Legal Counselling

Vietnam: Supplementing 04 types of risks in activities of commercial banks

13:20, 08/01/2019

This is a notable content of Circular No. 40/2018/TT-NHNN of the State Bank of Vietnam amending and supplementing Circular No. 13/2018/TT-NHNN prescribing internal control systems of commercial banks and foreign bank branches.

In order for the banking system to operate effectively and avoid unnecessary losses, Circular No. 40/2018/TT-NHNN of the State Bank of Vietnam has supplemented 04 types of risks in activities of commercial banks and foreign bank branches, specifically as follows:

- Credit risk includes:

+ The risk of a customer’s failure or incapacity to fulfill part or all of debt repayment obligations;

+ The risk of a counterparty’s failure or incapacity to discharge part or all of payment obligations prior to or by the maturity dates of proprietary trades; repo and reverse repo transactions; etc.

- Market risk refers to the risk that may arise due to an adverse fluctuation in interest rates, securities prices and commodity market prices.

- Interest rate risk in the trading book refers to the risk incurred due to an adverse variation in interest rates with respect to income, value of assets, value of liabilities and value of off-balance-sheet commitments.

- Operational risk refers to the risk arising due to inadequate or failed internal processes, people, system errors, failures or external events that cause financial losses or non-financial negative impacts.

View details at Circular No. 40/2018/TT-NHNN of the State Bank of Vietnam, effective from February 12, 2019.

- Thanh Lam -

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