Legal Counselling

Vietnam: The internal control system must have 03 lines of defense

13:53, 17/09/2018

This is a notable content of Circular No. 13/2018/TT-NHNN of the State Bank of Vietnam on internal control systems of commercial banks and foreign banks’ branches.

According to Circular No. 13/2018/TT-NHNN of the State Bank of Vietnam, commercial banks and foreign banks’ branches shall have 03 lines of defense, specifically as follows:

The first line of defense has the functions of risk identification, control and minimization, carried out by the following departments:

- Business departments (also including product development), other revenue-generating departments; departments responsible for making risk-bearing decisions;

- Departments responsible for risk limit allocation, risk management and risk minimization (affiliated with a business department or independent) in each type of transaction and business activity;

- Human resource department, accounting department;

The second line of defense has the functions of formulating risk management policies and internal regulations on risk management, measuring and monitoring risk in accordance with regulations of law, carried out by the following departments:

- Departments conforming to the regulations in Article 18 of this Circular;

- The risk management department specified in Article 22 of this Circular;

The third line of defense has the function of internal audit, carried out by the internal audit department specified in the Law on Credit Institutions and this Circular.

View details at Circular No. 13/2018/TT-NHNN of the State Bank of Vietnam, effective from January 01, 2019.

- Thanh Lam -

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