04 market risks in banking activities in Vietnam

17:40, 07/01/2019

On December 28, 2018, the State Bank of Vietnam issued Circular No. 40/2018/TT-NHNN amending and supplementing Circular No. 13/2018/TT-NHNN prescribing internal control systems of commercial banks and foreign bank branches.

Circular No. 40/2018/TT-NHNN of the State Bank of Vietnam supplements risks in activities of commercial banks and foreign bank branches, one of which is market risk. Specifically, market risk includes:

- Interest rate risk refers to the risk incurred due to an adverse variation in market interest rates with respect to value of securities, interest-bearing financial instruments, interest rate derivatives in the trading book of commercial banks and/or foreign bank branches;

- Foreign exchange risk refers to the risk incurred due to an adverse variation in foreign exchange rates occurring on the market when a commercial bank or foreign bank branch is running a foreign currency position;

- Equity risk refers to the risk incurred due to an adverse variation in market stock prices with respect to value of stocks, value of derivative securities in the trading book of commercial banks and/or foreign bank branches;

- Commodity risk refers to the risk that may arise due to an adverse variation in commodity prices with respect to value of commodity derivatives, value of products in spot transactions exposed to the commodity risk of commercial banks and/or foreign bank branches.

View other risks at Circular No. 40/2018/TT-NHNN of the State Bank of Vietnam, effective from February 12, 2019.

- Thanh Lam -

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