Vietnam’s new regulations on market risk management strategies in banking sector

09:14, 08/01/2019

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.

According to Circular No. 40/2018/TT-NHNN of the State Bank of Vietnam, market risk management strategies must include at least the following contents:

- The required risk position in the accounting book;

- Principles of market risk management in normal conditions and in case of high volatility in security prices, commodity prices, exchange rates, gold prices and interest rates subject to the commercial bank’s/foreign bank branch’s internal regulations;

- Principles of implementing market risk prevention measures.

Besides, the market risk limits are also amended, specifically as follows:

- Interest rate risk limit Interest rate risk limit for transacted product portfolio, limit for transactors, loss recovery limit, the total risk position limit in the accounting book;

- Foreign exchange risk limit: Limits on positive foreign exchange position; negative foreign exchange position, gold position; limit for traders; loss recovery limit;

- Proprietary share price limit for security companies that are commercial banks’ subsidiaries;

- Commodity price risk limit: limit for transacted product portfolios; limit for transactors; loss recovery limit.

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

- Thanh Lam -

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