tóm tắt tiếng anh quản lý tài chính góp phần nâng cao năng lực cạnh tranh của các tập đoàn kinh tế việt nam

- It is to research contents regarding the credit risk management, experience of developed countries, international practices and referential lesson ability, applicable to Vietnam Commer

PREFACE

1 URGENCY OF RESEARCH THEME:

The banking system which is the life-line of the economy always plays an important role Vietnam Banking system has attained encouraging achievements such

as contribution to inflation stability and repression and effective implementation of national monetary policy for the last years However, in the market economy, business risk is unavoidable, especially banking business risk because it is able to cause chain reaction, spread and represent more complexity The collapse of bank affects the whole life – economy – politics – society in negative way and may spread out of a country even a region and global

In front of the integration trend, financial and banking institutions will always deal with competition and different risk types as well In Vietnam, because the point

of departure of domestic banks is rather low compared to the average of the region, focusing on development and taking interest in profit are firstly priority This leads to which the risk management of Vietnam banks is almost left open and not invested in construction in satisfactory and professional manner This is the reason why the bad debt ratio and many problems occurred due to uncontrollability that are becoming a question without answer in most of Vietnam banks and even in Vietnam Bank for Agriculture and Rural Development, a financial institution mainly operating in agriculture and rural field The profits of Vietnam Bank for Agriculture and Rural Development are mainly from credit activities (account for 90% total income of the Bank) Therefore, the credit risk management plays the decisive role in existence and growth of Vietnam Bank for Agriculture and Rural Development

In order to restrict risks in credit activities, it is necessary to build up and promulgate a credit risk management strategy in accordance with principles and standards of modern bank

As practical requirements above, the writer chooses “Credit risk management

of Vietnam Bank for Agriculture and Rural Development” as the research theme

2 PURPOSE OF RESEARCH:

- It is to interpret and systematize basic theory matters of risk management in general as well as bank credit risk in particular

- It is to research contents regarding the credit risk management, experience of developed countries, international practices and referential lesson ability, applicable

to Vietnam Commercial Banks in general and Vietnam Bank for Agriculture and Rural Development in particular

- On the basis of practical theory and situation and specificity analysis of operation of Vietnam Bank for Agriculture and Rural Development to build up an effective credit risk management strategy, and propose solutions and recommendations to perfect and improve the effectiveness of credit risk management

of Vietnam Bank for Agriculture and Rural Development

3 OBJECT AND SCOPE OF RESEARCH:

- The object of research is the credit risk management in Vietnam Bank for Agriculture and Rural Development

- The scope of research is to focus on research into credit risk management in general and assess the credit risk management in Vietnam Bank for Agriculture and Rural Development The data is concentrated in the period 2005-2010

4 RESEARCH METHODS:

The Thesis approaches the object of research on the basis of applying and collecting economic scientific research methods, from dialectical materialism, historical materialism, summary, analysis and comparison methods to practical summary survey, comparision of practice to theoretical frame on credit risk management of countries in the world and at home for argument, and then proposes the construction of credit risk management models for Vietnam Bank for Agriculture and Rural Development

5 THESIS STRUCTURE:

Apart from the preface, conclusion, references, list of tables and diagrams, the main contents of the Thesis include about 210 pages divided into 3 chapters as

follows:

Chapter 1: Credit risk management at Commercial Banks

Chapter 2: Situation of risk management of Vietnam Bank for Agriculture and Rural Development

Chapter 3: Credit risk management improvement of Vietnam Bank for Agriculture and Rural Development

CHAPTER 1:

CREDIT RISK MANAGEMENT AT COMMERCIAL BANKS

1.1 BUSINESS RISK OF COMMERCIAL BANKS:

1.1.1 Business risk of Commercial Banks:

1.1.1.1 Definition of risk:

Risk means the probability of uncertain events in future that makes the subject cannot reach its strategic and operating targets as well as opportunity cost of losing market opportunities

1.1.1.2 Basic risks of Commercial Banks:

1.1.2 Credit activities and credit risks of Commercial Banks:

1.1.2.1 Overview of credit activities of Commercial Banks:

“Credit activities mean that Commercial Banks use their equity capital and mobilized capital to grant credit for their customers using an amount with the principle of redemption through lending, discount, financial leasing, bank guarantee and other related operations”

1.1.2.2 Definition of banking credit risk:

Credit risk means the risk and loss of finance (direct or indirect) stemming from a borrower’s failure to fulfill a loan repayment as agreed or insolvency

(See the diagram 1.3 overleaf)

1.1.2.3 Reasons for credit risk:

In this part, the Thesis clearly analyzes objective reasons and reasons from the lending bank

1.1.2.4 Some basic identification signs of credit risk:

1.1.2.5 Credit risk measurement:

1.1.2.6 Consequence of credit risk for banking: The Thesis analyzes it for the

economy and the bank

Diagram 1.3: Process of arising credit risks at Commercial Banks [17]

1.2 CREDIT RISK MANAGEMENT OF COMMERCIAL BANKS:

1.2.1 Definition of credit risk management:

According to the Thesis, credit risk management means a process of building and implementing strategies, policies and methods relating to credit activities to prevent and limit banking credit risk

1.2.2 Role of credit risk management for Commercial Banks:

1.2.3 Contents and standards of credit risk management in accordance with the Basel Committee:

1.2.3.1 Contents of credit risk management: The credit risk management

includes the following contents: Credit policy; Credit procedure; Risk identification related to borrowing customers; Customer scoring; Debt classification; Credit control system; Provision and risk treatment policy; and Implementation of applying credit risk measurement tools

1.2.3.2 Standards of credit risk management according to Basel Committee

on Banking Supervision:

Reduced solvency, reduced production and business efficiency, capital loss, bankruptcy

Failure to

receive

interest

Failure to receive capital

Failure to receive enough interest

Failure to receive enough lending capital

Arising accrued

interest overdue debt Arising Arising frozen

accrued interest

Arising bad debt

Credit risks

a Standards of credit risk management according to Basel I: The Thesis focuses on analyzing 4 standards regarding the credit risk management, including Credit grant standard and credit supervision procedure; Asset quality assessment and loan loss provision; risk concentration and big risks; and lending related customers

b Standards of credit risk management according to Basel II: The Thesis analyzes two contents as following: Standardized approach to credit risk; and internal ratings based approach (according to Paragraph 18, 19 and 20 Basel II)

1.2.4 Factors influence the credit risk management:

The Thesis analyzes factors of mechanism, policy and model of bank credit risk management; man factor including officials of Commercial Banks and borrowers; and technology factor

1.2.5 Assessment indicators of credit risk management effectiveness of Commercial Banks:

1.2.5.1 Quantitative indicators:

• General operating quality group:

Indicator 1: Loan outstanding and the customer’s loan outstanding growth rate Indicator 2: Profitable loan outstanding ratio

Indicator 3: Execution and implementation of lending policies and activities

• Capital-use safety indicator group:

Indicator 1: Overdue debt ratio

Indicator 2: Bed debt ratio Substandard debt (Category 3); Doubtful debt (Category 4); Loss debt (Category 5)

• Profit indicator group:

Indicator 1: Gross lending profit;

Indicator 2: Net profit before taxed;

Indicator 3: Net profit after taxed;

Indicator 4: Return on assets and return on equity;

Indicator 5: Input and output interest rate spread in production household credit; Indicator 6: Loan interest receipt ratio

1.2.3.2 Qualitative indicators for effectiveness assessment of credit risk management of Commercial Banks: The Thesis researches in the angle of influence on

borrowers, economy and banks

1.3 INTERNATIONAL EXPERIENCE IN CREDIT RISK MANAGEMENT AND EXPERIENCE LESSON FOR VIETNAM:

1.3.1 Experience in credit risk management of Thailand Banks

1.3.2 Experience of ANZ Banking Group Ltd

1.3.3 Experience of other banks in the world

1.3.4 Experience lesson for Vietnam:

1.3.4.1 The experience lesson learnt from the experience of some international institutions and Commercial Banks in the world:

Firstly, absolutely applying golden principles of credit risk management according

to Basel Committee

Secondly, building up a system of key risk indicators (KRIs), quantifying credit

risk according to AMA; combining qualitative indicators (assessment and

self-inspection) and quantitative indicators, and calculating likelihood

Thirdly, building consciousness of credit risk management in the whole system,

choosing priority fields to establish control points of credit risk

Fourthly, building a data bank on credit risk and using modern technology in

analysis/treatment of credit risk

Fifthly, minimizing causes of credit risk made from internal factors of

Commercial Banks such as people, procedures and system

Finally, minimizing causes of credit risk made from the external

1.3.4.2 Experience lesson learnt from Vietnamese Commercial Banks for Vietnam Bank for Agriculture and Rural Development:

Firstly, building credit procedure that specifies responsibilities of relating

departments;

Secondly, building the indicator system to score customers;

Thirdly, using support measures;

Fourthly, strengthening information collection and storage, and loan supervision; Fifthly, establishing a qualified, competent and professional ethic department of

credit risk management;

CHAPTER 2:

SITUATION OF CREDIT RISK MANAGEMENT OF VIETNAM BANK FOR

AGRICULTURE AND RURAL DEVELOPMENT 2.1 OVERVIEW OF VIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

2.1.1 Formation and development of Vietnam Bank for Agriculture and Rural Development: [13]

2.1.2 Overview of Vietnam Bank for Agriculture and Rural Development: 2.1.3 Human resources:

2.1.4 Services and products of Vietnam Bank for Agriculture and Rural Development:

2.1.5 Main business result of Vietnam Bank for Agriculture and Rural Development:

2.1.5.1 Assessment of implementation result of business strategy in period

2001 – 2010 of Vietnam Bank for Agriculture and Rural Development:

Table 2.1 Implementation result of some operating indicators of Vietnam Bank for

Agriculture and Rural Development in the period 2005 - 2010

Unit: percentage and trillion dongs

Proportion of residential savings

Proportion of demand deposit, balance

(Source: Business activities statement of Vietnam Bank for Agriculture and Rural

Development in the period 2005 – 2010) [14]

Diagram 2.2: Lending market share of Vietnam Bank for Agriculture and

Rural Development compared to other financial institutions

Source: Report from the State Bank of Vietnam’s Credit Department 2.1.5.4 Debt restructuring, financial healthy making:

2.1.5.5 Guarantee activities:

2.2 SITUATION OF CREDIT RISK MANAGEMENT IN VIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT FOR THE LAST TIME:

2.2.1 Model of credit risk management: (See diagram 2.3)

2.2.2 Credit mechanism and policy for customer:

It is possible to say that credit procedure and other internal procedure directly related to credit activities are timely and fully issued by Vietnam Bank for

Agriculture and Rural Development suitable to its operation and based on Decisions

of the State Bank Governor and other legal regulations

Diagram 2.3: Model of credit risk management at Vietnam Bank for Agriculture

and Rural Development [14]

2.2.3 Credit operation procedure:

Vietnam Bank for Agriculture and Rural Development authorizes branches to approve credit grant basing on credit rank of customers and each respective branch

Diagram 2.4: Credit grant procedure [14]

Customer

Credit Department – Operation Center

General Director

Director Leader of Credit

Department

Credit officer

CREDIT

DEPARTMENT

INTERNAL INSPECTION AND SUPERVISION DEPARTMENT

RISK PREVENTION

& TREATMENT CENTER

BRANCHES GRADE 1

2.2.4 Information of credit risk prevention: At Vietnam Bank for Agriculture

and Rural Development, the Risk prevention and Treatment Center focuses on procession and supply of customer information of the whole system

2.2.5 Customer scoring and ranking system:

Today, customer scoring and ranking are implementing in accordance with the Dispatch No 1406/NHNo-TD dated 23rd May, 2007 of the General Director Until 31st December, 2010, Vietnam Bank for Agriculture and Rural Development has basically completed the customer scoring in accordance with regulations of the State Bank of Vietnam and approaching to the international practice

2.2.6 Lending method and agricultural – rural credit mechanism:

In addition to credit activities for enterprises, business households and urban households, credit for production household and agriculture – rural can be considered

as the biggest credit market of Vietnam Bank for Agriculture and Rural Development Therefore, in credit management, Vietnam Bank for Agriculture and Rural Development has specific method and implements separate mechanism for

credit in such field For agricultural and rural loans, Vietnam Bank for Agriculture

and Rural Development effectively implements the Decision No 67/TTg of the Prime Minister and other related legal documents

2.2.7 Debt classification and bad debt management:

Branches of Vietnam Bank for Agriculture and Rural Development are making debt classification, provision and credit risk treatment in accordance with Decision

No 636/2007/QD-HDQT-XLRR dated 22nd June, 2007 of the Board of Directors of Vietnam Bank for Agriculture and Rural Development

Table 2.9: Asset quality of Vietnam Bank for Agriculture and Rural Development

in the period 2007 - 2010 Unit: billion dongs; %

Total assets 326,897 400,485 480,963 542,166 Non-profit debt (bad debt) 5,048 9,575 15,259 22.280 Ratio of Non-profit debt/Loan

outstanding 2.01 3.25 4.12

5.25

Ratio of Provision/Non-profit

debt 91.48 58.31 40.99 54.89

Ratio of Risk asset/ Total assets 87.73 84.28 86.51 85.25

(Source: Annual report of Vietnam Bank for Agriculture and Rural Development in

Ratio Loan

outstan ding

Ratio Loan

outstan ding

Ratio Loan

outstan ding

Table 2.11: Bad debt ratio of Vietnam Bank for Agriculture and Rural

Development in the period 2005 -2010

Unit: billion dongs

Bad debt / Overdue debt 3.689 3.503 4.589 7.699 9.266 15.575 Ratio of Bad debt/ Total debt 2,3% 1,9% 1,9% 2,7% 2,6% 3,7%

(Source: Annual report of Vietnam Bank for Agriculture and Rural

Development in the period 2005 - 2010) [13]

2.2.9 Risk provisioning and credit risk treatment:

Table 2.13: Result of provisioning and risk provision treatment of Vietnam Bank

for Agriculture and Rural Development in the period 2007 - 2010

Unit: billion dongs

2.2.10 Recovery of debts treatd risk

In 2008, total recoveries of debts after risk treatment of Vietnam Bank for Agriculture and Rural Development were 3,307 billion dongs In 2007, they were 2,821 billion dongs, exceeding 87% in comparison with the plan In 2009, Vietnam Bank for Agriculture and Rural Development specially succeeded in debt recovery after risk treatment with an amount of 4,012 billion dongs that was the highest figure of debt recoveries since its establishment In 2010, the debt recovery after risk treatment was 2,834 billion dongs that is smaller than that of 2009, however, in comparison with other Commercial Banks, this is an impressive figure