commercial banks up to now has evolved in three stages as follows: (See the table of Capital adequacy ratio (%) of the group of commercial banks in the period 2008 - 2011 below)
- Phase 1: Applying Decision 297/1999/QD-NHNN5 regulating safety ratios in commercial bank operations. During this period, the State-owned commercial bank sector could not ensure the minimum capital safety level.
- Phase two: The phase of implementing Decision 457/2005/QD-NHNN stipulating a minimum capital safety ratio of 8%. During this phase, the equity capital of commercial banks increased rapidly thanks to the favorable business environment as well as the boom of the stock market in the period 200-2008.
- Phase 3: Implementing the minimum capital safety requirement of 9% in accordance with the spirit of Circular No. 13/2010/TT-NHNN. In this phase, the picture of capital safety is quite complicated. If looking at the calculation level for the entire system, the Vietnamese commercial banking system has ensured the minimum capital safety ratio of 9%.
Table 2.12: Capital adequacy ratio CAR (%) of G14 commercial banks in the period
2008 – 2011
STT
YEAR BANK | 2008 | 2009 | 2010 | 2011 | |
1 | BIDV | 7.55% | 6.62% | 9.30% | 9.32% |
2 | Agribank | 7.50% | 8.05% | 6.10% | 8.00% |
3 | VietinBank | 10.57% | 8.02% | 8.06% | 12.02% |
4 | Vietcombank | 8.90% | 8.11% | 9.00% | 11.14% |
5 | Eximbank | 45.89% | 26.87% | 17.79% | 12.94% |
6 | Sacombank | 12.16% | 11.41% | 9.97% | 11.66% |
7 | CB (Saigon Stock Exchange) | 9.91% | 11.54% | 10.32% | 10.40% |
8 | ACB | 12.44% | 9.73% | 10.60% | 10.60% |
9 | Techcombank | 13.99% | 9.60% | 13.11% | 11.34% |
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STT
YEAR BANK | 2008 | 2009 | 2010 | 2011 | |
10 | MB (Military) | 12.35% | 12.00% | 11.60% | 11.60% |
11 | Maritime Bank | 9.00% | 9.83% | 9.18% | 9.18% |
12 | SeAbank | 10.75% | 10.75% | 10.84% | 10.84% |
13 | VP Bank | 19.54% | 15.00% | 15.05% | 13.46% |
Medium | 13.89% | 11.35% | 10.84% | 10.96% | |
Source: Compiled from annual reports of banks and the State Bank of Vietnam. Note: Since Lien Viet Post Bank was only established in 2008, there is no data yet.
The author has not yet updated the full publication of the CAR ratio at this stage.
2.3.2.2. Survey based on statistical investigation through questionnaire
a. Measuring variables - questionnaire
“Requirements for international financial integration” (4 variables)
In this topic, the author focuses on measuring and studying the relationship between variables (Specifically, the components of the explanatory variables are described and defined in detail in Appendix 9 of the topic).
Awareness of Basel II
(4 variables)
“The State Bank's orientation on Basel II” (5 variables)
Possibility of applying Basel II to Vietnam's commercial banking system by 2020
“Basel II Implementation Costs”
(3 variables)
“NLHT of commercial banks on Basel II application skills” (7 variables)
Figure 2.5: Research model diagram
- Research variable (dependent variable): "Possibility of applying Basel II to the Vietnamese commercial banking system by 2020" and is denoted as KN
- Explanatory variable (independent variable): “Awareness of Basel II”
- Explanatory variable (independent variable): “The State Bank's orientational view on Basel
II”
- Explanatory variable (independent variable): “Cost of implementing Basel II”
- Explanatory variable (independent variable): "Current capacity of commercial banks in terms of ability
Basel II application”
- Explanatory variable (independent variable): "Requirements and pressures in integrating into the international financial system from now until 2020"
b. General description of the research sample
In Section 2.3.2.2b, the author describes the surveyed sample and its basic statistical indicators. (Research methods, data collection, and data processing are presented in detail in Appendix 10 of the thesis)
Table 2.13: Description of general statistical indicators of the research sample
Variable
N | Range | Minimum | Maximum | Sum | Mean | Std. Deviation | Variance | |
B1 | 100 | 3 | 2 | 5 | 387 | 3.87 | 0.580 | 0.336 |
B2 | 100 | 4 | 1 | 5 | 302 | 3.02 | 0.666 | 0.444 |
B3 | 100 | 4 | 1 | 5 | 407 | 4.07 | 0.590 | 0.349 |
B4 | 100 | 2 | 3 | 5 | 390 | 3.90 | 0.560 | 0.313 |
B5 | 100 | 2 | 2 | 4 | 276 | 2.76 | 0.452 | 0.204 |
B6 | 100 | 2 | 2 | 4 | 303 | 3.03 | 0.437 | 0.191 |
B7 | 100 | 2 | 2 | 4 | 299 | 2.99 | 0.389 | 0.151 |
B8 | 100 | 2 | 3 | 5 | 404 | 4.04 | 0.315 | 0.099 |
B9 | 100 | 4 | 1 | 5 | 300 | 3.00 | 0.471 | 0.222 |
B10 | 100 | 2 | 3 | 5 | 428 | 4.28 | 0.473 | 0.224 |
B11 | 100 | 2 | 3 | 5 | 414 | 4.14 | 0.450 | 0.202 |
B12 | 100 | 3 | 2 | 5 | 385 | 3.85 | 0.687 | 00,472 |
B13 | 100 | 2 | 3 | 5 | 413 | 4.13 | 0.442 | 0.195 |
B14 | 100 | 1 | 4 | 5 | 479 | 4.79 | 0.409 | 0.168 |
B15 | 100 | 4 | 1 | 5 | 289 | 2.89 | 0.840 | 0.705 |