Implication of Basel III in

Vietnam - current situation

and case study of TPBank

Group 5

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OUR TEAM

Dương Thuỳ Trang Nguyễn Yến Nhi

Trần Thị Ngân Lâm Đình Đức

Phạm Vũ Phương Liên Nguyễn Ngọc Khánh Linh

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TABLE OF CONTENTS
01
BASEL III 02
Introduction to Basel III
IMPLICATION OF BASEL III
IN VIETNAM

03 2.1. Implementation of Basel III in Vietnam

2.2. Implication of Basel III in Vietnam
2.3. Some barriers
CASE STUDY OF TPBANK 2.4. Some recommendations
3.1. Introduction to TPBank
3.2. Basel III in TPBank
3.2.1. Pioneering steps
3.2.2. Advanced deployment
3.3. Advantages of Basel III for TPBank
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01
BASEL III

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THE MAJOR CHANGES OF BASEL III
Increasing Capital Adequacy and
1 Quality 6 Focusing on Risk-weighted Assets

Enhancing Risk Management

2 Capacity 7 Enhancing Credit Risk Management

Adjusting Mandatory Leverage

3 Ratio 8 Simplifying Operational Risk Treatment

Increasing the Leverage Ratio for

4 Improving Bank Liquidity 9 Large Banks

Establishing a Stronger and More

5 Limiting Pro-cyclicality 10 Risk-sensitive Income Floor

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02
IMPLICATION OF BASEL III
IN VIETNAM

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2.1.IMPLEMENTATION OF BASEL III IN VIETNAM

Regarding Basel III, there are currently no

regulations requiring the entire
application of this standard for
Vietnamese banks. However, some
banks have pioneered in implementing
Basel III such as: VIB, TPBank, MSB,
Nam A Bank, ACB, LienVietPostBank,...

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2.1.IMPLEMENTATION OF BASEL III IN VIETNAM

At the end of 2022, Moody's Investors

Service upgraded the ratings of 12
Vietnamese banks, all of which are
pioneer banks in risk management
activities. This confirms that the
reputation of many Vietnamese banks in
the international market is increasingly
being consolidated and enhanced.

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2.2.IMPLICATION OF BASEL III IN VIETNAM

Regarding capital quality and adequacy.

Basel III has raised the minimum
common equity tier 1 ratio to 4.5 per
cent with an additional capital buffer of
2.5 per cent, bringing the minimum
requirement to 7 per cent

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2.2. IMPLICATION OF BASEL III IN VIETNAM

A counter-cyclical capital buffer to

enhance macroeconomic stability
can help counter a common issue
seen during periods of strong
economic growth, when systemic
risks in the banking sector are
expected to increase.
Conversely, during economic
downturns, credit can tighten
excessively, exacerbating the
problem.

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2.2. IMPLICATION OF BASEL III IN VIETNAM
THIRD FOURTH
The third aspect involves regulations that These adjustments aim to enhance
allow write-down and converting capital the sensitivity of risk-based capital
instruments into equity when financial estimation and the comparability of
institutions fail to meet minimum capital capital requirements based on risk
adequacy ratios. This regulation will profiles of commercial banks
provide an additional mechanism for
banks to ensure safety in a crisis.

FIFTH SIXTH
The output floor limits the level of The leverage ratio aims to limit banks from
capital estimated from internal excessively using debt instruments (both
models for all types of risks to a on-balance sheet and off-balance sheet)
floor level calculated using the while maintaining a healthy capital
standardized approach of Basel III. adequacy ratio. This isn't considered a
major issue for banks in Vietnam. 11
2.2. IMPLICATION OF BASEL III IN VIETNAM

Basel III introduces additional liquidity The NSFR, on the other hand, aims to
monitoring metrics. Based on the lessons complement the LCR by encouraging
learned from the 2008 crisis, Basel III has banks to maintain stable funding
introduced two key ratios: the liquidity sources to meet their cash flow needs
coverage ratio (LCR) and the net stable over a one-year period
funding ratio (NSFR). The LCR aims to
enhance a bank's resilience to short-term
liquidity stress by requiring banks to hold
sufficient high-quality liquid assets to meet
their net cash outflow needs over a 30-day
period during a crisis

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2.2.IMPLICATION OF BASEL III IN VIETNAM

Basel III enhances regulations on the

management and measurement of
interest rate risk on the banking book.
These regulations aim to improve the
quality of capital measurement for
interest rate risk on the banking book
and provide a more accurate reflection
of the cash flow nature of these
instruments.

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2.2. IMPLICATION OF BASEL III IN VIETNAM

Basel III introduces enhanced monitoring

of large exposures, aiming to minimize
risk concentration and systemic risk
among financial institutions. Different
from Vietnam's current principles of
concentration risk calculation, which
focus on outstanding credit loans, Basel
III expands the scope of large exposure
to include risk exposure arising from
counterparties/customers (other than
outstanding credit) such as derivatives
or repo/re-repo.

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2.2. IMPLICATION OF BASEL III IN VIETNAM

By improving disclosure requirements,

Basel III promotes greater
transparency in banks' risk
management activities beyond the
simple safety ratios, thereby
increasing trust and confidence in the
financial market.

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Basel III emphasizes the establishment
of a robust risk governance framework,
including the development of an
appropriate compensation regime that
integrates both business performance
and long-term risk assessment results

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2.3. SOME BARRIERS

FIRST SECOND THIRD

The challenge of capital Lacking an accurate, reliable A lack of a unified credit
resources and regularly updated rating basis for the entire
banking data center banking system

FOURTH FIFTH SIXTH

Barriers to the quality of Vietnamese commercial The cost Basel III is high
human resources banks have not yet met the and the financial capacity
conditions of Basel III (the of Vietnamese commercial
high capital requirements) banks is limited 17
2.4. SOME RECOMMENDATIONS
Improve the data quality of the Vietnam National
Credit Information Center (CIC)

Perfect the credit rating method

Improve the effectiveness of the internal audit

system and supervision capacity

Improve the quality of human resources

Increase capital sources according to Basel III

requirements 18
03
CASE STUDY OF TPBANK

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3.1. INTRODUCTION TO TPBANK

Tien Phong Bank (TPBank) is a

Vietnamese commercial bank
established in 2008 with
headquarters in Hanoi city, Vietnam.
TPBank provides banking services
to individuals, businesses and
financial institutions, including
deposit accounts, borrowing and
lending, payments, credit cards,
securities, insurance and e-banking
services.

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3.2. BASEL III IN TPBANK
3.2.1. PIONEERING STEPS
Since 2015, the bank has been interested in Basel III and
has conducted internal research on liquidity risk
management, liquidity assurance ratio, net stable capital
ratio and leverage ratio

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“From the end of 2020, TPBank has implemented
the remaining components of Basel III and aims to
fully meet the agreement by early October 2021.
That explains why the bank finalized Basel III
standards shortly after the comprehensive
implementation of Basel II early last year.”

—MR. NGUYEN HUNG

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TO MEET THE BASEL III COMPONENT,
IN 2021
TPBank has completed a private placement of 100 million shares at a price of VND
33,000 per share. The issuance results help strengthen the capital base, and also
show shareholders' confidence in the future development of the bank
The capital adequacy ratio (CAR) after completing the capital increase reached
13.43%, much higher than the minimum level of 8% stipulated by the SBV and also
higher than the standard of 10.5% of Basel III.
Total assets increased by 7% compared to the beginning of the year and exceeded
the plan by 4%.
Non-Performing loan ratio improved to 1.02%
ROA and ROE are 2% and 22.6%, respectively, among the highest banks in Vietnam.

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3.2.2. ADVANCED DEPLOYMENT

By 2023, despite meeting Basel III

standards, TP Bank will continue to
raise this standard to a higher level
when deploying capital according to
the internal rating method (IRB)
(basic and advanced).

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Applications of IRB
management
Proactive portfolio management
Limit determination
activities
according to risk levels
Credit

The bank's taste for each

Loan valuation
specific risk portfolio

Performance measurement Risk adjusted returns

Thereby contributing to capital allocation decisions, and

effective capital planning/strategy.
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To perform calculations This project is a significant
under IRB, the bank must challenge for TPBank, but
meet the requirements when successful, it will
for data quality and create a new step forward in
model governance risk management, adding
long-term core values.

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3.3. Advantages of Basel III for TPBank
Building belief: The increased level of maturity in risk
management of the bank creates confidence, creating a
good, stable image of TPBank and Vietnam for investors
and the market when sending trust.

Increase access to capital: With this platform, banks have

the opportunity to access cheaper capital sources from
organizations, as well as broader access to foreign
investors.

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3.3. Advantages of Basel III for TPBank
Create sustainability: The benefit of applying new
standards is to help reduce operational risks, improve
management capacity, and the bank's resilience to
possible events

Bring experience to other banks: When the market has

pioneering organizations implementing Basel III, such as
TPBank, it will bring experience in implementation to other
banks, when problems in TP Bank's operations will be
shared, listened to, and discussed with policy makers.

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THANKS FOR
LISTENING
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RESOURCES
━ 1. BASEL III: IMPLEMENTATION IN VIETNAM AND SOME RECOMMENDATIONS (2024)
━ 2. Basel Committee on Banking Supervision (2010), Countercyclical capital buffer
proposal, Bank for International Settlements.
━ 4. Quỳnh Trang (2022), Chủ động tiến tới Basel III.
━ 5. Thủy Tiên (2020), Đi trước làm việc khó, một ngân hàng thí điểm chuẩn mực Basel III tại
Việt Nam.
━ 6. Thanh Anh (2022), Nhiều ngân hàng chuẩn bị hoàn thành Basel III.
━ 7. Xuân Thanh (2018), Một số điểm cơ bản về cải cách Basel III, Cổng thông tin điện tử
ngân hàng nhà nước Việt Nam.
━ 8. TPBank (2021), Basel III và vị thế “Người Tiên Phong”.
━ 9. TPBank (2023), TPBank triển khai mức Basel III nâng cao.

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