Application of BASEL III in Vietnam – Current Situation and Legal Improvement Solutions

Abstract: Basel III standards, issued by the Basel Committee on Banking Supervision (BCBS), aim to strengthen the resilience of the banking system against financial shocks, particularly in the aftermath of the 2008-2009 global financial crisis. In Viet Nam, the adoption and implementation of Basel III standards have been carried out in a phased manner. Although specific achievements have been made, the legal framework governing banking safety and soundness still exhibits limitations and shortcomings relative to the Basel requirements. This article analyzes the current state of Basel III implementation in Vietnam from a legal perspective, clarifying existing gaps and challenges in the legal system. Based on this analysis, the article proposes several solutions to improve banking safety and soundness regulations, thereby enhancing the effectiveness of state management and ensuring the safe and sustainable development of Vietnam’s banking system.

Keywords: Basel III; banking safety and soundness; banking law; risk management.

I. Introduction

Banks are the core financial intermediaries of the economy, playing the role of mobilizing and allocating capital. If the credit mechanism operates without proper control, risks such as non-performing loans, loss of liquidity, or chain collapse may occur, causing negative impacts on the entire economic–financial system. Capital adequacy, risk management, and financial transparency constitute the foundation for the banking system to maintain stability and achieve sustainable development[1].

Since the aftermath of the 2008 crisis, international bodies have reached consensus on stricter regulatory frameworks aimed at strengthening bank capital, liquidity, and risk management. Notably, Basel II and subsequently Basel III[2]—a global set of measures to enhance bank regulation, supervision, and risk management. The Basel III standards were finalized in 2017, and according to the Basel Committee on Banking Supervision (BCBS), they “will make banks more resilient and restore confidence in the banking system”[3]. In Vietnam, this issue is particularly significant in the context where non-performing loans remain a persistent challenge. A report of the State Bank of Vietnam (2023) indicates that the on-balance-sheet non-performing loan ratio has shown an upward trend following the COVID-19 pandemic, particularly in the real estate and consumer sectors[4]. Given the importance of Basel standards, although the application of Basel II and Basel III is not easy and may even require sacrificing a portion of capital to enhance safety, many Vietnamese banks have been actively piloting these standards for a long time[5].

Arising from the above-mentioned issues, this article focuses on introducing Basel III; analyzing the current state of Vietnamese law, with emphasis on the extent of internalization of Basel III requirements within the legal system; assessing the practice of law enforcement and the practical application of Basel III in Vietnam; thereby proposing solutions to improve the legal framework in order to enhance the effectiveness of Basel III implementation, contribute to ensuring the safety of the banking system, and promote the sustainable development of Vietnam’s financial market.

II. Introduction to Basel III

The Basel Committee was established under the name the Committee on Banking Regulations and Supervisory Practices by the Governors of the central banks of the Group of Ten (G10)[6] at the end of 1974, in the context of serious disruptions in the international monetary and banking markets (notably the collapse of Bankhaus Herstatt in West Germany)[7]. The Basel Committee meets four times a year, with 25 technical working groups and several other bodies convening regularly to carry out the Committee’s tasks. The Secretariat of the Basel Committee is proposed by the Bank for International Settlements (BIS) and consists of 15 members who are professional banking supervisors seconded temporarily from member countries. The Basel Committee does not have any supervisory authority, and its conclusions do not have legal force nor impose binding compliance requirements on banking supervision. The Committee reports to the Governors of central banks or banking supervisory authorities of the G10 group. One important objective of the Committee is to narrow international supervisory gaps based on two fundamental principles: (1) no foreign bank should be established without supervision; and (2) supervision must be adequate. To achieve these objectives, since 1975 the Basel Committee has issued numerous documents and materials related to these issues.

(1) The formation process of Basel I and Basel II capital adequacy standards

In 1988, the Committee decided to introduce the Basel Capital Accord, or Basel I (International Convergence of Capital Measurement and Capital Standards). Basel I provides a framework for measuring credit risk with a minimum capital adequacy ratio of 8%[8]. Since 1988, Basel I has been disseminated not only among member countries but also in most countries with internationally active banks. In June 1999, the Basel Committee issued a proposal for a new measurement framework with three main pillars: (1) minimum capital requirements based on the inheritance of Basel I; (2) supervision of the internal assessment process and capital adequacy of banks; and (3) effective use of disclosure to ensure market discipline as a complement to supervisory efforts. After consultations with banks, industry groups, and supervisory authorities outside the Committee, Basel II was issued on 26 June 2004[9] (and subsequently consolidated and finalized in 2006)[10]. Not only inheriting the two main objectives of Basel I, Basel II added a third objective, which is to move toward a regulatory framework that relies more on internal data, practices, and models. In general, at the time of its implementation, Basel II was a relatively comprehensive framework for assessing commercial bank risks. However, the global financial crisis of 2007 revealed certain shortcomings of Basel II.

(2) Basel III and reforms on bank capital adequacy, leverage, and liquidity

Based on the above reasons, on 12 September 2010, the Basel Committee officially announced Basel III on minimum capital standards as a supplement, refinement, and remedy for the shortcomings of Basel II. The two most important documents of Basel III are Basel III: A global regulatory framework for more resilient banks and banking system (issued in June 2011)[11] and Basel III: International framework for liquidity risk measurement, standards, and monitoring (issued in January 2013)[12]. The objectives of Basel III are: (i) to improve the resilience of the banking system against economic and financial crises; (ii) to enhance supervisory and risk management practices; and (iii) to strengthen transparency and disclosure of banks. Meanwhile, the reforms target two levels:

- Micro level (bank level): regulations aimed at increasing the resilience of individual banks during crisis periods;

- Macro level: risks across the entire banking system as well as procyclicality arising from economic cycles.

Some notable changes within the Basel III framework include the increase in both the quantity and quality of capital. Basel III raises the minimum common equity capital ratio to 4.5% and introduces a capital conservation buffer (CCB) ≥ 2.5% and a countercyclical buffer (CCyB) ranging from 0–2.5%, thereby increasing the total minimum common equity requirement to 7%, while the total capital adequacy ratio including buffers rises to at least 10.5%. In addition, Basel III introduces separate capital requirements for common equity and Tier 1 capital, emphasizing the importance of the quality and soundness of banks’ own capital structures rather than focusing solely on the total capital value.

Basel III also introduces new requirements on leverage and liquidity to protect banks from excessive lending and risk, while ensuring that banks maintain sufficient liquidity during periods of financial stress. The leverage ratio is calculated as Tier 1 capital divided by total assets, with a minimum requirement of 3%. In addition, Basel III enhances liquidity supervision by introducing two ratios, namely the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). The LCR aims to promote banks’ resilience to short-term stress scenarios by requiring them to hold sufficient high-quality liquid assets to meet net cash outflows over a 30-day stress period. The NSFR aims to complement this by encouraging banks to maintain stable funding sources to meet cash flow needs over a one-year horizon, with a minimum requirement of 100%[13].

It can be said that Basel III is a reputable risk management standard widely applied internationally and being pursued by banking systems of many countries. By enhancing the quality of capital and liquidity capacity in accordance with the standard’s requirements, it enables commercial banks to better withstand liquidity stress; at the same time, it creates a foundation for a sustainable banking system with resilience to shocks, the ability to recover from disruptions, and contributes to preventing potential systemic losses.

On 7 December 2017, the Bank for International Settlements (BIS) announced the finalization of the Basel III reforms and postponed the implementation start date to 2022 in order to provide banks with sufficient time for implementation[15]. The 2017 reforms continued to address weaknesses of the banking system, particularly those exposed during the global financial crisis of 2008–2009[16]. In addition to liquidity and leverage requirements, the finalized Basel III reforms focus on comprehensively resolving issues related to the reliability and comparability of risk-weighted assets (RWA). Accordingly, the new legal framework establishes an output floor mechanism to limit the benefits of using internal models, ensuring that required capital does not fall excessively below the standardized approach, thereby preventing model optimization for capital reduction. Regarding operational risk, the new standard completely removes previously complex internal measurement models and replaces them with a single standardized approach based on business size and actual loss history, thereby more accurately reflecting the bank’s risk profile. In addition, Basel III requires the separation and supplementation of capital for credit valuation adjustment (CVA) risk in derivative transactions, while reducing mechanical reliance on external credit ratings in assessing credit risk, thereby enhancing prudence and proactiveness in risk management.

III. Current Situation of Legal Development Towards the Application of Basel III in Vietnam

In Vietnam, up to the present time, there has not yet been any regulation mandating the application of Basel III standards for banks. However, with the orientation toward Basel application in Vietnam, the gradual enhancement of standards from Basel I to Basel II and eventually Basel III has been clearly reflected in legal normative documents over different periods.

More than 20 years ago, although official documents had not yet mentioned Basel standards, Decision No. 297/1999 of the State Bank of Vietnam (SBV Decision) issued in August 1999 initially provided simple regulations on safety ratios in banking operations. It was not until May 2006 that Prime Minister’s Decision No. 112/2006 (PMD) approving the Scheme on Development of the Vietnam Banking Sector up to 2010 with orientation to 2020 officially referred to Basel standards in the development orientation of the banking supervisory system of the State Bank of Vietnam. Facing instabilities in the Vietnamese banking system during the 2009–2010 period, Prime Minister’s Decision No. 254 (PMD) issued in 2012 once again referred to Basel standards as a solution orientation for restructuring the finance, operations, and governance of credit institutions. This Decision addressed all three pillars of Basel II, including: (i) issuance of capital adequacy standards; (ii) development of risk management systems; and (iii) regulations on information disclosure in accordance with the principles and standards of the Basel Committee, with an implementation deadline by the end of 2015.

At present, closely following the contents of the three pillars of Basel II and Basel III, legislative bodies in Vietnam have initially developed the necessary legal framework to guide banks in implementing the pillars of Basel standards. The current legal framework can be summarized in the following table:

In addition to the general legal normative document governing the sector, namely the Law on Credit Institutions 2024 (amended and supplemented in 2025), the contents related to each Pillar of Basel II, with orientation toward Basel III, have been regulated in various legal documents as follows:

With respect to Pillar I, on 30 June 2025, the State Bank of Vietnam issued Circular No. 14/2025 of the State Bank of Vietnam (SBV Circular) regulating capital adequacy ratios applicable to commercial banks and branches of foreign banks, replacing Circular No. 41/2016 of the State Bank of Vietnam (SBV Circular) dated 30 December 2016. The new Circular not only adjusts the technical calculation of the capital adequacy ratio (CAR) but also incorporates Basel III principles on capital, transparency, and risk control, marking an important step in modernizing Vietnam’s banking system.

It can be said that Circular No. 14/2025 of the State Bank of Vietnam (SBV Circular) marks a significant transformation in the orientation of capital and risk governance of the Vietnamese banking system, reflecting a clear shift from a formal supervisory model to a substantive, prudential approach based on risk absorption capacity in accordance with Basel III standards. The tightening of criteria for recognizing own capital, the restructuring of asset risk weights, and the enhancement of requirements for the quality of collateral not only aim to strengthen the resilience of the credit institution system but also help reshape capital structures toward greater stability and sustainability. These adjustments contribute to ensuring long-term system safety and aligning with the expectations of international financial markets regarding transparency, efficiency, and internal risk management capacity[17].

- With respect to Pillar II, the State Bank of Vietnam has developed and issued Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) regulating the internal control system of commercial banks and branches of foreign banks (as amended and supplemented by Circular No. 40/2018 of the State Bank of Vietnam (SBV Circular), Circular No. 14/2023 of the State Bank of Vietnam (SBV Circular), and Circular No. 09/2024 of the State Bank of Vietnam (SBV Circular)). In essence, Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) has established a fundamental and coherent legal framework for supervision by senior management, internal control, risk management, internal capital adequacy assessment, and internal audit of commercial banks. This Circular enables banks to comply with international standards and practices, thereby enhancing the effectiveness of inspection and supervision by the State Bank of Vietnam over commercial banks, with the aim of reducing losses and the risk of insolvency and systemic collapse[18].

However, up to the present time, with the promulgation of the Law on Credit Institutions 2024 (amended and supplemented in 2025) as well as changes in the organizational structure of the State Bank of Vietnam, Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) and its amending and supplementing documents have revealed certain inadequacies. Some contents, when compared with Basel standards, remain incomplete, such as model risk management, requirements on risk data, stress testing, and guidance on measuring interest rate risk in the banking book. A fundamental change in the structure and approach of Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) is therefore essential. These changes should aim to align with international practices, address practical difficulties faced by commercial banks and branches of foreign banks, enhance transparency, and ensure the safety of the banking system’s operations[19].

- With respect to Pillar III, in addition to being governed by the Law on Securities 2019 and its guiding documents on information disclosure in the securities market, the provisions of the Law on Credit Institutions, Circular No. 14/2025 of the State Bank of Vietnam (SBV Circular), and Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) also demonstrate the determination of the State Bank of Vietnam to strengthen requirements for banks to report and disclose information on capital calculation results, the status of control and risk management, the determination of risk appetite, the results of internal capital adequacy assessment, capital utilization plans, and related matters. This serves as a basis for supervisory authorities to monitor risk appetite and assess operational safety[20].

In conclusion, the legal framework on capital adequacy and bank risk management in Vietnam in recent years has achieved important accomplishments, clearly demonstrating the determination of legislative bodies to approach and internalize Basel II standards, and gradually move toward Basel III. The system of legal documents, with the Law on Credit Institutions 2024 (amended and supplemented in 2025) as the core, together with specialized circulars such as Circular No. 14/2025 of the State Bank of Vietnam (SBV Circular) and Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular), has formed a framework covering all three Basel Pillars. These regulations contribute to improving capital quality, strengthening governance and risk control systems, enhancing information transparency and market discipline, thereby improving the resilience of the banking system and increasing alignment with international practices.

However, besides these positive results, the current legal framework still reveals certain limitations. Provisions related to each Pillar are issued across multiple documents, lacking consistency and close linkage in terms of structure and methodological approach. Some core contents under Basel III standards have not yet been fully regulated or remain at a principle-based level.

Although Circular No. 14/2025 of the State Bank of Vietnam (SBV Circular) has laid the foundation for new capital standards, Pillar I still faces significant challenges regarding the substantive quality of capital and advanced technical barriers. Specifically, the capital structure of many Vietnamese banks still heavily depends on Tier 2 capital (long-term bonds) rather than core Tier 1 capital (CET1), which has the highest capacity to absorb losses. In addition, current regulations still require more detailed guidance on mechanisms for activating the countercyclical capital buffer to control excessive credit growth, as well as the application of the output floor for banks using internal models to prevent risk optimization aimed at reducing required capital. At the same time, Pillar II concerning the internal assessment process still shows a considerable gap compared to international practices, as the provisions under Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) have not been fully updated with Basel III techniques. The Internal Capital Adequacy Assessment Process (ICAAP) and stress testing at many banks remain largely formalistic, lacking unified macroeconomic scenarios (such as exchange rates and interest rates) to accurately quantify capital needs under stress conditions. In particular, complex risks such as interest rate risk in the banking book (IRRBB) lack behavioral models to address non-maturity deposits, and concentration risk has not fully captured economic interdependencies among related counterparties in accordance with new standards. Moreover, although disclosure requirements under Pillar III have been strengthened, the level of detail, standardization, and comparability among banks remains limited. These shortcomings indicate that the current legal framework is still in a transitional phase and needs to be further reviewed, amended, and improved in a more synchronized and modern manner, better aligned with practical conditions as well as the requirements of international financial and banking integration.

IV. Implementation of Laws to Meet Basel III Requirements in Vietnamese Commercial Banks

To apply Basel III, banks must prepare a substantial amount of capital and accept higher buffer levels to mitigate operational risks. In addition, commercial banks must meet standards and requirements to ensure their ability to identify and manage risks. In practice, the cost of implementing Basel III is high, while the financial capacity of Vietnamese commercial banks remains limited. The implementation and execution of Basel III Pillars require significant expenditures. With the burden of complying with Basel III standards, banks in Europe have been estimated to spend tens of millions of USD to implement Basel III[21]. These constitute major challenges, and only banks with strong financial capacity are able to meet such requirements.

According to statistics as of early 2024, 10 commercial banks in Vietnam have announced the completion of Basel III implementation—a risk management standard in banking operations. Many other banks have also partially applied Basel III requirements, such as implementing the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) in periodic risk supervision. This demonstrates the notable efforts of banks in gradually improving the quality of risk control, capital adequacy ratios, and the stability of the financial market[22].

In specific terms, the capital adequacy ratio (CAR) is one of the key indicators in assessing the safety and risk management performance of banks under Basel III standards. According to data from the State Bank of Vietnam as of the end of October 2022, there is a significant disparity in CAR among banks, particularly between state-owned commercial banks (9.04%), joint-stock commercial banks (12.29%), and foreign banks (18.61%)[23]. Previously, periodic disclosures showed that some banks recorded CAR at very high levels above 15%, approximately twice the minimum requirement of 8%. State-owned banks such as Vietcombank, VietinBank, and BIDV are among those with the lowest CAR among banks listed on the Ho Chi Minh Stock Exchange (HoSE), although they still meet the minimum requirement of above 8%. However, it should be noted that, according to Bloomberg (2022), CAR levels in ASEAN countries are significantly higher than those in Vietnam. For instance, the average CAR in Indonesia is 22.6%, the Philippines 17.2%, Singapore 17.1%, Thailand 19.6%, and Malaysia 18.5%[24]. It can be seen that the relatively low CAR of Vietnamese banks compared to the region constitutes a major challenge in meeting Basel III standards in particular and international integration requirements in general.

Regarding the internal control system, internal audit departments have generally been established in all commercial banks; however, the number of personnel in these departments is often not commensurate with the scale of the banks. The internal audit function has conducted inspections of certain operations and units within banks, identifying shortcomings and making recommendations for remedial measures. The number of audited units compared to the operational network of commercial banks indicates that audit coverage remains limited, with many units not yet inspected and audit contents not sufficiently comprehensive. Consequently, it has not been possible to provide an overall assessment of banking operations or to promptly prevent violations and deficiencies. Although commercial banks have regulations on periodic assessment of internal control systems, some reports still fail to thoroughly evaluate the fundamental principles of internal control systems, instead mainly describing organizational structures, summarizing audit plan implementation during the year, and reviewing internal documents and regulations; the roles of units within the risk management system remain limited.

In addition, to effectively implement current legal provisions, a supervisory authority with sufficient competence to oversee the entire financial market is required in order to promptly issue decisions to mitigate risks within the banking system. According to international experience, to supervise the safety of banking operations, countries tend to adopt one of two basic supervisory models: a unified supervisory authority or a sectoral supervisory authority. Under the unified model, supervisory functions over banking, securities, and insurance sectors are concentrated in a single authority, whereas under the sectoral model, a separate supervisory authority within the central bank is responsible for banking supervision. The unified supervisory model is more effective when banks expand their operations into multiple sectors such as securities and insurance; however, it may lead to risks of power abuse due to excessive concentration of authority in a single body[25]. In contrast, the sectoral supervisory model benefits from the independence of supervisory authorities, thereby contributing to a more effective supervisory system. Moreover, assigning banking inspection and supervision to the central bank is necessary, as it enables timely decision-making and enhances the central bank’s forecasting capacity[26]. Other issues such as technological infrastructure and human resources for implementing Basel III also reveal significant limitations.

V. Recommendations and Solutions

Based on the analysis of the current legal framework as well as the practice of implementing and applying Basel III in Vietnam, the author proposes several recommendations and solutions as follows:

First, to continue improving the legal framework toward Basel III standards

It can be affirmed that the benefits and global trend of Basel III are undeniable; therefore, every country needs to establish appropriate orientations and implementation plans. The IMF (2018) suggests that it is not necessary to fully implement Basel I/II before adopting certain Basel III reforms, but the sequence of implementation must be carefully considered. Given the modular nature of the Basel III framework, jurisdictions may adopt a flexible approach to implementation based on their legal characteristics, financial development, banking sector risks, supervisory capacity, and the benefits and challenges of Basel III adoption[27]. Accordingly, in terms of implementation priority, modules should be deployed progressively from simpler, less impactful components to more complex, higher-impact ones. More complex instruments should only be applied when the necessary conditions are met.

Based on the study of the current situation of Basel III application in Vietnam and consideration of international experiences in implementing Basel II and III, a roadmap suitable to Vietnam’s economy in general and the banking system in particular is essential to ensure effective adoption of Basel III. Fundamentally, Basel III serves as an enhancement and extension of Basel II requirements and standards. Therefore, even if Basel II recommendations have not been fully completed, Vietnam still has the capacity to adopt Basel III. Under current conditions, it may be premature to require all commercial banks in Vietnam to implement Basel III; however, in subsequent phases[28], this objective is entirely feasible.

With regard to legal recommendations, several key issues should be noted as follows:

For Pillar I: There should be detailed guidance on mechanisms for activating and operating the capital conservation buffer and the countercyclical capital buffer. Instead of merely stipulating fixed capital adequacy ratios, the law should establish a flexible mechanism that allows regulatory authorities to adjust additional capital requirements based on macroeconomic indicators such as credit growth, thereby enabling the banking system to accumulate capital during periods of rapid economic expansion as a buffer for downturns. In addition, to ensure fairness and prevent the abuse of internal risk management models to reduce capital requirements, legal provisions on a minimum output floor for risk-weighted assets should be introduced. This provision would limit discrepancies between capital calculations under internal models and standardized approaches, ensuring that own capital adequately reflects actual risk exposure. Furthermore, it is necessary to promptly promulgate formal legal provisions adopting Basel III liquidity ratios (LCR and NSFR) to replace existing traditional liquidity ratios.

For Pillar II: The State Bank of Vietnam should accelerate the development and issuance of a new circular to replace Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) in the context of increasing risk pressures on the banking system. The regulatory approach should focus on principle-based provisions for governance models to ensure flexibility and avoid excessive micro-level detail that may hinder practical implementation. However, to address current technical gaps, the new circular should standardize key quantitative criteria, including: issuing a set of standardized macroeconomic scenarios for stress testing to ensure consistency of assessment results; providing guidance on developing behavioral models for measuring interest rate risk in the banking book (IRRBB); and updating the definition of concentration risk based on economic interdependence rather than solely ownership relationships. These provisions should be designed with clear recognition of each bank’s risk management model to avoid overlap, while ensuring consistency with the existing legal framework and providing clear explanations of new terms in line with international practices to facilitate implementation by credit institutions.

For Pillar III: The improvement of regulations to enhance market discipline is also essential, particularly in strengthening disclosure requirements. For example, disclosure regulations should be supplemented to require banks to publicly disclose compensation and remuneration policies for key personnel linked to risk and long-term business performance, rather than only quantitative financial indicators. This would promote greater transparency in banks’ risk governance beyond simple safety ratios, thereby enhancing credibility and trust among stakeholders in the financial market.

Second, to enhance the effectiveness of legal implementation to meet Basel III requirements

For state management authorities, to support the consistent and timely implementation of legal documents aligned with Basel standards across the system, the State Bank of Vietnam should promptly issue practical guidance materials, application manuals, or technical reference documents that clearly explain technical concepts, provide practical examples, and offer solutions to common situations. These materials would serve as quick-reference tools, enabling staff at credit institutions to proactively address technical issues during implementation. Another key factor is the establishment of a two-way policy feedback mechanism through regular dialogue forums with representatives of credit institutions, banking associations, and independent experts.

State management authorities should prioritize the organization of systematic and specialized training programs focusing on core areas such as CAR and risk-weighted asset (RWA) calculation methods, collateral classification, and mechanisms for determining and supervising Tier 1 and Tier 2 capital components under new standards. This is particularly necessary for credit institutions that have not yet fully implemented Basel II or Basel III or that have weak risk management foundations, in order to narrow the implementation gap among different groups of banks.

In addition, as noted, inspection and supervision activities in Vietnam still exhibit a considerable gap between regulatory provisions and actual implementation, especially given the incomplete regulations on enforcement powers of state authorities, which may create negative precedents in supervisory discipline. Therefore, although many regulations are directly aligned with Basel supervisory principles, in practice Vietnamese commercial banks have only partially complied, with very few criteria being fully implemented. It is evident that to meet international standards, banking inspection and supervision in Vietnam must continue to be standardized and improved not only in legal terms but also in practical implementation. Specifically, it is necessary to restructure supervisory authorities to enable consolidated supervision; enhance the independence and operational effectiveness of banking supervisory agencies, particularly by reducing overlap between supervisory and management functions; and reform supervisory methods, with greater emphasis on off-site supervision and preventive supervision.

For commercial banks, to effectively implement Basel III, banks need to continue drafting and adjusting internal regulations, implementing relevant measures, enhancing institutional capacity to apply the new legal framework, planning investments in information systems, databases, and technology, and strengthening coordination with regulatory authorities[29]. In addition, banks should continue to increase capital and ensure capital adequacy ratios in compliance with Basel III standards. Commercial banks should focus on improving business performance, increasing after-tax profits, strengthening capital buffers, and particularly enhancing capital adequacy ratios. At the same time, greater attention should be paid to credit risk management and market risks associated with bank assets, followed by the development of an appropriate roadmap for Basel III implementation.

Banks must continuously review their internal control systems to ensure that all necessary components are in place in accordance with international practices as well as Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) and its amending and supplementing documents. This will enable banks to establish clear and comprehensive objectives as a basis for identifying and assessing risks that may affect the achievement of those objectives, as well as determining appropriate risk management measures. Banks should consider selecting and developing control activities to mitigate risks and achieve organizational goals; implement these controls through established policies translated into concrete actions; strengthen the monitoring of controls; and improve the effectiveness of internal audit and internal inspection systems to prevent and detect fraud[30].

Commercial banks must prepare robust information technology and data infrastructure to support the development of models initially in accordance with Basel II standards and subsequently Basel III. Not only information management activities but also disclosure activities must comply with legal requirements and Basel III standards. Commercial banks should develop complete data systems to ensure the standardization of disclosed information, thereby accelerating compliance with Basel III standards and minimizing risks associated with non-transparent information that may lead to errors in analysis and evaluation.

Commercial banks should also proactively develop medium- and long-term strategies for training and developing human resources capable of supporting the future development of Vietnam’s commercial banking system. Appropriate incentive policies should be adopted for banking professionals and staff to prevent brain drain under current conditions in Vietnam, while also enhancing professional ethics and accountability among banking personnel./.

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24. Peek, J., E. S. Rosengren and G .M. B. Tootle, Is Bank Supervision Central to Central Banking?, Quarterly Journal of Economics, 629-653 (1999).

25. Xuan Thanh, Key aspects of Basel III reforms, State Bank of Vietnam Portal, (04/01/2018),https://sbv.gov.vn/vi/w/sbv322201?p_l_back_url=%2Fvi%2Ftim-kiem%3Fq%3Dc%25E1%25BA%25A3i%2Bc%25C3%25A1ch%2Bbasel&p_l_back_url_title=T%C3%ACm+ki%E1%BA%BFm.

26. Electronic Journal of Labor and Trade Union, Basel III as a prerequisite for banking sector international integration, Labor and Trade Union Journal, (08/08/2023).

27.Financial Market and Monetary Review, Bank risk management: New perspectives from the draft amendments to Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) and Circular No. 41/2016 of the State Bank of Vietnam (SBV Circular), (16/07/2025), https://thitruongtaichinhtiente.vn/quan-tri-rui-ro-ngan-hang-tam-nhin-moi-tu-du-thao-sua-doi-thong-tu-13-2018-tt-nhnn-va-thong-tu-41-2016-tt-nhnn-68941.html.

28. Prime Minister’s Decision No. 986/2018 (PMD) dated 08/08/2018 approving the Strategy for the Development of Vietnam’s Banking Sector up to 2025 with orientation to 2030.

PhD, Faculty of Law – Banking Academy, Email: haipd@hvnh.edu.vn, accepted for publication on 26/3/2026.

[1] Claessens, S., & Kodres, L, The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions, IMF Working Paper, Research Department and Institute for Capacity Development (March 2014).

[2] Basel Committee on Banking Supervision - BCBS, Basel III: International Regulatory Framework for more resilient banks, BIS, (December 2017), https://www.bis.org/bcbs/publ/d424.pdf.

[3] BIS, Basel III: International Regulatory Framework For Banks, BIS (September 2007) https://www.bis.org/bcbs/basel3.htm#:~:text=Basel%20III%20is%20an%20internationally,and%20risk%20management%20of%20banks.

[4] State Bank of Vietnam, Annual Report on the Banking Sector 2022–2023, (14/08/2023).

[5] Electronic Journal of Labor and Trade Union, Basel III as a prerequisite for the banking sector’s international integration, Labor and Trade Union Journal, (08/08/2023), https://laodongcongdoan.vn/basel-iii-la-dieu-kien-can-de-nganh-ngan-hang-hoi-nhap-quoc-te-98898.html.[6] Including: the United Kingdom, Belgium, Canada, Germany, the Netherlands, the United States, Luxembourg, Japan, France, Spain, Sweden, Switzerland and Italy.

[7] Bank for International Settlements (BIS), History of the Basel Committee and Its Membership, BIS, (March 2001), https://www.bis.org/publ/bcbsc101.pdf.

[8] Basel Committee on Banking Supervision (BCBS), International Convergence of Capital Measurement and Capital Standards, BIS, (July 1988), https://www.bis.org/publ/bcbs04a.pdf.

[9] Basel Committee on Banking Supervision (BCBS), International Convergence of Capital Measurement and Capital Standards, BIS, (June 2004), https://www.bis.org/publ/bcbs107.pdf.

[10] Basel Committee on Banking Supervision (BCBS), International Convergence of Capital Measurement and Capital Standards (Comprehensive Version), BIS, (June 2006), https://www.bis.org/publ/bcbs128.pdf.

[11] BCBS, Basel III: A global regulatory framework for more resilient banks and banking systems, December 2010, BIS, (July 1988), https://www.bis.org/publ/bcbs189.pdf.

[12] BCBS, Basel III: International framework for liquidity risk measurement, standards, and monitoring, BIS, (January 2013), https://www.bis.org/publ/bcbs238.pdf.

[13] Financial Market and Monetary Review, Bank risk management: New perspectives from the draft amendments to Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) and Circular No. 41/2016 of the State Bank of Vietnam (SBV Circular), (16/7/2025), https://thitruongtaichinhtiente.vn/quan-tri-rui-ro-ngan-hang-tam-nhin-moi-tu-du-thao-sua-doi-thong-tu-13-2018-tt-nhnn-va-thong-tu-41-2016-tt-nhnn-68941.html.

[14] Hoang Cong Gia Khanh, Basel Accord – From regulations to practical application in Vietnam, Vietnam National University Ho Chi Minh City Publishing House, Ho Chi Minh City, 163 (2018).

[15] BCBS, Basel III: Finalising post-crisis reforms, BIS, (December 2017), https://www.bis.org/bcbs/publ/d424.pdf.

[16] Xuan Thanh, Key aspects of Basel III reforms, State Bank of Vietnam Portal (04/01/2018), https://sbv.gov.vn/vi/w/sbv322201?p_l_back_url=%2Fvi%2Ftim-kiem%3Fq%3Dc%25E1%25BA%25A3i%2Bc%25C3%25A1ch%2Bbasel&p_l_back_url_title=T%C3%ACm+ki%E1%BA%BFm.

Nguyen Thi Ngoc Anh, Nguyen Thi Diem, Basel III: Implementation process in Vietnam and some recommendations, Banking Journal No. 5, 25–31 (2023).

[17] Nguyen Trung Kien, Standardizing capital adequacy ratio: A new step in risk management and enhancing the resilience of the banking system, Banking Journal, (06/08/2025), https://tapchinganhang.gov.vn/chuan-hoa-ty-le-an-toan-von-buoc-tien-moi-trong-quan-ly-rui-ro-va-nang-cao-suc-chong-chiu-cua-he-thong-ngan-hang-16379.html.

[18] Chi Mai, Implementation of Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular): Challenges and opportunities, Investment Newspaper, (03/01/2019), https://baodautu.vn/trien-khai-thong-tu-132018tt-nhnn-thach-thuc-va-co-hoi-d93465.html.

[19] At present, the State Bank of Vietnam has been actively developing a new legal framework to codify the core requirements of Basel III in the Vietnamese banking system through the Draft Circular replacing Circular No. 13/2018 of the State Bank of Vietnam (SBV Circular) on the internal control system of commercial banks (second draft).

[20] Nguyen Thi Lan Anh, Practical application of Basel II standards at Vietnamese commercial banks, Finance Journal, (22/10/2023), https://tapchitaichinh.vn/thuc-tien-ap-dung-tieu-chuan-basel-ii-tai-cac-ngan-hang-thuong-mai-viet-nam.html.

[21] Nguyen Thi Anh Ngoc, Nguyen Thi Diem, Basel III: Implementation process in Vietnam and some recommendations, Banking Journal, (27/03/2023).

[22] Vo Quoc Khanh, Nguyen Huy Cuong (2024), Opportunities and challenges for banks in implementing Basel III, Securities News, (09/02/2024), https://www.tinnhanhchungkhoan.vn/co-hoi-va-thach-thuc-cho-cac-ngan-hang-khi-trien-khai-basel-iii-post338970.html.

[23] Hong Anh, Banks strengthen capital buffers, Nhan Dan Newspaper, (16/12/2025), https://nhandan.vn/ngan-hang-tang-cuong-bo-dem-von-post746200.html.

[24] Nguyen Thi Thu Ha, Enhancing competitiveness and stability of the Vietnamese commercial banking system in the context of international economic integration, Journal of Economics and Forecasting, (13/03/2024), https://kinhtevadubao.vn/nang-cao-nang-luc-canh-tranh-va-muc-do-on-dinh-cua-he-thong-ngan-hang-thuong-mai-viet-nam-trong-boi-canh-hoi-nhap-kinh-te-quoc-te-28357.html

[25] Abrams, R.K. and M.W. Taylor, Assessing the Case for Unified Sector Supervision, Paper Presented at the 2001 Risk Management, and Insurance International Conference, (2001).

[26] Peek, J., E S Rosengren and G M B Tootle, Is Bank Supervision Central to Central Banking?, Quarterly Journal of Economics, 629-653 (1999).

[27] IMF, Global Financial Stability Report 2018: A Decade after the Global Financial Crisis: Are We Safer?, IMF, (October 2018).

[28] Prime Minister’s Decision No. 986/2018 (PMD) dated 08/08/2018 approving the Strategy for the Development of Vietnam’s Banking Sector up to 2025 with orientation to 2030. According to PMD No. 986/2018, it clearly records the issuance of a roadmap for guiding and implementing Basel II.

[29] Nguyen Khuong, Dao Van Ha, Nguyen Vu Phuong, Nguyen Thu Huong et al., Approaches to Basel III implementation in several regions and countries and implications for Vietnam, Banking Journal, (11/12/2023).

[30] Nguyen Thi Quynh Huong, Orientation for improving internal control systems in Vietnamese commercial banks, Finance Journal, (June 2021), https://tapchitaichinh.vn/dinh-huong-hoan-thien-he-thong-kiem-soat-noi-bo-tai-cac-ngan-hang-thuong-mai-viet-nam.html.