Vietnam: The calculation of liquid reserve ratio

According to Circular No. 16/2018/TT-NHNN of the State Bank of Vietnam, the calculation of liquid reserve ratio is based on the following formula:

Where:

- Highly liquid assets are determined according to the Appendix 3 hereof;

- Total liability denotes total liability entry on a balance sheet minus:

+ Refinanced loans made by the State Bank through discount on valuable papers, loans pledged by valuable papers (minus the refinanced loans made by the State Bank based on bonds issued by Vietnam Asset Management Company); overnight loans made through the interbank electronic payment system; forward sale of valuable papers through open market operations of the State Bank; forward sale of valuable papers through open market operations of the State Bank.

+ Credit extensions of other credit institutions and foreign bank branches through forward sale, discount, re-discount and pledged loans:  (i) valuable papers used in the State Bank's transactions; (ii) bonds or treasury bills issued by or issued under the guarantee by the Governments or Central Banks of countries rated at least “AA” by an international credit rating agency (Standard & Poor’s, or Fitch Rating) or other corresponding rank of other independent credit rating organizations.

Notably, highly liquid assets and total liability are calculated in VND, including VND and other freely convertible foreign currencies converted into VND according to the exchange rate regulated.

View details at Circular No. 16/2018/TT-NHNN of the State Bank of Vietnam, effective from July 31, 2018.

-Thao Uyen-

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