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1. 1. Why do the bank regulators set capital standards for commercial banks, and illustrate with the capital
requirements in Vietnam’s banking system? Are banks free from failure probability by fully complying
with capital requirements set by the Central Bank? Why? (Chapter 2, P44,52)
Tại sao các cơ quan quản lí ngân hàng đặt ra các tiêu chuẩn về vốn cho ngân hàng thương mại?
Minh họa bằng các yêu cầu về vốn của hệ thống ngân hàng Việt Nam.
Các ngân hàng có thoát khỏi xác suất thất bại bằng cách tuân thủ đầy đủ các yêu cầu về vốn do Ngân
hàng Trung ương đặt ra không? Tại sao?
2. What are off balance sheet activities? How do they cause risk to financial institutions? Illustrate
your view by the case of one commercial bank in Vietnam. (Chapter 5, P142).
+ Viết đủ ý, càng chi tiết càng tốt, nhưng cần phân bổ thời gian hợp lí cho cả 3 câu.
+ Không trình bày dưới dạng gạch đầu dòng.
+ Không chép bài của nhau. (những phần trả lời giống nhau sẽ không được tính điểm).
+ Viết cẩn thận để cô có thể đọc được.
1. Because banking is such an important part of the economy, regulators have established minimum
required levels of bank capital, generally requiring more capital if the bank is larger or is riskier,
though exactly what counts as capital these days, and how size and risk are measured, becomes quite
complex.
Capital standards play an integral part in improving risk measurement and management for
commercial banks. These standards are designed to help banks and competitors hold sufficient capital
(especially funds contributed by their owners) to absorb large and unpredictable losses and protect
the public. Therefore, regulators are concern about setting capital standards for commercial banks.
Vietnamese bank’s capital requirements came to be based on the terms of the FDIC Improvement Act
of 1991 and the international agreements known as Basel I and II, and later Basel III. Most banks in

2. Vietnam face a major challenge in meeting the Basel II standards, specifically due to a lack of
domestic-capital availability. As such, most lenders will have to look to overseas investors in order to
raise capital. To date, only 16 out of 38 local banks are able to meet the Basel II standards. Basel III, a
new international regulatory accord for governing banks’ capital requirement developed in the wake
of the 2007-2009 financial crisis, was issued in 2010 to improve on Basel II, and its implementation
deadline is January 1, 2023.
Partly, this is impossible because capital is intended to protect against unexpected losses. Since these
losses are unexpected, their magnitude and frequency are unknownand unpredictable, so that the
amount of capital required to absorb them must also be unknown. Partly, the difficulty of determining
capital standards is that society’s estimation of what is the optimum is bound to change.
Consequently, capital standards cannot be immutable, and bank regulatory authorities should not be
embarrassed when their standards change from time to time. Moreover, as time goes on, unalterable
capital standards are more and more likely to come into conflict with other social objectives.
2. Off-balance-sheet activities like fees, loan sales, and derivatives trading help banks to manage their
interest rate risk by providing them with income that is not based on assets (and hence is off the
balance sheet).
Unlike balance- sheet assets, the potential obligations are not funded withbalance sheet liabilities or not
considered in determining a bank’s regulatory capital requirements. Therefore, conventional measures of
financial health may not present an accuratepicture of a bank’s condition. The problem with these off-
balance-sheet transactions is that they often expose a financial firm to considerable risk that
conventional financial reports simply won’t pick up. Subsequently, off-balance-sheetactivities can be
used to either increase or decrease a financial firm’s risk exposure.
Therefore, the author believes that the potential risks of the bank mainly come from potential debt
obligations, namely the commitment to guarantee loans (overdraftloans), commitments in L/C

3. operations and commitments to guarantee loans and others (payment guarantee, contract performance,
bid...).
In 2012, therewas a casewhere the guarantee party failed to pay, causing Agribank to perform the
guarantee obligation for the guaranteed party, Cao Truong Son Co., Ltd., for an amount of VND38.5
billion.
Cao Truong Son Company had signed two contracts worth more than VND50.1 billion to sell 2,830
tonnes of construction steel to a construction and industry equipment joint stock company. Agribank
issued two letters of guarantee in case the buyer refuses to liquidate. In the first instance decision, it
forced Agribank to pay Cao Truong Son Company VND38.5 billion under its guarantee obligation.
Agribank also had to pay VND170 million for legal fees.
3. Why do interest rates on consumer loans typically average higher than on most other kinds of loan?
(Chap 12)
4. What are major types of deposits offered by commercial banks? Which are the least costly and why?
Illustration with Vietnam case of one commercial bank. (Chap 12, P398)
There are 3 major types of deposits offered by commercial banks. They are:
Transaction (Payment or Demand) Deposits includes:
1. Noninterest-Bearing Transaction Deposits
2. Interest-Bearing Transaction Deposits
a. NOW Accounts
b. Money Market Deposit Accounts (MMDAs)
c. Super NOWs
Non-transaction (Savings or Thrift) Deposits includes:

4. 1. Passbook Savings Deposits
2. Statement Savings Deposits
3. Time Deposits
Retirement Savings Deposits
1. Individual Retirement Accounts (IRAs)
2. Keogh Plans
3. Roth IRAs
Commercial checkabledeposits, particularly regular noninterest bearing demand deposits, are usually
the least costly.The most costly deposits are passbook savings accounts having substantial deposit and
withdrawal activity and higher interest-rate time deposits.