Regulations On Risk Provision In Vietnam

The provision for risk reserves in the banking sector is a requirement based on International Financial Reporting Standards (IFRS) and specific regulations of financial regulatory authorities.

When a bank provides loans and those loans become loans from group 2 onwards, the bank is required to set aside a corresponding portion as a provision for risk. The purpose of setting aside risk reserves in the banking sector is to ensure that banks have sufficient capital reserves to deal with non-repayable loans and other risks in their business operations.

The rate of provision for risk reserves is typically determined based on factors such as loan types, customer types, collateral types, credit quality, and other risk factors. Regulations on provision for risk reserves are usually specifically stipulated by financial regulatory authorities and international organizations such as the Central Bank and the International Accounting Standards Board (IASB).