CO-TEACHING
1. Internal regulations
Independent audit
1. Operation of internal control system
+ Audit report
+ Management letter
+ Related docs
2. Independent audit of FSs
+ AC balance sheet
+ Business result report
+ CF report
+ Explanatory notes on FSs
→ stick to local regulation
Internal audit, internal control
→ regulation/policy within the company or from the headquarter
Special control
1. Insolvency due to low liquid assets or low tier-1 capital adequacy ratio
2. When the bank is put under special control → Circular 11
Prudential ratios
Banking operations
a) Deposit taking:
- Receiving money from an organization or individual as demand or term deposit, savings deposit,
issuing deposit certificates, bills or treasury bills, and other forms of receiving deposits on the
principles of full payment of principals and interests to depositors under agreement LDR
b) LDR used to assess:
A loan-to-deposit ratio shows a bank's ability to cover loan losses and withdrawals by
its customers.
1. Adequate liquidity to cover loans, especially in economic downturn
2. If a bank is managed properly
+ If bank lend too much its deposit à might overextend
+ If bank lend too few its deposit à low interest income à low earnings
+ If bank borrow money to lend à lower profit margin + more debts
Maximum LDR that bank needs to maintain is 85% (Circular 22/2019)
Exceptional cases that are not required to apply the maximum LDR?
The Governor of SBV shall impose specific ratios applicable to banks and FBBs over
their first 03 years of operation on a case-by-case basis.
1
A bank or FBB (Foreign Bank Branches) is not required to apply the LDR specified in
Clause 5 of this Article if its charter capital/assigned capital minus (-) cumulative loss
(according to the balance sheet when LDR), costs of fixed assets, capital contributions,
purchases of shares is greater than total loans.
When the bank reaches the maximum LDR, what should they do to?
Prove to the SBV that the bank has other strengths that sufficient enough to maintain
the credit stability
e.g., Non-performing loan ratio (% of loans that are not being repaid) ~ 0
c) CASA (Current Account- Savings Account)
reflect both the profitability and prudential
CASA: A bank account that combines the function of a checking and savings account
The customer gets little or no interest on the current account money that is used
routinely to pay bills but is paid interest on the savings portion.
- Benefits: CASA tends to be cheaper way for a bank to raise money than issuing
term deposit
- Drawback: Uncertainty à bank cannot be sure how much money it will actually
have available to lend
d) CAR (Capital Adequacy ratio)
Reflect prudential, The capital adequacy ratio is calculated by dividing a bank's capital by its
riskweighted assets.
- Measures a bank's financial strength by using its capital and assets. → Ensuring that banks have
enough cushion to absorb a reasonable amount of losses before they become insolvent and
consequently lose depositors’ funds → used to protect depositors and promote the stability and
efficiency of financial systems around the world.
- Minimum CAR ratio: 8% under Basel II and 10.5% under Basel III
e) NIM (Net Interest margin)
- It reveals how much the bank is earning in interest on its loans compared to how much it is
paying out in interest on deposits. reflect the profitability of a credit institutions
NIM high
→ Interest received from loan is high
→ They have a good deal
- Borrowers who are willing to pay high interest
- Depositors who are lending a high amount to bank with a low interest
→ LDR may be been reached
→ Higher CASA → (Lower cost of funds) à Higher NIM
How many forms if deposits eligible for premature withdrawals?
A few certain forms (Circular 4/2022)
- Time savings deposits (Tiền gửi tiết kiệm có kỳ hạn)
- Time deposits. (Tiền gửi có kỳ hạn)
- Deposit certificates, bills, treasury bills, and bonds issued by credit institutions. (Chứng chỉ tiền
gửi, kỳ phiếu, tín phiếu và trái phiếu do tổ chức tín dụng phát hành)
- Các hình thức nhận tiền gửi có kỳ hạn khác theo quy định tại Luật Các tổ chức tín dụng.
