Today, Vietnam Prosperity Joint Stock Commercial Bank (VPBank) is officially approved by the State Bank of Vietnam to apply Circular 41 of minimum capital adequacy ratio requirements, which makes it one of the first banks to apply Basel II standards in Vietnam.
According to the decision of the State Bank, VPBank will begin to comply with the provisions of Circular 41 from May 1st, 2019, which also means that all VPBank’s activities will follow Basel II standards from early May.
Basel II is a set of international standards that comprises quantifying risk through indicators and model, improving risk management structure, enhancing risk policies, refining risk culture and increasing market transparency. Applying Basel II reaffirms that VPBank can fulfill higher risk management principles with safer and more sustainable operation.
VPBank is one of 10 banks selected by the State Bank to undergo a pilot scheme for Basel II standards since 2014. From this year, Basel II is one of the top priorities at the bank. Specifically, instead of hiring external consultancy company, VPBank has built of team of 58 full-time staffs to implementing this program. Over the past four years, the bank has conducted 82 sub-projects related to Basel II, held 28 training courses and deployed 15 risk measurement models.
The minimum capital requirement of Basel II has challenged many banks. However, in recent years, VPBank has well satisfied this requirement. VPBank's capital adequacy ratio (CAR) has always been much higher than the 8% requirement under Basel II standards. At the end of 2018, CAR of VPBank was 11.2%.
Besides, the bank can gain great benefits when applying Basel II standards in business operation. In recent years, the bank has balanced between business goals and risk control with three rings protection model. All business and support units regularly receive reports on capital usage under Basel II standards, as well as proposals to optimize capital, which minimizes operation risk. Thanks to that, business decisions have been made based on not only profitability, but also quantified risk factors. As a result, VPBank has become one of the most profitable banks in the market.
By the end of 2018, total consolidated operating income was more than VND 31,000 billion while the bank’s pre-tax consolidated profit reached VND 9,200 billion. Return on assets (ROA) and return on equity (ROE) were 2.4 % and 22.8 %, respectively.
With the State Bank's approval to comply with Circular 41, VPBank has developed a solid risk management framework. Additionally, as information disclosure is one of three pillars of Basel II, VPBank’s corporate governance will be more transparent. A solid risk management framework and transparent operation will create a foundation for VPBank to expand its business sustainably and effectively.