Limiting systemic risks in the monetary, banking and financial sectors

VTV.vn - The State Bank of Vietnam is drafting a Circular regulating the procedures for identifying, assessing, preventing and limiting systemic risks in the monetary, banking and financial sectors.

Proposing procedures to identify and limit systemic risks in the monetary, banking and financial sectors

According to the draft, this procedure will not overlap with the management and supervision processes according to the functions and tasks of the units under the State Bank. In particular, the work of identifying and assessing risks is carried out through analyzing developments from domestic and international macroeconomic and financial sectors, identifying risks spreading between sectors, and building scenarios to forecast the impact of domestic and international policies or fluctuations.

At the same time, the endurance of credit institutions, foreign bank branches and the business sector will be tested. Measures to prevent and limit systemic risks will be determined based on assessment results, specific developments, causes as well as domestic and international experience, in accordance with legal regulations.

Systemic risk identification and assessment is carried out through the analysis of one, some or all of the following:

1. Analyze developments and assess potential systemic risks originating from domestic and international macroeconomic and financial sectors, including: Risks from the real economic sector; risks from the monetary and credit sector; risks from the foreign sector; risks from the fiscal sector.

2. Identify and assess systemic risks in the monetary, banking and financial sectors according to the intermediate objectives of the macro-prudential policy according to international practices, including: Risks of credit growth and excessive leverage; risks of excessive credit concentration; liquidity risks; risks from the unsoundness of the monetary, banking and financial systems.

3. Analyze and identify the risk of contagion risk in the financial system originating from financial linkages within the banking system and linkages between the banking sector and other sectors, including one, some or all of the following contents: Linkages between credit institutions and foreign bank branches; linkages between the banking system and other financial institutions, including organizations operating in the fields of securities, insurance and investment fund management; linkages between the banking system and the real economic sector, including the business and household sectors; linkages between the banking system and asset markets, including the real estate market.

4. Develop analytical scenarios and forecast the impact of policy changes or domestic and international economic and financial shocks on the domestic monetary, banking and financial sectors.

5. Endurance testing is conducted periodically semi-annually, annually or at the request of the Governor of the State Bank for one, some or all of the following contents:

a) Check the endurance of credit institutions and foreign bank branches against risks related to credit, market, liquidity and other related risks;

b) Check the business sector's tolerance for risks in interest costs and profits;

c) In case of necessity or at the request of the Governor of the State Bank, test the endurance of other entities or types of risks arising outside the contents specified in points a and b above.

6. Identify and assess risks to systemically important commercial banks.

7. Conduct systematic risk assessments of reporting organizations.

Source: https://vtv.vn/han-che-rui-ro-co-tinh-he-thong-trong-linh-vuc-tien-te-ngan-hang-tai-chinh-100251001094154546.htm