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Shinhan Bank Vietnam has officially announced its application of Pillar 2 of Basel II, pertaining to the assessment of a bank’s internal capital adequacy as prescribed in the State Bank of Vietnam's (SBV) Circular No.3/2018/TT-NHNN dated May 18, 2018 on the internal control system of commercial banks and foreign banks' branches.
Thus, Shinhan Bank has officially completed all three Pillars of Basel II ahead of the schedule set by the SBV. The early adoption of Basel II affirms the capabilities, potential, and special attention Shinhan Bank pays to risk management.
Pillar 2 of Basel II is the Internal Capital Adequacy Assessment Process (ICAAP), which includes the measurement of material risks. In addition to credit risk, market risk, and operational risk as prescribed in Pillar 1 of Basel II, Shinhan Bank also measures and allocates its capital to interest rate risk in the banking book, concentration risk, settlement risk and other material risks. At the same time, Shinhank Bank conducts stress tests for the most challenging scenarios to create an appropriate strategic plan based on economic capital, own capital, and risk profile.
During the implementation of ICAAP, with support from Shinhan Financial Group in Korea and expert consultancy, Shinhan Bank Vietnam has upgraded its system to automate information processing from Risk Data Mart in a fast and accurate manner. This not only ensures compliance with the requirements regulated by the SBV, Shinhan Bank also proactively implements advanced standards set by the Basel Committee, such as using Internal Ratings-based approach (IRB) to calculate total credit risk-weighted assets.
Sharing about this event, Shin Dong Min, CEO of Shinhan Bank in Vietnam said, “Building a comprehensive risk management framework is one of the top priorities set by Shinhan Bank and Shinhan Financial Group in order to ensure safe and sustainable growth. The completion of all three pillars of Basel II will help Shinhan Bank strengthen risk management, improve performance, ensure operation safety, and contribute to building a sustainable and transparent banking system."
Previously, in October 2019, Shinhan Bank successfully implemented Pillar 1 and Pillar 3 of Basel II according to the standardised approach, ahead the deadline required by the SBV in the Circular No.41/2016/TT-NHNN.
In the future, Shinhan Bank intends to continue applying advanced Basel II standards to move towards the goal of applying Basel III standards in its risk management.