Basel ii and the risk management of banks in vietnam,graduation thesis

STATE BANK OF VIETNAM BANKING ACADEMY FACULTY OF FOREIGN LANGUAGES  GRADUATION THESIS BASEL II AND THE RISK MANAGEMENT OF BANKS IN VIETNAM Supervisor Nguyen Thi Hong Mai, M.A Student Bui Le Ngoc Quynh Student code 16A7510127 Class K16 – ATCA Hanoi, May 2017 Bui Le Ngoc Quynh – K16ATCA Graduation Thesis DECLARATION OF AUTHORSHIP I hereby declare that the Graduation Thesis “Basel II and the risk management of banks in Vietnam” is the results of my own research and has never been published in any work of others During the implementation process of this thesis, I have seriously taken research ethics; all findings of this thesis are results of my own research and surveys; all references in this thesis are clearly cited according to regulations I bear full responsibility for the fidelity of the number and data and other contents of my graduation thesis Hanoi, ……… May 2017 Signature Bui Le Ngoc Quynh Bui Le Ngoc Quynh – K16ATCA ACKNOWLEDGEMENT First and foremost, I wish to express my sincere gratitude and appreciation to my supervisor, Mrs Nguyen Thi Hong Mai Without her assistance and dedicated involvement in every step throughout the process, this thesis would have never been accomplished I would also like to thank all teachers in the faculty of Foreign Languages at Banking Academy of Vietnam for providing me with unfailing support and valuable knowledge over past four years Last but not least, none of this could have happened without unconditional love and encouragement from my family and friends I would like to acknowledge with a deep sense of reverence towards them Bui Le Ngoc Quynh – K16ATCA Graduation Thesis ABSTRACT Since the early 1990s, the Vietnamese banking system has been regarded as the lifeblood of Vietnam’s economy, an emerging market and newly industrialized economy Being still in the primitive stages of development and reforms, commercial banks in Vietnam have been confronting with various risks, such as credit risk, market risk, and operational risk Therefore, the banking industry is being demanding vital concentration into risk management Against the backdrop of Vietnam’s global integration, the business activity of Vietnamese banks is increasingly complicated; along with that competition pressure in both domestic and foreign market is growing more intense Consequently, the State Bank of Vietnam (SBV) and the government have synchronously coordinated moves toward the banking system to meet international standard of risk management, particularly Basel II Accord, a banking regulations set by the Basel Committee on Bank Supervision (BCBS) providing recommendations on banking regulations in regards to risks Nevertheless, it is urged that Vietnamese banks in are potentially exposed to plenty of fundamental challenges as the implementation of Basel Accord is a complicating task In this thesis, “Basel II and the risk management of banks in Vietnam”, by studying the practical application of Vietnam-based commercial banks recently, it is possible to evaluate the practical capacities and recommend appropriate solutions for the improvement of Vietnam's banking system Bui Le Ngoc Quynh – K16ATCA Graduation Thesis Bui Le Ngoc Quynh – K16ATCA TABLE OF CONTENTS LIST OF ABBREVIATIONS i LIST OF TABLES AND FIGURES iii INTRODUCTION 1 Research motivation/ Rationale Research objective Subject and scope Research methodology Structure of research CHAP 1: LITERATURE REVIEW 1.1 Theoretical background of Basel II Accord and risk management operation 1.1.1.Risk management operations in commercial banks a Commercial banks b Risks of commercial banks c Risk management operation of commercial banks 1.1.2.Basel II Accord a The advent of Basel Accord b Summary of Basel I c Overview of Basel II 10 1.2 Lessons learned from experiences of Basel II application from developing countries in the region 13 1.2.1.The application of Basel in the commercial banks of some developing countries outside the G-10 13 a Experience from Thailand 14 b Experience from Indonesia 14 c Experience from the Philippines 15 d Experience from Sri Lanka 15 1.2.2.Lessons learned from the Basel practice in risk management in countries around the world 16 Basel II and the risk management of banks in Vietnam Graduation Thesis Bui Le Ngoc Quynh – K16ATCA 1.2.3.Basel II implementation roadmap in Vietnam and its benefits 17 CHAP 2: CURRENT SITUATION OF THE APPLICATION OF THE BASEL II ACCORD IN THE RISK MANAGEMENT IN VIETNAMESE COMMERCIAL BANKS 20 2.1 Current situation of the financial capacity of Vietnamese banking system 20 2.2 Current situation of the application of the Basel II Accord in Vietnamese commercial banks 27 2.2.1 Current situation of the application of the Basel II first pillar 27 2.2.2 Current situation of the application of the Basel II second pillar 35 a Inspection and supervision operation of the SBV 35 b Inspection and supervision operation at commercial banks in Vietnam 38 2.2.3 Current situation of the application of the Basel II third pillar 40 a Statistic reporting system at the SBV 40 b Statistic reporting system at commercial banks in Vietnam 42 2.3 Assessment of the current situation of the application of the Basel II Accord in Vietnamese commercial banks 42 CHAP 3: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE EFFECIENCY OF THE APPLICATION OF THE BASEL II ACCORD IN THE RISK MANAGEMENT IN VIETNAMESE COMMERCIAL BANKS 49 3.1 Perfecting system of legal documents 49 3.2 Improving human resource’s quality 50 3.3 Improving the quality of credit information Error! Bookmark not defined 3.4 Implementing transparency policy and disclosure of information 55 3.5 Improving quality of credit rating 52 3.6 Improving the efficiency of banking inspection, control and supervision 54 3.7 Investing in risk management system with high technology infrastructure Error! Bookmark not defined CONCLUSION 57 REFERENCES 59 Basel II and the risk management of banks in Vietnam Graduation Thesis Bui Le Ngoc Quynh – K16ATCA LIST OF ABBREVIATIONS ACB Asia Commercial Joint Stock Bank Agribank Vietnam Bank of Agriculture and Rural Development BCBS Basel Committee on Banking Supervision BI Bank Indonesia BIDV Bank for Investment and Development of Vietnam BIS Bank for International Settlements BOD Board of Directors BOT Bank of Thailand BSP Central Bank of the Philippines CAR Capital Adequacy Ratio CBSL Central Bank of the Sri Lanka IDR Indonesian Rupiah M&A Merge and Acquisition Maritime Bank Vietnam Maritime Commercial Joint Stock Bank MB Military Commercial Joint Stock Bank NPLs Non-performed loans OECD Organisation for Economic Co-operation and Development ROA Return on assets ROE Return on equity RWA Risk Weighted Assets Sacombank Saigon Thuong Tin Commercial Joint Stock Bank Basel II and the risk management of banks in Vietnam i Graduation Thesis Bui Le Ngoc Quynh – K16ATCA SBV State Bank of Vietnam SOCBs State-owned commercial banks Techcombank Vietnam Technological and Commercial Joint Stock Bank TPP Trans Pacific Partnership VAMC Vietnam Asset Management Company VIB Vietnam International Commercial Joint Stock Bank Vietcombank Bank for Foreign Trade of Vietnam VietinBank Vietnam Joint Stock Commercial Bank for Industry and Trade VND Vietnam Dong VPBank Vietnam Prosperity Bank WTO World Trade Organization Basel II and the risk management of banks in Vietnam ii Bui Le Ngoc Quynh – K16ATCA Graduation Thesis LIST OF TABLES AND FIGURES List of tables Table Risk weight (Basel I) Risk weight Asset classification Table Types and quantities of banks in Vietnam 22 Table CAR of Credit Institutions in Vietnam and some countries 27 in the world Table Estimated CAR of 10 commercial banks piloting Basel II 33 List of figures Figure Major risks in banks Figure CAR of the commercial banking system 23 Figure Credit growth and GDP growth 24 Figure ROA of Vietnamese banking system 24 Figure ROE of Vietnamese banking system 24 Figure Liquidity of Vietnamese banking system 26 Figure CAR (calculated according Circular 36) of some Vietnamese commercial banks in 2015 28 Basel II and the risk management of banks in Vietnam iii Bui Le Ngoc Quynh – K16ATCA Graduation Thesis INTRODUCTION Research motivation/ Rationale In recent years, Vietnam is enthusiastically integrating into the world, witnessed the participation in WTO, or the TPP Along with this trend, there are many opportunities and challenges the Vietnamese economy has to face Therefore, Vietnam should pay attention to how to confront the unfavorable circumstance, to take the advantages out, and to turn challenges into opportunities Banking sector which is considered a sensitive area plays the most important role in the economy Based on the banking activity, we can figure out clearly whether the economy is healthy or not As a consequence, to participate actively, to enhance competitiveness in the international playing field, and to implement business goals safely and effectively, all members of Vietnam banking system should be aware and willing to engage with a number of international standards, laws and regulations However, according to the World Bank and prestigious credit rating agencies, the risk management of most commercial banks operating in Vietnam is weak and that affects the sustainable development of Vietnam banking sector One of the treaties bank industries draw remarkable attention to is the international accord on capital adequacy in the banking operations, known as the Basel Accord Launched nearly 20 years ago, this accord is common with a lot of countries in the world In August 2014, SBV required 10 banks to complete the pilot practice for Basel II by 2018, before expanding the application to other banks During the roadmap of compliance, commercial banks are challenged with numerous complications; however, studies on Basel II in commercial banks are neither limited nor outdated There are few preliminary introductory articles about the Basel Accord and the promulgation from the SBV only In order to have comprehensive understanding of the practical application of the Basel II Accord in risk management of Vietnamese banks, the topic “Basel II and the risk management of banks in Vietnam” is chosen for this graduation thesis Basel II and the risk management of banks in Vietnam Graduation Thesis Bui Le Ngoc Quynh – K16ATCA commercial banks, the risk management area can then be applied to the possibilities When considering the application of the Basel II in Vietnamese commercial banks, the shortage of high qualified human resources is a common problem for all commercial banks and even for commercial bank supervisors such as the SBV Low qualifications and lack of experience are a common fact not only of the Vietnamese banking sector but of the whole economy It can be seen that in order to master and apply these standards, professionals in the governance, banking and management field must have a certain level of knowledge, good in foreign languages and mathematical knowledge and management knowledge Also the technical requirements are high for Vietnamese banking experts at this time Vietnamese commercial banks are competing with each other to keep qualified professionals in the banking sector through incentives such as salaries or bonuses However, with the current rapid growth of the banking system, the number of qualified professionals is not enough and requires a great deal of training In addition, the cost of courses with foreign experts in the field of finance - banking is usually very large, requiring a lot of time and effort Information on the stock market and capital markets is very important if a banking system wants to comply with Basel II standards Meanwhile, in fact, Vietnam stock market was born so far just over ten years Thus, it is difficult for banks to expect the support of information processing from the stock market to apply to their risk management According to regulations, the calculation and use of factors to consider the risk of each type of shares of each company can only be made when the list of commodities on the market must represent all sectors of the economy The issue of information disclosure has been much improved in recent times through mass media, newspapers, radio, and internet, especially on some official websites of ministries such as the Ministry of Information and Communications or egovernment gateways However, these reports are usually made in annual reports, and there is a relatively large lag in the timing of the events, so it is difficult to support banks in forecasting price and risk prevention The specialized statistical Basel II and the risk management of banks in Vietnam 47 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA information to create database for banks is very little, apart from CIC credit information center, almost no organization is able to collect and provide information Thus, the problem of lack of information as well as not fully supported information is one of the biggest difficulties that commercial banks in Vietnam encountered when applying the new standards of the Basel Basel II and the risk management of banks in Vietnam 48 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA CHAP 3: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE EFFECIENCY OF THE APPLICATION OF THE BASEL II ACCORD IN THE RISK MANAGEMENT IN VIETNAMESE COMMERCIAL BANKS 3.1 Perfecting system of legal documents It is important to be able to implement successfully the risk monitoring and risk management process in accordance with Basel II standards; therefore, the SBV has the role and responsibility in providing completed legal bases These legal frameworks specify the authority of organizations as well as the clear definitions of terminology or standards used as the basis for risk analysis In fact, the legal system of Vietnam's credit institutions, which was born in 1997, and amended and revised in 2014, is almost not up-to-date with the new regulations in Basel In addition, relevant decisions such as safety rates for credit institutions (Decision 457/2005, or 03/2007) or the Decree on the minimum charter capital are disjointed fragments of information A law regulating the operation of credit institutions with clear orientation on all activities and indicators of these organizations should be established Developing a Law on Banking Supervision on the principle of improving the independence, accountability, and transparency of banking supervisors is associated with the implementation of a risk-based monitoring mechanism The regulatory regime in the banking sector should be improved in line with market principles to promote fair competitive playing field and ensure the safety of the monetary and banking system The current banking accounting system needs to be reformed in line with international accounting standards, especially risk classification on debt quality, and risk provisioning The SBV should coordinate with ministries and agencies in completing the accounting system in accordance with the International Accounting Standards (IAS) and in developing policy solutions to improve internal control and audit methods in banks and thereby enabling banks to apply modern banking management technology and creating barriers against abuse and fraud There are incentives as well as coercive measures improving governance capacity of Basel II and the risk management of banks in Vietnam 49 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA commercial banks in order to harmonize the legal framework and to fully apply international standards on monetary banking business The policies and regulations on monetary and banking activities contribute to create a healthy environment and motivation for banks and businesses to develop their business The SBV should soon issue a guideline for the implementation of Basel standards on the basis of the selection of appropriate standards, with a focus on the regulations governing the internal rating of each bank For independent credit rating agencies, the SBV shall advise the Government and the Ministry of Finance to issue specific guidelines on the basis of the standard methodology of the Basel II 3.2 Improving human resource’s quality Among the resources that need to be mobilized and prepared to deploy Basel II, human resource is the most important factor, because without qualified human resources, no matter modern database management systems and complex models, they cannot be used most effectively In addition, a project in general and the Basel II project in particular needs a long period to implement, usually at least years Therefore, banks should have a policy of recruiting high quality personnel and commit themselves to a long-term commitment to the project First of all, it is necessary to timely train available human resource such as managers, supervisors of the SBV and commercial banks as well as credit officers to meet immediate demands Particularly, the SBV should cooperate with commercial banks to hold training courses to foster and update knowledge for managers in order to improve their ability in assessing, measuring, analyzing and controlling credit risk Especially, it should invite experts from international banks that successfully applied Basel II for intensive training and sharing practical experience Nevertheless, if considering medium and long term, it needs to train qualified workforces together with ability in anticipating trends of Vietnam’s banking industry In particular, it should limit number of universities with improper professional training that focus only on quantity instead of quality In this way, it can make the most of resources for training high- quality human resource on an Basel II and the risk management of banks in Vietnam 50 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA international level It is necessary to develop the supervision teams that have not only sufficient quantity, but also advanced banking skills The bank officers, especially banking inspectorates, should enhance the learning experience and strengthen international cooperation on banking inspection and supervision It is possible to improve professional skills for staff in the form of sending them abroad to practice in other countries, and have a long-term plan to train the staff with sufficient knowledge to operate, exploit and master the techniques of the most efficient new technical systems Vietnamese commercial banks need to actively participate in forums for commercial banks such as the Bank Administration Institute, the Association of Asset and Liabilities Managers Professional, the Banking Solutions Trading Company (BankTech), and other organizations and agencies to regularly update and exchange new knowledge and experiences Seminars and workshops on exchanging Basel II application experiences should be organized regularly in order to solve inquiries and difficulties timely 3.3 Investing in risk management system with high technology infrastructure In the market economy, science and technology with the unceasing development control systematically and globally the complicated operation of the banks Therefore, applying advanced technology to modernize the operations is an indispensable requirement in the process of integration of Vietnamese commercial banks Commercial banks should determine to spend an appreciate amount of the profit to invest in technology infrastructure A centralized data system is a prerequisite for building any risk management system in the bank Furthermore, commercial banks need to develop a system of documents including the Credit Manual, the Credit Committee Regulation, the Risk Management of the BOD Regulations, the Consumer Credit Rating Regulation, etc The database system must contain all information on banking activities as well as external information sources such as market interest rate, exchange rate, or customer's credit rating Based on that, the system provides algorithms for calculating and analyzing risk levels, minimum CAR and other parameters in risk quantification models Basel II and the risk management of banks in Vietnam 51 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA One of the fastest measures that can be taken to help commercial banks approach the system of risk management in accordance with Basel II standards is to invest in the purchase of software developed by companies specialized in producing software programs for banks Currently there are many companies that have such products available, and these solutions are applicable to commercial banks of many different scales However, in Vietnam, there is no Basel II risk management solution provided by a Vietnamese software company In addition, commercial banks need to deploy an extensive internal information network based on the application of network technology They need to upgrade the wide network and information technology infrastructure with technical solutions and communication methods suitable to the development level of the Vietnamese banking system and international standards Moreover, it is essential to enhance security system of information, data and network, to implement projects on upgrading network security solutions, assurance of asset safety and operation of the bank, and to build data transmission lines linking to the national information network to create initiative for the banks 3.4 Improving the efficiency of banking inspection, control and supervision Under the Basel II, the SBV plays the role of a banking watchdog that is particularly important for the stability of the entire banking system Therefore, the SBV has the right to take great initiative, including the right to make a high ruling to commercial banks if detecting any violations In order to fulfill this responsibility, the SBV should improve the efficiency of banking inspection and supervision activities as soon as possible Basel II forces regulators to change surveillance culture from compliance inspection to risk assessment The SBV should actively guide and urge commercial banks to promulgate regulations on standards and minimum capital requirements for risk management systems applied at banks They are prerequisites for the State regulators to approve the use of the banking corresponding risk management systems The SBV should renovate inspection contents, methods and procedures in line with the development of information technology and banking technology, and on the basis of the application of basic principles of effective Basel II and the risk management of banks in Vietnam 52 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA banking supervision of the BCBS and international standards The SBV must indeed be the licensing authority for all banking activities and the observance of monetary policies and legislation and banking operations in the Vietnamese territory  Perfect the organizational structure of the banking inspectorate The supervisory principles are based on the Basel Committee's principle of effective monitoring of bank performance and strict adherence to prudential rules  Continue to promote international cooperation and join international treaties and agreements on banking supervision and financial system safety Strengthen the exchange of information with foreign bank supervisors  Develop and implement an integrated and risk based inspection and supervision framework and methodology which is capable of early warning for banks  Undertake an overall assessment through the inspection and supervision of the bank in accordance with the 25 basic principles of the Basel Committee In order to promote the effectiveness of inspection and supervision, commercial banks need to change the inspection process in an appropriate manner in the direction not only of checking compliance in operation but also checking and assessing the level of risk in each business unit of the bank Commercial banks must plan and regularly monitor the implementation of their strategic objectives Commercial banks need to clearly define the responsibilities of each department within the bank to clearly identify the risk control points They are also the basis for senior staff or responsible staff to perform well the work of inspection and supervision Internal control departments are established with the primary function of conducting risk monitoring and compliance within their own organizations Therefore, only when the machinery maximizes its capacity and operates effectively, inspection and supervision of commercial banks can be evaluated as good and effective On the other hand, if internal controls are not working well, the overall supervision of the bank will be stagnant and cannot timely detect risks to prevent Basel II and the risk management of banks in Vietnam 53 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA 3.5 Improving quality of credit rating information Developing a plan to improve the information management system is a step to improve the database and to ensure that the risk model runs for the most accurate results for each bank The database is a prerequisite for implementing Basel II, it is also critical determinants of the success or failure of Basel II implementation at all banks At the request of Basel II, information and data of customers and collateral (including risk mitigation measures) must be kept for to years, while the bad debt information and data must be stored for to years Therefore, banks need to review and standardize the data to prepare for good implementation In the short-term, in order to promptly meet demands for credit rating on customers assisting the risk management and determining credit limits for customers, each commercial bank needs to build and develop a professional internal credit rating system In addition, commercial banks should be consistent with one another on criteria for rating and share information of customer for the objective and accurate assessment The SBV should become the bridge for commercial banks to share and exchange information about their customers Commercial banks need to study and add potential customer assessments to improve the forecasting function of the rating system A further point to note is that the banks need to consider criteria related to the market risk and collateral assets of each customer In the long run, it is necessary to establish independent credit rating agencies, especially focusing on the function for rating credit rather than announcing information as present From the experience of developed countries in the world and from the reality of Vietnamese economy, the Government should soon issue a Decree allowing the formation of professional credit rating agencies under the management of the SBV This helps the commercial banks have the opportunity to access high techniques, and ensure professionalism, independence and objectivity when evaluating customers Information on credit ratings of professional agencies will be reference materials for commercial banks Moreover, in order to enhance the international level and to prove the reliability of the evaluation ratings, credit rating Basel II and the risk management of banks in Vietnam 54 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA agencies must disclose the solvency liabilities for each rating level of the banks To this, credit rating agencies need to collect data for several years Therefore, they have to build data by providing free services rank in the first few years Attention should be paid to professional training in the parallel with morals training for the ranking officials To further improve the quality of credit information, documents guiding the establishment of credit rating systems in each bank as well as the establishment and operation of independent credit rating agencies should be official established For banks, the SBV should also clarify prerequisites in order to develop an independent credit rating system Banks that not meet the requirements will have to use the results of independent credit ratings of a prestigious organization designated by the SBV For independent credit rating agencies, authorizations may be made in various forms of ownership, but they must also be closely monitored to ensure the quality of these ratings There should be no collusion between the rating organization and the organization being ranked The criteria on quality of rating agencies must also be consistent with the Basel to strengthen disclosure regulations, improve the quality and reliability of information 3.6 Implementing transparency policy and disclosure of information Commercial banks need to review, revise and complete their internal procedures on credit activities, currency trading, foreign exchange, payment, money transfer, and information technology application in accordance with the related laws The risks that may occur need to be assessed in each business process to immediately take preventative measures and handle risks Banks must promptly report difficulties and problems in their business activities to the SBV for consideration, and provide accurate information and reports on monetary, credit and banking activities in a timely manner in accordance with regulations of the SBV Transparency and disclosure of information not only help the SBV and senior bank officials fully understand the operation of a commercial bank but also help Basel II and the risk management of banks in Vietnam 55 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA shareholders, other beneficiaries and the market understand properly the financial situation, management capacity of the bank in relation to the safety and healthy operation Therefore, the SBV should soon stipulate that the commercial banks should be transparent on the principle of detail, exactly, and timely The SBV should issue a document providing mechanisms with specific penalties and disciplines for banks that not report or in contravention of regulations on reporting formats, contents and deadlines At the same time, cases of repeated violations must be strictly sanctioned in order to avoid recidivism the next time The perfunctory behaviors should be prevented thoroughly by instructing banks to realize their benefits from information disclosure Basel II and the risk management of banks in Vietnam 56 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA CONCLUSION The Basel Accord with standardized content of the risk management is considered a remarkable turning point in the process of reforming global risk management Thanks to the revolutionary content, the Basel Accord in general and Basel II in particular not only have been performed in multinational banks of G-10 as the initial target but have become a benchmark for risk management in banking industries worldwide According to the Basel Committee on Banking Supervision, there are about 100 countries besides G-10 declaring their intention to implement the Basel within the framework of their domestic banking systems It is undeniable evidence that macroeconomic managers in developing countries desire to shift towards Basel II orientation As other banking systems, the objective of Vietnamese banking system is safe, effective and sustainable Furthermore, compared with the international practice, the level of risk in credit activities of commercial banks in Vietnam, especially in Stateowned commercial banks, is high and brings unpredictable consequences Therefore, the analysis and application of Basel standards is indispensable to ensure the safeness in the operation of Vietnam- based commercial banks as well as of the entire economy in the context of integration With strict standards, the Basel Accord generally and Basel II particularly create challenges in deployment, even for large banks around the world As a result, there is no surprise that the application of Basel encounters significant barriers in the banking system of the developing country, including Vietnam, requiring the coordination and consensus of many departments involved By combining analytical and synthesized methods, based on the fundamental norms of the Basel Committee on Banking Supervision and the practical activities of Vietnamese commercial banks, the thesis "Basel II and the risk management of banks in Vietnam" has completed the following contents: Basel II and the risk management of banks in Vietnam 57 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA Systematize theoretical background of risk management standards under the Basel II Accord; Outline the basic contents of Basel I and Basel II with conditions to apply the Basel standards; Analyze the current status of Vietnamese commercial banks in accordance with Basel II standards evidenced by verified data from 10 commercial banks the SBV nominates to pilot Basel II; Thereby, expose limitations of the application in these banks and leading causes; Propose solutions and recommendations for Vietnamese commercial banks to approach and improve risk management operation in banking activities under the Basel II Accord However, the successful application of Basel II is a long- term complex issue, therefore, the solutions and recommendations in the thesis are only an initial contribution to the process Due to the extensive scope and content of the Basel II Accord and the numerous additional guidance documents, this thesis is only a preliminary study The author wishes to receive the feedbacks from lecturers for the thesis to be completed at a higher level of research Basel II and the risk management of banks in Vietnam 58 Bui Le Ngoc Quynh – K16ATCA Graduation Thesis REFERENCES Bao Viet Securities interview with Dr Nguyen Tri Hieu Articles, (November 2014), Implementing Basel II requires transparency Basel Committee on Banking Supervision, (January 2001), Overview of the New Basel Capital Accord Basel Committee on Banking Supervision, (June 2004), The New Basel Capital Accord: an explanatory note Principles for the Management and Supervision of Interest Rate Risk Operational Risk International Convergence of Capital Measurement and Capital Standards Basel Committee on Banking Supervision, (November 2005), Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework Delloitte & Touch Tomatsu, (Financial Services, 2005), Understanding the Framework Adopting the Basel II Accord in Asia Pacific PhD Le Minh Trang, (2015), Risk management in Vietnamese commercial banks – Lecturing Address Dr Tran Viet Dung, (2016), Application of the Basel II Accord: International Experience and Implications for Vietnam – Doctor of Philosophy Thesis MA Vien The Giang, (2012) , Improve the credit risk management in BIDV to meet the CAR of the Treaty of Basel Committee – Doctoral Thesis Ministry of Justice of Vietnam, Law on Credit Institutions 2014 PhD Nguyen Anh Tuan, (October 2011), Insight into the finance and banking sector – Foreign Trade University’s International scientific conference with topic “Global Finance and Banking Management” Basel II and the risk management of banks in Vietnam 59 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA Stefan Hohl, Patrick McGuire and Eli Remolona, (2011), Cross-border banking in Asia: Basel and other prudential issues The Organization for Economic Co-operation and Development Structural Policy, (2015), Country Notes: Vietnam The State Bank of Vietnam, Annual Report (2011, 2013, 2014, 2015) Valladares M R., (July 2014), Basel II: Can it be implemented in Emerging Markets? Assoc Prof Le Thi Kim Nhung, Vietnam's banking system after years of WTO accession: Current status and recommendations – Journal of Banking Number 11/ 2013 World Bank, (2014), World Development Indicators: Domestic credit provided by banking sector World Bank, (2015), World Development Indicators: Vietnam World Bank Vietnam, (January 2013), Development Report 2012: Market Economy for a Middle-income Vietnam WEBSITES: Official websites of Vietcombank, VietinBank, BIDV, MB, Sacombank, Techcombank, ACB, VPBank, VIB, and Maritime Bank https://www.banktech.com (Bank Systems & Technology) https://www.baochinhphu.vn https://www.bis.org (Bank for International Settlement) https://www.fitchratings.com (Fitch ICBA) https://www.imf.org (International Monetary Fund Home Page) Basel II and the risk management of banks in Vietnam 60 Graduation Thesis Bui Le Ngoc Quynh – K16ATCA https://www.mof.gov.vn (Ministry of Finance of Vietnam) https://www.sbv.gov.vn (The State Bank of Vietnam) https://www.tapchitaichinh.vn https://www.vietstock.vn https://www.vneconomy.com.vn Basel II and the risk management of banks in Vietnam 61