VPBank has just announced that it has completed the last pillar of Basel II - Internal Capital Adequacy Assessment Process (ICAAP). Along with the implementation of the two previous pillars, this pillar was also completed by VPBank one year earlier than required by SBV and half a year after VPBank had officially approved by the SBV for early application of Circular No. 41 (Basel II). With this result, VPBank is one of the pioneers in completing Basel II in Vietnam market.
“VPBank is one of the pioneering banks in applying advanced regional management standards. The completion of all three pillars of Basel II one year ahead of the SBV's requirement is the fulcrum that allows VPBank to continue to be ahead of the market in meeting the highest international standards. This achievement reflects serious efforts of the bank's leadership and staff to help VPBank gain a more valuable voice in the investment community, as well as with credit rating agencies. The early implementation of VPBank is expected to inspire the Vietnamese banking market, contributing to bring the investment environment in Vietnam closer to the investment environment in the region. These are considered as the initial foundations for VPBank to continue moving toward the basic standards of Basel III, bringing our governance standards closer to the standards of advanced banks in the world,” Mr. Dmytro Kolechko, Head of Risk Management Division shared.
The ICAAP process is a comprehensive capital assessment, i.e. identifying risk profiles, developing strategies, risk appetite, calculating required capital levels for risks(with a broader coverage than Pillar 1, including additional interest rate risks on bank books and centralized risk) not only in normal business conditions but also in the context of adverse fluctuations of the market. Since then, the bank has identified capital targets to ensure that its business objectives are appropriate with the bank's ability to accept risks.
The ICAAP report, together with other reports at the request of the SBV on risk management and the internal control system, is a transparent and comprehensive source of information to enable the SBV to carry out supervision and administration of the system.
VPBank is well aware of the benefits of actively complying with the requirements and instructions of the SBV for strengthening risk management activities under Basel II standards. In particular, the successful implementation of ICAAP means that the bank has joined the SBV in strengthening the risk-based monitoring mechanism and proactive information exchange between supervisory agencies and commercial banks.
VPBank not only adheres to the standards of the SBV, but also actively approaches international practices and standards in gradually implementing ICAAP. The implementation of ICAAP has played an important role in improving risk management in the bank, especially increasing the awareness of risk management among all employees and leaders at all levels; ensuring the appropriate level between risk strategy and business plan; effectively measuring the Bank's sensitivity to the risk of macroeconomic conditions such as interest rates, exchange rates, inflation, GDP, real estate price volatility; utilizing capital effectively through allocation of capital to each material risk and business unit; and integrating the process of assessing business performance for each position in the bank.
The early completion of Basel II reaffirms VPBank's ability and potential in risk management as well as demonstrates its ability to approach international standards. Besides, VPBank continues to take further steps to reach out to more comprehensive international practices, including Basel II IRB, IFRS 9 and Basel III.