Shinhan Bank Vietnam has applied liquidity coverage ratio and net stable funding ratio indicators to manage liquidity risk in accordance with Basel III standards. — Photo courtesy of the bank

Shinhan Bank Vietnam Ltd. has adopted Basel III risk management indicators liquidity coverage ratio and net stable funding ratio indicators.

The constant improvement in the bank’s risk management system in accordance to meet the most advanced international standards points to its focus on managing risk.

In contrast with Basel II standards that are widely used by banks in Viet Nam, Basel III concentrates on strengthening capital and enhancing liquidity risk management.

LCR seeks to ensure that banks have enough liquid assets to meet their needs for 30 days, even in stress conditions.

This allows management and regulators enough time to take appropriate corrective actions, minimising negative impacts on individual banks as well as the financial system.

NSFR requires banks to maintain a sustainable capital structure that limits their reliance on short-term wholesale funding with both balance sheet and off-balance sheet assets.

As a result, banks’ regular funding sources will be more stable, reducing the risk of liquidity position erosion leading to a banking crisis and system-wide stress.

Based on the Basel III implementation experience in Korea and experts’ consultation, Shinhan developed a system to automatically calculate LCR and NSFR from the centralised risk data warehouse, and simultaneously set internal limits and integrate indicators into the comprehensive daily risk monitoring mechanism.

With its bright prospects in the medium and long terms, Viet Nam remains a key market for Shinhan Bank. — VNS