Open AccessImplementation of Internal Capital Adequacy and Assessment Process in Vietnamese Commercial Banks
Author(s) -
Duong Thuy Nguyen,
Hang Thu,
Thi-Hoai-Thu Nguyen,
Ngan Bich Nguyen
Publication year - 2021
Publication title -
asian economic and financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.215
H-Index - 10
eISSN - 2305-2147
pISSN - 2222-6737
DOI - 10.18488/journal.aefr.2021.1111.873.893
Subject(s) - basel ii , risk weighted asset , risk adjusted return on capital , vietnamese , capital requirement , basel i , operational risk , capital (architecture) , capital adequacy ratio , business , basel iii , accounting , risk analysis (engineering) , computer science , economics , finance , risk management , financial capital , capital formation , human capital , profit (economics) , linguistics , philosophy , archaeology , microeconomics , history , incentive , economic growth
The internal capital adequacy and assessment process (ICAAP) was first introduced in the second pillar of Basel II in 2004 to offset the deficiencies of Basel I and capital adequacy regulations in the first pillar of Basel II. This process is aimed at identifying and measuring risks generated in banks’ activities, and then provides the requirements for internal capital levels and methods to raise capital to deal with these risks. In fact, the implementation of Basel II and ICAAP in Vietnamese commercial banks has attained notable achievements, but it also revealed some major weaknesses. The purpose of this research is to evaluate the implementation of ICAAP in Vietnamese commercial banks in eight components of the ICAAP addressed by Basel II using the survey method and then to simulate the implementation of ICAAP in a Vietnamese commercial bank. From the facts and the simulation of the ICAAP framework in this study, the authors offer some suggestions for Vietnamese commercial banks to implement ICAAP effectively in their banking operations.