What are principles of control activities for proprietary transactions of commercial banks in Vietnam?

What are principles of control activities for proprietary transactions of commercial banks in Vietnam? - Image from Internet

The principles of control activities for proprietary transactions of commercial banks in Vietnam are stipulated under Clause 1 Article 17 of the Circular 13/2018/TT-NHNN by the Governor of the State Bank of Vietnam, which provides the internal control systems of commercial banks and foreign banks’ branches, as follows:

Control activities for the commercial bank’s/foreign bank's branch’s proprietary transactions must comply with Clauses 1 and 2, Article 15 of this Circular. Specifically:

1. The commercial bank’s/foreign bank's branch’s control activities shall be carried out at least as follows:

a) Allocation of competence to approve must be based on prestige of the competent level and capacity of the executing individual/department. The competence to approve must be displayed by transaction scale and risk limit criteria, alongside other limits specified in the commercial bank’s/foreign bank's branch’s internal regulations;

b) The commercial bank’s (including the headquarters, branches and other affiliates) or foreign bank's branch’s regulations on functions and tasks of individuals/departments at all levels and in all types of transactions must apply the following principles:

(i) Members of the Board of Directors/Members’ Council shall not participate in review and approval of risk-bearing decisions which belong to the functions and tasks of the Director General (Director), unless the Director General (Director) is one of those members;

(ii) Divide the functions and tasks among transactions and business processes in order to avoid or control, prevent conflict of interest; an individual shall not be in control of a whole transaction or its process; an individual shall not be given tasks that give rise to conflict of interest;

(iii) There are independent individuals within a department, or belong to departments which are independent from each other in order to carry out scheduled and unscheduled inspections as specified in the commercial bank’s/foreign bank's branch’s internal regulations;

(iv) If conflict of interest or violation against internal regulations still occurs despite implementation of regulations specified in Points b(ii) and b(iii), the commercial bank/foreign bank's branch must identify the cause, have measures for minimization of operational risk , carry out tight surveillance and independent assessment more frequently;

c) Allocation of each individual’s/department’s management duties (also including receiving and delivering, storage, transport, inspection, inventory) for assets (including both financial and material assets) must be based on asset value or other specific limits specified in the commercial bank’s/foreign bank's branch’s internal regulations;

d) Bookkeeping complies with accounting standards and regulations; compile, produce and send financial reports in accordance with regulations of law and internal regulations of the commercial bank/foreign bank's branch. Bookkeeping must be inspected and compared in order to detect and rectify errors in a timely manner and must be reported to competent level as specified in the commercial bank’s/foreign bank's branch’s internal regulations;

dd) Have measures for prevention of and taking action against violations of law and internal regulations of the commercial bank (including the headquarters, branches and other affiliates) or foreign bank's branch;

e) Human resources allocation must be appropriate for each business and control activity (including substitutes for absent managers and employees, recruitment, manager transfer and appointment).

2. Controls activities in the commercial bank’s headquarters, branches and other affiliates must ensure that:

a) The headquarters is able to oversee and control transactions and activities of the branches and other affiliates, also including oversight and control through individuals and departments carrying out control activities in those branches and affiliates;

b) There are regulations on functions, tasks, report mechanism, reward/discipline, manager transfer and other mechanisms in order to ensure independence and that the branch’s/other affiliate’s individual/department carrying out control activities does not have conflict of interest with other individuals/departments of the same branch/other affiliate;

c) There are mechanisms that allow clients to search, check and compare transactions carried out in the commercial bank’s branches/other affiliates to those carried out in the headquarters.

Above are principles of control activities for proprietary transactions of commercial banks in Vietnam. Please refer to the Circular 13/2018/TT-NHNN for further information.

Best regards!