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Official Gazette

Tuesday, August 22, 2017

Credit institutions advised to prudently manage risks

Updated: 16:27’ - 28/06/2014

Credit institutions and foreign bank branches must set up management systems for credit risks, liquidity risks, market risks, operational risks, and more.

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                            Customers carry out borrowing procedures at OceanBank, Dong Da branch
                                     (Hanoi)__Photo: Tran Viet/VNA

This is required by the State Bank of Vietnam in a draft circular providing risk management systems in the banking sector which has been recently posted on the central bank’s website www.sbv.gov.vn for public comments.

Meanwhile, non-bank credit institutions would be required to devise management systems for credit risks and operational risks.

As defined in the draft, a credit institution’s or foreign bank branch’s risk management system must be composed of four elements, including supervision of the Board of Directors, Members’ Council, parent bank and executive board; documents on risk management strategies, policies and processes; the management information system; and internal audit.

The draft goes on to stipulate that the risk management system would be structured and organized at three tiers being the Board of Directors or Members’ Council and parent bank; the executive board (risk management director or asset-liability committee); and the risk management sector based on the three-lines-of-defense principle.

Additionally, the risk management system must suit the scope, structure and complexity of business operations and be capable of identifying, measuring, assessing, monitoring, reporting and controlling risks arising in all operations of the credit institution or foreign bank branch.

The draft circular is expected to take effect on June 1. Credit institutions and foreign bank branches would be required to work out plans on building risk management systems under the circular within six months after its effective date and complete the work by June 1, 2016, at the latest.-


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