The headquarters of the State Bank of Vietnam (Photo: VNA) Hanoi (VNS/VNA) - The State Bank of Vietnam (SBV) iscollecting comments on its draft circular to minimise potential risks fornon-banking credit institutions and ensure they work in accordance withinternational standards.
The draft circular stipulates the internal control system ofnon-banking credit institutions, which include financial companies, financialleasing companies and other non-banking credit institutions.
According to the SBV, the operation of non-banking creditinstitutions is simpler than that of commercial banks and foreign bankbranches. Under the current legal regulations, the institutions are not allowedto receive deposits from individuals, but only from organisations; as well asnot being permitted to provide payment means and payment services likecommercial banks and foreign bank branches, but their operations still poserisks.
Therefore, the establishment of a risk management system accordingto Basel standards can be considered a solution to minimise potential risksthat may occur during the operation of non-banking credit institutions, the SBVsaid, adding that the change is also consistent with the current trend ofcorporate governance in general.
The draft circular stipulates the internal control system musthave three independent protection lines.
The first line has the function of identifying, controlling andmitigating risks. Banks’ divisions related to sales, risk control, accountingand human resources will take responsibility for the line.
The second line has the function of developing risk managementpolicies and internal regulations on risk management. It also takes theresponsibility for measuring and monitoring risks.
The third line has the function of internal auditing, which willbe performed by the banks’ internal audit division in accordance with the Lawon Credit Institutions and this circular.
According to the SBV, the draft circular is also consistent withthe regulations in Basel which also has the similar three-line protectionmodel.
Besides, the new regulations in the draft circular are dispensableas the Law on Credit Institutions has also amended and supplemented regulationsthat credit institutions must issue internal regulations to ensure riskmanagement, the SBV said./.
The draft circular stipulates the internal control system ofnon-banking credit institutions, which include financial companies, financialleasing companies and other non-banking credit institutions.
According to the SBV, the operation of non-banking creditinstitutions is simpler than that of commercial banks and foreign bankbranches. Under the current legal regulations, the institutions are not allowedto receive deposits from individuals, but only from organisations; as well asnot being permitted to provide payment means and payment services likecommercial banks and foreign bank branches, but their operations still poserisks.
Therefore, the establishment of a risk management system accordingto Basel standards can be considered a solution to minimise potential risksthat may occur during the operation of non-banking credit institutions, the SBVsaid, adding that the change is also consistent with the current trend ofcorporate governance in general.
The draft circular stipulates the internal control system musthave three independent protection lines.
The first line has the function of identifying, controlling andmitigating risks. Banks’ divisions related to sales, risk control, accountingand human resources will take responsibility for the line.
The second line has the function of developing risk managementpolicies and internal regulations on risk management. It also takes theresponsibility for measuring and monitoring risks.
The third line has the function of internal auditing, which willbe performed by the banks’ internal audit division in accordance with the Lawon Credit Institutions and this circular.
According to the SBV, the draft circular is also consistent withthe regulations in Basel which also has the similar three-line protectionmodel.
Besides, the new regulations in the draft circular are dispensableas the Law on Credit Institutions has also amended and supplemented regulationsthat credit institutions must issue internal regulations to ensure riskmanagement, the SBV said./.
VNA
