What is the equity and minimum prudential capital ratio of the non-bank credit institution in Vietnam?

According to Article 9 of the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam (SBV), the equity equals (=) Tier 1 capital plus (+) Tier 2 capital minus (-) the deductions stipulated in Appendix 1 hereto.

Minimum prudential capital ratio is specified as follows:

- The minimum prudential capital ratio (MPCR) reflects the capital adequacy of the non-bank credit institution based on the value of its equity and level of operational risk. Every non-bank credit institution shall maintain MPCRs.

- A non-bank credit institution’s MPCR:

+ MPCR of a non-bank credit institution consists of standalone MPCAR and consolidated MPCR.

+ Standalone MPCR: Each non-bank credit institution’s MPCR must maintain the standalone MPCR of 9%.

Standalone MPCR is calculated according to the following formula:

Standalone MPCR (%) = [(Standalone equity) : (Total standalone risk-weighted asset)] x 100%

In which:

- Standalone equity is determined according to Appendix 1 attached to the Circular No. 23/2020/TT-NHNN.

- Total standalone risk-weighted assets is the sum of on-balance assets, determined according to the level of risks and value of corresponding on-balance assets of off-balance sheet commitments according to the level of risk specified in Appendix 2 attached to the Circular No. 23/2020/TT-NHNN.

+ Consolidated MPCR: With respect to a financial company that has a subsidiary, it shall maintain a consolidated MPCR of 9% in addition to the individual CAR specified in Point b Clause 2 Article 9 of the Circular No. 23/2020/TT-NHNN.

Consolidated MPCR is calculated according to the following formula:

Consolidated MPCR (%) = [(Consolidated equity) : (Total consolidated risk-weighted asset)] x 100%

In which:

- Consolidated equity is determined according to Appendix 1 attached to the Circular No. 23/2020/TT-NHNN.

- Total consolidated risk-weighted asset is determined according to Appendix 2 attached to the Circular No. 23/2020/TT-NHNN.

More details at the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam, effective from February 14, 2021.

Thuy Tram

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