|Basel II compliance could earn HDBank more open credit growth limits |
HDBank is celebrating the SBV Governor's official approval of the implementation of Circular No.41/2016/TT-NHNN stipulating capital adequacy ratios for banks and branches of foreign banks which comply with Basel II, from October 1, 2019.
This demonstrates HDBank’s conformity with the high-risk management principles proposed by SBV to maintain operational efficiency, prudence, sustainability, and transparency. With this approval, HDBank will officially implement Basel II for capital adequacy ratios ahead of its original deadline in late 2019.
In 2015, HDBank has embarked on a course of research and collaboration with various reputable international consultancies to implement Basel II. In addition, the bank maintained its regular participation in many SBV initiatives to apply and observe credit risk management measures while focusing on operational risk management across its network to ensure its sustainable and transparent growth.
Basel II is the second of the Basel Accords for risk management which Vietnamese commercial banks are aiming to gradually implement. To gain the compliance status, banks are required to meet various rigorous criteria for capital, risk management system, and investment in technological infrastructure to comprehensively monitor risks in operation.
Under Basel II, the capital adequacy ratio (CAR) at banks must reach a minimum of 8 per cent, down 1 percentage point compared to Basel I. The calculation, however, is more complex. A report from MB Securities said that under the Basel II calculation method, the CAR of banks following Basel I standards can be reduced by 1-3 per cent.
The application roadmap for Basel II has been set by the SBV with two phases. Phase 1 has been piloted at ten banks from February 2016: Vietcombank, VietinBank, BIDV, MB, Sacombank, Techcombank, ACB, VPBank, VIB, and Maritime Bank. Phase 2 is basically commercial banks with a level of equity in accordance with Basel II standards, of which at least 12-15 can successfully apply the standards.
By meeting Basel II standards, newly-approved banks will have a more open mechanism on credit growth limits, helping them overcome a bottleneck restricting growth and profitability at many banks. At a press conference earlier this year, The SBV’s Deputy Governor Nguyen Thi Hong said the central bank could allow credit growth at banks meeting Basel II to be higher than other credit institutions.
Applying Basel II reaffirms that HDBank can fulfil higher risk management principles with safer and more sustainable operations. With a view of generating robust and sustainable growth while securing an effective risk management system, HDBank’s asset quality has been on par with the industry’s best. In addition, its return on assets (ROA) and return on equity (ROE) both reflect high profitability while its separate non-performing loan ratio is kept at one per cent.