LIQUIDITY RISK MANAGEMENT UNDER BASEL ACCORD AT JSC, BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM

39 2.2 Liquidity risk management under Basel II Accord at Joint Stock Commercial Bank for Investment and Development of Vietnam .... 66 CHAPTER III: SOLUTIONS FOR PROMOTING ACTIVITIES L

FOREIGN TRADE UNIVERSITY

DISSERTATION

LIQUIDITY RISK MANAGEMENT UNDER BASEL ACCORD

AT JSC, BANK FOR INVESTMENT AND DEVELOPMENT OF

VIETNAM

Major: Master of International Trade Policy and Law

CAO THI VAN ANH

MINISTRY OF EDUCATION AND TRAINING

FOREIGN TRADE UNIVERSITY

DISSERTATION

Liquidity risk management under Basel Accord at JSC,

Bank for Investment and Development of Viet Nam

Major: Master of International Trade Policy and Law

Full Name: CAO THI VAN ANH

SUPERVISOR: PhD NGUYEN THI HIEN

Ha Noi - 2017

ACKNOWLEDGEMENT

Firstly, I would like to express my sincere gratitude to my supervisor PhD Nguyen Thi Hien for her support to my study, for her patience, encouragement and immense knowledge Her guidance helped me in all the time of research and writing of this thesis I could not have imagined having a better advisor and mentor for my study Besides my supervisor, I would also like to show my gratitude to all of professors and lecturers during the master course of International Trade Policy and Law for sharing expertise, valuable guidance and encourage extended to me

Last but not the least; I would like to thank my all family members for supporting me spiritually throughout writing this thesis and my life in general

Hanoi, December, 2016

DECLARATION OF OWNERSHIP

I confirm that I have read and understood the guidelines on plagiarism, that I understand the meaning of plagiarism and that I may be penalized for submitting work that has been plagiarized

If I have been asked to submit hard copy, I understand that the work can’t be assessed unless both hard copy and electronic versions of the work are handed in

I declare that all material presented in the accompanying work is entirely my own work except where explicitly and individually indicated and that all sources used in its preparation and all quotations are clearly cited

Cao Thi Van Anh

LIST OF ABBREVIATIONS

APEC Asia-Pacific Economic Cooperation

ALCO Asset Liability Committee

ALM Asset Liability Management

APEC Asia-Pacific Economic Cooperation

BIDV Joint Stock Commercial Bank for Investment and Development of Vietnam BSC BIDV Security Company

BIS Bank for International Settlements

BTA Bilateral Trade Agreement

BOD Board of Director

CBs Commercial Banks

CAR Capital Adequacy Ratio

ECB European Central Bank

FED Federal Reverse

FPT Fund Transfer Pricing

GDP Gross Domestic Product

M&A Mergers And Acquisitions

LDR Loan to Deposit Ratio

PBOC People’s Bank of China

QE Quantitative Easing

Acronym Definition

ROA Return on Assets

ROE Return on Equity

NPL Net position Liquidity

NSFR Net Stable Funding Ratio

LCR Liquidity Coverage Ratio

SBV State Bank of Vietnam

SDR Special Drawing Right

TPP Trans-Pacific Partnership

UN United Nation

WTO World Trade Organization

TABLE OF CONTENTS

INTRODUCTION 1

1 Rationale 1

2 Literature Review 2

3 Research Objectives 3

4 Research Methodology 4

5 Structural thesis 4

CHAPTER I: THEORETICAL FRAMEWORK ON LIQUIDITY RISK MANAGEMENT ACCORDING TO BASEL II ACCORD 5

1.1 Fundamental of liquidity risk management 5

1.1.1 The concept of liquidity and liquidity risk 5

1.1.1.1 Definition 5

1.1.1.2 Causes of liquidity risk 6

1.1.1.3 Measuring liquidity risk 9

1.1.2 Liquidity risk management 10

1.1.2.1 Definition 10

1.1.2.2 Process of liquidity risk management 10

1.1.2.3 The roles of liquidity management 16

1.2 Liquidity risk management under Basel II Accord 17

1.2.1 Introduction to Basel II Accord 17

1.2.1.2 The basic contents of Basel II 19

1.2.2 Liquidity risk management under Basel II Accord 21

1.2.2.1 Identify liquidity risk management 21

1.2.2.2 Measurement of liquidity risk 24

1.2.2.3 Controlling liquidity risk management 29

1.2.2.4 Monitoring liquidity risk management 33

1.3 Factor effecting to the liquidity risk management 33

1.3.1 Legal framework 33

1.3.2 Information Technology 35

1.3.3 Human resources 36

1.3.4 Others 37

CHAPTER II: LIQUIDITY RISK MANAGEMENT PERFORMANCE UNDER BASEL II ACCORD AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM 38

2.1 Introduction of Joint Stock Commercial Bank for Investment and Development of Vietnam 38

2.1.1 General Information about BIDV 38

2.1.2 Operational performance of Joint Stock Commercial Bank for Investment and Development of Vietnam in the period 2010 - 2015 39

2.2 Liquidity risk management under Basel II Accord at Joint Stock Commercial Bank for Investment and Development of Vietnam 42

2.2.1 Legal framework on liquidity risk management at BIDV 42

2.2.1.1 Legal principles in liquidity risk management at BIDV 42

2.2.1.2 Organization structure for liquidity risk management at BIDV 44

2.2.2 Liquidity risk management under Basel II Accord at BIDV 46

2.2.2.2 Strategic Business Plan 49

2.2.2.3 The policy of liquidity risk management 50

2.3 Implementation processes of liquidity risk management under Basel II in BIDV 52

2.3.1 Risk identification 52

2.3.2 Measuring risk 53

2.3.3 Controlling risk 57

2.3.4 Monitoring and risk warning 59

2.4 Overall assessment on liquidity risk management at Bank for Investment and Development of Vietnam 61

2.4.1 Achievements 61

2.4.2 Shortcomings 63

2.4.3 Reasons 65

2.4.3.1 Objective reasons 65

2.4.3.2 Subjective reasons 66

CHAPTER III: SOLUTIONS FOR PROMOTING ACTIVITIES LIQUIDITY RISK MANAGEMENT UNDER BASEL II ACCORD AT JSC, BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM 69

3.1 Overview of liquidity risk management at BIDV 69

3.1.1 Business orientation 69

3.1.1.1 Forecast world economy and Vietnam's economy period 2017-2020 69

3.1.1.2 Business strategy period 2016 - 2020 72

3.1.2 Oriented development strategy: 74

3.1.3 Objectives towards the Environment and Social Community: 76

3.1.4 Strategic orientation of liquidity risk management 77

3.1.4.1 General orientation on the work of risk management 77

3.1.4.2 Strategy for liquidity risk management 78

3.2 Solutions to boost the liquidity risk management under Basel II Accord at the Joint Stock Commercial Bank for Investment and Development of Vietnam 79

3.2.1 Improving the effectiveness of macroeconomic forecasting 79

3.2.2 Continue to improve policies, regulations, procedures and measuring instruments liquidity risk under Basel II Accord and vision Basel III 80

3.2.3 Perfecting the system of liquidity risk reports 82

3.2.3.1 Liquidity gap report behaviour 82

3.2.3.2 Report endurance test in the conditions of liquidity crisis 83

3.2.3.3 Integrated reporting system of early warning indicators 84

3.2.4 Check the accuracy of the tool, the model used in the management of liquidity

risk 86

3.2.5 Construction Data Warehouse System 87

3.2.6 Improving the quality of workforce risk management 88 3.2.7 Initiative in coordination balance sheet according to the principles of Basel II

90

3.2.7.1 Develop retail banking services in order to attract funding sources for low-cost 88 3.2.7.2 Improve the capital performance 91 3.2.7.3 Closely manage the level of customer focus to mobilize large balances and high credit balance 92

CONCLUSION 95 REFERENCES 97

LIST OF TABLES AND FIGURES

Table 1: Credit rating of BIDV 39

Table 2.1: Bidv fund mobilization 54

Table 2.2: Bidv Outstanding Loans 55

Table 2.3: Key target of BIDV for period 2016-2020 74

Figure 2.1 Total Assets BIDV 40

Figure 2.2 Pre-tax Profit BIDV 41

Figure 2.3 ROE BIDV 41

Figure 2.4 ROA BIDV 42

Figure 2.5 Total Deposit BIDV 42

Figure 3.1 GDP of Vietnam from 2010 to September 2016 71

Figure 3.2 Foreign exchange USD/VND 2012-2016 (source: Reuteurs) 72

INTRODUCTION

1 Rationale

In recent years, the world economy in general and Vietnam's economy in particular has undergone many changes since the global financial crisis in 2008, the crisis began from the United States and spread to many countries around the world led

to the financial collapse, economic recession, declining growth in many economic sectors which are most severely affected the banking sector with the shedding batch burst banks in the world Basel Committee on Banking Supervision pointed out that one of the root causes of the crisis as liquidity issues have largely been ignored in the past, the crisis showed that banks dependent on short-term money market funding for their activities tend to be very large liquidity risk Vietnam banking sector also revealed many weaknesses in this period with the aftermath of 9 banks are classified as weaknesses should be included restructuring BIDV must also participate support, restructuring of some banks may operate on a small scale and inefficient activities such

as Mekong Housing Bank, Petrolimex Bank, Ocean Bank, Dong A Bank, and Construction Bank One of the main reasons for the collapse of the banks located in the issue of liquidity risk management, the subject of much interest from financial institutions, commercial banks and central banks around world With a financial market like Vietnam infancy, required capacity liquidity risk management is required Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) is one of the leading banks in Vietnam, head of the banking sector relative shares trade on profit before tax and operating indicators, proactive application of science and technology to modernize the bank in order to meet regulatory requirements and business value During its operations, the Bank has always identified risk management as one of the leading strategic goals, implement governance activities of the Bank in compliance with international practice; serious implementation the

direction of the Government, State Bank contributes effectively implement economic development plans, the implementation of social and national monetary policy

Date 03/17/2014, BIDV was selected State Bank implemented the Basel II capital Treaty under the scheme "Restructuring the system of credit institutions", the implementation of Basel II, the Bank has had 9 outside banks other goods Implementing Basel II assessment will generate significant step for the Bank in risk management and financial capacity building implementation goal of becoming the leading bank in Vietnam and regional risk management system standard international practice, won the appreciation of the strategic shareholders and investors at home and abroad The fact that Basel II implementation still faces many difficulties and challenges in terms of resources, institutions, mechanisms and policies as well as economic potential but BIDV also expressed determination to implement and mapped out plans as well as concrete steps to meet the requirements of Basel II

Starting from the importance of the work of the liquidity risk management requirements and improve governance at the Bank for the period 2015 - 2020, cooperation author has chosen the theme "Management of liquidity risk under Basel II Accord at the Joint Stock Commercial Bank for Investment and Development of Vietnam" to do research for his master's thesis The main purpose of this research is based on analysis and assessment of the situation of liquidity risk management at Commercial Bank for Investment and Development of Vietnam to propose new solutions in order to improve governance liquidity risk under Basel II, at the same time improve the efficiency of business operations of joint Stock Commercial Bank for Investment and Development of Vietnam, under the strategic direction of the Bank's Board of directors during the period from 2015 - 2020

2 Literature Review

In recent years in Vietnam, a number of master's thesis research also had Basel II and the state applied to risk management in commercial banks These include master's thesis: "International Standards for Risk Management in the business of commercial

banks as per Basel II and the application in Vietnam" by Nguyen Anh Tuan (2006),

"application of the Basel II accord on risk management systems at commercial banks in Vietnam" by Chu Thi Huong Giang (2014), the author went deep analysis of the three pillars of Basel II and associated us to experience Basel II applications in countries around the world and lessons from the US financial crisis in 2008 the author also studied the application of Basel II Treaty in risk management in commercial banks Vietnam trade, thereby offering solutions to improve the application of Basel II risk management in commercial banks in Vietnam

However, the above-mentioned projects are mainly research and application of the Basel II accord on risk management in general without going into a more detailed analysis of its own liquidity risk management Also, the work does not have a specific analysis of the content of the liquidity risk management such as risk appetite, risk management strategy, governance structure and processes to implement risk management practice liquidity risk under Basel II at the commercial banks in Vietnam

in general and in commercial banks Investment and Development of Vietnam in particular

3 Research Objectives

The purpose of the research study: baseline study activities of liquidity risk management under Basel II Accord in the Joint Stock Commercial Bank for Investment and Development of Vietnam, which proposed a number of solutions active measures to boost liquidity risk management, governance framework liquidity risk under Basel II

To achieve the purpose of the study performed the thesis the following tasks:

- Identifying the current liquidity risk, liquidity risk management under Basel II Accord

- Application liquidity risk management at Commercial Bank for Investment and Development of Vietnam toward Basel II Accord

- Propose some solutions to enhance the application of the Basel II accord operational liquidity risk management at the Joint Stock Commercial Bank for Investment and Development of Vietnam

Object of research: The theme focused on liquidity, liquidity risk, Basel II Accord and the work of liquidity risk management under Basel II at the Bank Commercial Joint Stock Investment and Development of Vietnam

Scope of the study: Limit around the regulations and standards of liquidity risk management mentioned in Basel II, using operational risk management the liquidity risk management at Commercial Bank investment and Development of Vietnam

4 Research Methodology

Use Thesis synthetic methods, information analysis, and statistical analysis, comparative methods Data collection from primary data (in depth interview) and secondary data sources are collected mainly from industry reports and the annual report

of the central bank, the Bank and some commercial banks by the students to synthesize and analyze the matching range of themes In addition, the sources of data from sources specialized magazines such prestigious financial magazine, Journal of Banking, Journal of the money markets, from internet banking website

5 Structural thesis

Besides the introduction, conclusion, list of tables, references the main content

of the thesis consists of three chapters structured as follows:

- Chapter 1: Theoretical framework on liquidity risk management according to Basel II Accord

- Chapter 2: Liquidity risk management performance under Basel II Accord in the Joint Stock Commercial Bank for Investment and Development of Vietnam

Chapter 3: Solutions to intensification of liquidity risk management under Basel

II Treaty in Joint Stock Commercial Bank for Investment and Development of Vietnam

CHAPTER I: THEORETICAL FRAMEWORK ON LIQUIDITY RISK

MANAGEMENT ACCORDING TO BASEL II ACCORD

1.1 Fundamental of liquidity risk management

1.1.1 The concept of liquidity and liquidity risk

1.1.1.1 Definition

Liquidity in view of the bank, “Liquidity is the ability to meet all financial bank

obligations on time incurred in the course of transactions such as payment of deposits, loans, payment and other financial transactions operations” (Nguyen Van Tien, 2015,

p 419)

A bank is considered to have good liquidity if the bank can access to a source of immediate liquidity fund at a reasonable cost and able to meet all financial bank obligations

Liquidity risk, is the situation the bank is not able to make the financial

commitments agreed upon with the client when the bank does not raise sufficient capital and /or asset cannot be sold for a reasonable cost and / or to mobilize capital at

high cost to meet its payment obligations to customers

Similar to the concept of risk has a lot of different perspectives on liquidity risk

- Liquidity risk is the risk of inability to mobilize liquidity, or if liquidity mobilize with high fees Liquidity risk arises from the balance sheet when there is imbalance in the size and maturity of assets and liabilities

- Liquidity risk is the risk of loss arising from state status shortage of cash or cash equivalent assets, particularly the risk of losses arising from the state lacks the ability

to mobilize capital at a reasonable cost, or the inability to sell a property at reasonable price, in order to make payment obligations

Circular No 36/2014 / TT-NHNN (2014) definition of liquidity risk is the risk due to: (i) credit institutions and branches of foreign banks cannot afford to implement the obligations in the point incurred financial obligations; or (ii) credit institutions and

branches of foreign banks have the ability to perform the obligation when due, but suffered major losses to carry out that obligation

At the Bank, liquidity risk is the situation the Bank has no liquidity to clients as committed or to mobilize capital at high cost to meet solvency, or other subjective reasons inability to pay

In sum: Liquidity risk is the risk that the bank does not have the ability to perform the financial obligations incurred, or may fulfill the financial obligations incurred but incur high costs, loss great to perform such obligations

1.1.1.2 Causes of liquidity risk

Economists usually call the Bank is "risky business." Practice has proved that no single branch likely to lead to greater risk, such as in the field of currency trading - credit Bank incurs risks from all sides in the banking business: from the subjective and objective, from the banks themselves, from clients, mechanisms and policies, from all kinds of other risks brought Therefore, the risk of the bank can be exponentially effect

to economic risks When the risk occurs, first trading profit of banks will be affected If the risk occurs in small degree, banks can offset with the reserves and with its own capital but it will directly affect the ability to expand the bank's business More seriously, if the risks to a large extent, banks' capital is not enough to compensate, banks lose liquidity, inability to pay for customer commitments, lack of available capital, reduced customer confidence course will lead to bankruptcy of banks Therefore, the prevention and liquidity risk management is a necessary job, critical to the commercial banks Bank will be much impacted from the subjective and objective financial market makes and faced with liquidity risk arises from the following reasons:

First, credit growth due to overheating: The overheated credit growth of

commercial banks associated with the investment structure is not reasonable, focused

on investment in some industries risks run high as the real estate profits will arise as the market risk freezing or reversing, creating an imbalance between the maturity of

assets and liabilities due to banks using too many resources short-term loans to long term loans Before the state bank announced growth targets in 2016, experts predicted credit growth target would be about 18-20% higher than 13-14% in 2015, the study recent research shows that growth in bank credit has an important role for the growth

of the economy, affecting directly to GDP, interest rates and inflation Therefore oriented credit growth rates are usually based on expected macroeconomic indicators

to be 1% of GDP growth by 2-3% facing credit growth, while credit growth will create pressure force on money supply growth, raising the pressure on the banks' capital This has created a high liquidity risk for commercial banks

Second, due to bad loans and higher credit risk: Bad debt has a negative impact

on the flow of capital and the economy and the safety and efficiency of the banking business The weak banking business, rising bad loans the bank does not lead to the irrecoverable capital to cover its obligations corresponding deposits but also need to pay for a provision for this bad loans In many stages as banks chasing immediate profit objective should be the lending policies too openly, leading to lower lending conditions, accept holding a portfolio of assets with credit risk high When financial markets collapse, rising bad debts and most of the banks cannot recover the capital, many banks have made losses, a severe liquidity shortage, on the verge of collapse and suffer the acquisition of other large banks, or wait until the assistance from the central bank

Third, due to the imbalance between assets and liability: In the banking

business, banks also have raised long-term funds to finance long-term assets In fact, banks tend to borrow from individuals, economic organizations and other financial institutions (including non-term deposit and short-term deposit with less than 1 year); while implementing lending and investing valuable papers have long-term (1 year or more) with corresponding interest rates higher deposit rates, to compensate the cost of capital and ensure margins for Bank The very nature of this operation makes the bank maintains the imbalance between assets - liability, which in adverse situations, banks

cannot raise the additional funds to implement the obligations (short-term) maturity, banks will face liquidity risk

Fourth, the lack of liquidity reserves, including the lack of assets with high liquidity: even bank maintain maturity mismatch between assets - funds in a safe level,

the bank could still face liquidity risk if the liquidity reserves of banks at low levels According Aspachs (2005), in crisis situations, the property has high liquidity of banks can easily be converted into cash, but still not enough to fulfill all the obligations of due debts Or in many cases, lack of assets which have high liquidity, to stress resulting

in liquidity, banks cannot convert, or have costly / discount to convert the property into money, and banks suffer from liquidity risk

Fifth, mobilized unstable funding sources: bank deposits can come from many

sources such as: (i) primary market (the market 1), including individuals and economic organizations; (ii) the secondary market (the market 2) includes banks, credit institutions and other financial institutions; and in many forms, such as current account, call account, deposits, security, bonds In the form of deposit mobilization, current account is the lowest stable, banks cannot foreseen the time customers will withdraw it, except the customer and the bank have agreed on the plan to withdraw money or the bank has models for analyzing customer behavior Also, the resources mobilized from the market 2 are also considered unstable due to the interaction between banks, financial institutions on the money market Specifically, when the financial crisis hit, almost all banks are faced with liquidity tensions, and it is difficult to raise from the market if possible 2 or funding costs is very high Therefore, banks maintain a ratio of capital mobilized from the market 2 too high will also vulnerable when the market liquidity of big changes

Sixth, comes from the client side: it is assessed is the reason why the group of

banks is difficult to use market tools to effectively regulate the liquidity of banks In conditions of asymmetric information, the less transparency, a number of clients including legal persons withdrew money from the bank and switch to other banks,

people withdraw money to buy gold, buy US dollars to hoard has increased the instability of the market and affect the liquidity of the bank When depositors withdraw money unexpectedly, forcing banks to additional borrowings or sell assets (assets convert into cash) to meet solvency In assets, the cash has the highest level of liquidity, banks typically use cash as the first means of direct and to meet liquidity needs, but do not bring cash because interest income, due to that banks tend to reduce assets in the form of cash and investments less money into more liquid assets or assets

in the long term Whether, in the end, most of the different assets can turn into money, but the cost to convert into cash immediately for various assets are very different When selling a property must immediately then its price can be lower than was the case a lot of time to find a buyer and negotiate the price As a result, some assets can only be converted into cash immediately at a very low price, so it may threaten the solvency of the bank last In addition to the liquidation of assets, the bank can seek additional funds through borrowing on the money market

1.1.1.3 Measuring liquidity risk

In recent years to governance liquidity risk some liquidity risk measurement methods have been developed including: liquidity index method, approach and use of funds, structured capital, financial index method and some other methods Each method mentioned above are based on certain assumptions that the bank can only estimate the approximate actual liquidity level of the bank at some given moment, and this is why the liquidity management is always ready to adjust the estimates of liquidity requirements to match the actual operation of the bank and often regularly review funding strategy and process for the ongoing measurement and monitoring the effective liquidity risk management

Bank should enhance liquidity risk measurement that maintains sufficient liquidity to withstand a wide range of stress event It includes appropriate process and effective policy for managing liquidity risk that have been revised by Board of

Directors These process and policies must provide a comprehensive view of liquidity risk and are suitable to bank’s profile

1.1.2 Liquidity risk management

1.1.2.1 Definition

In the course of business activities, the bank wishes to obtain a net liquidity status so that appropriate both safety and ensuring maximum profits But this task is not simple; liquidity risk is always latent in the daily activities of the bank Therefore, banks must implement liquidity management Scientific management was portrayed liquidity risk management is a process of constant impact, intentionally managers of banks on the supply and demand of liquidity achieve the security objectives liquidity and profitability goals of every commercial bank in the specific period

Thus, the management "Liquidity risk management is the process of identification,

measurement, control and financing of risks of banks cannot meet the timely and adequate liquidity needs for customers "(Rudolf Duttweiler, 2010)

1.1.2.2 Process of liquidity risk management

Approach to funding and capital gap

This method aims to determine the status of net liquidity (Liquidity position Net NPL) by measuring the difference between the supply of liquidity (the ability to supply the bank's money to meet the needs of the customer payment as agreed that include cash, ability to raise new funds and withdraw the loan maturity, investors valuable papers due and other receivables, selling liquid assets at a given time) and liquidity (demand payment under the bank's commitments to customers include the claim for payment from deposit accounts, valuable papers issued by banks in the maturity, commitment loan disbursement and payment obligations at a given moment), the bank with this method can measure the changes of supply and demand are expected

liquidity to thereby determine the status based on net liquidity gap liquidity demand and supply

Step 1: Estimate the demand and supply of liquidity through the construction method

of forecasting models or build trend line

The forecast for total deposits and loans during the period will be based on the statistics of the past, the forecast supply and demand assumptions about future liquidity

to build trend line includes the following major components:

- The trend: the liquidity increase / decrease over growth in the long term is calculated by collecting the actual number of years and ran econometric models to get the function average annual growth

- The season: other than growth trend direction due to the impact of seasonal factors at certain times, is calculated in the collection of data in the past and an assumed growth rate with growth plans earlier period

- The cycle: the level difference between the actual and forecast is calculated as the difference between actual and forecast, calculated as the difference between estimated and seasonal trends of the previous period with the actual deposits, lending

of that period

Total deposits, loans contemplated in the period = deposits, loans prior period + actual + component part seasonal trend cycle component +

Step 2: Calculate the changes in the plan period is calculated according to the

method trend line

Δ (deposits and loans) = Total deposits and loans expected in the period - Total deposits and loans in the previous period

How to forecast based on the statistics in the past has the advantage of easy implementation, data sources are used from the bank itself should be proactive banking data sources and consistent with each bank itself goods

Liquidity gap method

The objective of the liquidity gap to estimate the maturity of assets and liabilities and off-balance sheet commitments of banks in a particular period based on the current financial situation bank This analysis helps evaluate and balance sheet structure of the bank's accounting, as well as forecast cash flow and the liquidity situation in the future through the review of balance sheet risks Due to the liquidity gap is the main tool for managing the liquidity of banks, the analysis should be carried out daily

Liquidity gap Liquidity = Supply - Demand for liquidity

= Δ (Deposit) - Δ (Loans)

Liquidity gap> 0: Bank liquidity surplus, banks can invest in productive assets

Liquidity gap <0: Bank liquidation deficit account, the bank must supplement liquidity shortage

Liquidity gap = 0: Bank liquidity status has ideal, balanced liquidity but such cases are rare in practice

Steps to calculate the gap liquidity as follows:

First, all of the cash flows arising from the assets and liabilities (both internal and

external tables) are classified in the maturity range of different maturities (for products with terms contract) or based on the conduct agreed for each product (the assumptions

or behavioral model)

Secondly, the cash flows arising on assets (internal and external tables) of each strip

selected period are compared to the cash flow generated from total debt (internal and external tables) in the same stretch of the term

The difference between cash inflows and cash outflows for each maturity band is determined the liquidity gap of banks in terms that range Depending on the regulations

of each bank, each bank can divide the maturity range in a variety of ways, the most common terms include: maturity O / N, 1 week, 1 month, 3 months, 6 months, 1 year

Financial indicators methodology

Liquidity index provides a snapshot summary of records accounting balance sheet of the bank Banks should be aware of how to calculate and information can be had from the index Usually the index includes:

(a) The liquidity reserve ratio

Main objective of the liquid assets ratio is to ensure continuous availability of highly liquid assets unencumbered, can sold or pledged to raise funds in the crisis scenario due to short-term liabilities tends to fluctuate and cannot be approached in the context of the crisis

The credit institution, foreign bank branches to hold the assets of high liquidity reserves to meet payment demands arising due and unexpected, according to the definition of central bank (2014) liquidity reserve ratio is calculated by the formula:

(1.1)

Total liquid assets will consist of cash, gold, and deposits at the central bank, government bonds, treasury bills, and other forms of assets that can be used to easily raise capital

Total liabilities should include any form of capital less stable and more volatile as interbank lending, part of customer deposits easily turn A rate action identified in the total committed undisbursed credits must also be taken into account because the bank may require additional capital to meet the demand for withdrawal of the adverse situation

(b) The rate for loan to deposit (LDR - loan to deposit ratio)

This ratio to ensure sufficient stability of the deposit (usually a customer deposits) was used for the growth of lending, according to the central bank (2014) lending rate on deposits is calculated by the formula:

(1.2)

In which, total loans include all loans or overdrafts that banks disbursed to customers Total deposits only include customer deposits, excluding interbank loans from money markets

In particular, the total loan portfolio includes all loans or bank overdraft disbursed to customers Total deposits only include customer deposits, excluding interbank loans from money markets

If this rate is too high, a high probability the bank does not have enough liquidity to cover stable unforeseen capital needs due to loan growth was too hot and had to rely on interbank funding If the ratio is too low, the loan growth failed to keep up the growth

of bank deposits (increased funding costs) and the banks cannot earn profits as expected

(c) Percentage of possibilities pays for 30 days

This indicator to ensure that banks have sufficient assets reserve liquidity including cash or assets that can be converted into cash without losing value or less, to meet liquidity needs of banks for liquidity crisis scenario for 30 days The high rates show that banks have enough liquid assets to meet high requirements on the net cash outflow

in the event of a crisis, according to the State Bank of Vietnam (2014) solvency ratio of

30 days to be counted by the formula:

Percentage of top 30 customers deposit:

According to EY Singapore (2016), the main objective of this ratio is to avoid being too dependent on a group of certain customer deposit as this may cause a shortage of huge capital if the customer group this withdrawal of deposits This ratio is calculated

by the formula:

(1.4)

Numerator will include the main depositors of the bank (should be based on aggregated deposits from clients group linked together) and the denominator includes total deposits (savings, payment, fixed deposit) This rate only applies to the customer's deposit is economic organizations and individuals that do not apply to deposits of the nest credit institutions For interbank deposits, banks need to have a separate rate deposits to avoid being too dependent on a certain group of inter-bank counterparts

Ratio of mobilization fund in the market 1 on total liabilities:

The main goal is to ensure banks maintain large amounts of deposits from economic entities and individuals, not on the interbank group This is because the underlying interbank funds more volatile and may not be available in times of crisis This ratio is calculated by the formula:

(1.5)

Ratio of deposits:

The main objective is to assess the composition of deposits with the bank's credit stability Banks need to ensure there is a suitable amount of deposits stable Typically, term deposits generally more stable than payment deposit (demand deposits) This ratio

is calculated by the formula:

(1.6)

This rate only applies to deposits from the market 1

The proportion of short term capital is used for medium and long term:

The main objective is to ensure banks maintain a stable long-term capital to finance long-term assets If the number of major long-term assets financed by short-term funding, banks will be faced with a situation where liquidity stress short-term deposits cannot continue as expected According to the central bank (2014) this ratio is calculated by the formula:

(1.7)

1.1.2.3 The roles of liquidity management

Risks in the banking business are inevitable, especially it has a domino effect, spreading and affecting the whole banking system Therefore, liquidity risk management is seen as key activities and should be implemented at all levels of the bank Which manages liquidity risk bearing certain importance in the operation of the banking system? This is the essential problem; ask to be done regularly, repeatedly coming from the following fundamental reasons:

First, the liquidity risks occur, the bank suffered huge losses depending on the

level risk The first is the damage caused by the metabolic costs of assets into money or high costs and borrowing conditions on the money market becomes harsher reduce assets and profits of the bank With a high level of risk, banks can face the delayed operation resulting in reduced income Moreover, reducing the liquidity risk reputation

The ratio of short-term

capital fund for long

with customers led to the loss of customers, especially the traditional customers, and is

at risk management agencies alarm, tight control All expressions are pushing banks to the brink closer risks losing the ability to pay and go bankrupt

Second, existence tradeoff between liquidity and profitability This means that when selecting target bank liquidity by maintaining liquidity surplus state with an amount of capital that is not included in the profitability of investment, the greater the amount of capital the potential profit is declining In contrast, if banks choose high profit targets using various sources of investment capital into profit making liquidity deficit will push banks to liquidity risk situation detrimental to banking activities groin

Third, in some special cases, liquidity risk becomes extremely severe beyond

the ability of the bank, the bank could fall into the loss of ability to pay, and without assistance from state banks will go bankrupt or be sold, or merged The bankruptcy of

a bank due to lack of liquidity is likely to become a major influence on the effect the stability of the entire banking system For example, the global financial crisis in 2008 also began with the banks face liquidity risk

The reasons leading to the inevitable problems posed to the bank's leaders need

to manage liquidity with strategies and policies to fit reasonably guaranteed liquidity but still maximum ability profitability in the banking activities Liquidity management

is the process of continuous impact, intentionally bank's executives on the supply and demand of liquidity but ensure payment requests, payment requests and bank credit with the smallest losses

Thus, the payment needs of customers on a regular basis and in special circumstances are urgent and pressing needs are important issues in the management of banks to limit risk for the bank and for the whole system

1.2 Liquidity risk management under Basel II Accord

1.2.1 Introduction to Basel II Accord

1.2.1.1 The process of the introduction of Basel II

Basel Committee on banking supervision birth is derived from the crisis of financial markets following the collapse of the Bretton Woods system of managed exchange rates in 1973 After the collapse of the Bretton Woods system, many banks have large foreign currency losses

To deal with these and other disruptions in international financial markets, the Governor of the Central Bank from the G10 group of developing countries has established a Committee on banking regulation and supervision practices in late 1974 Then, renamed Basel Committee on monitoring banking activities, Commission has been designed as a forum for members to meet and exchange relevant issues to international banking activities Its purpose was and is to strengthen financial stability

by improving the quality of banking supervision worldwide

Commission seeks to achieve its objectives by setting up standards least for the regulation and banking supervision; by sharing supervisory issues, approaches and techniques to promote common understanding and improve cross-border cooperation; and by exchanging information on the development in the banking sector and financial markets to help distribute the risks of existing and emerging on the global financial system

Ever since the first meeting in February 1975 a meeting of the Basel Committee have been held regularly three or four years Once established, the initial G10 members

of the group of 10 developing countries, the Commission has extended its membership

in 2009 and again in 2014, and now includes 28 jurisdictions management Current Chairman of the Committee is Governor, Central Bank of Sweden

The Basel Committee does not have any public oversight bodies and the Commission's conclusions are not legally binding and compliance requirements for banking supervision Instead, the Basel Committee only develop and publish criteria and recommendations on banking supervision, while introducing best practices and guide members will widely applied through the separate regulations, details best suited

to the characteristics of the financial system in each country In this way, the Commission encourages the application of approaches and common standards without the need to intervene in the technical supervision of the Member States

The critical points of the Basel Committee's weakness in the banking system of a country, whether developed or developing, can threaten not only to financial stability

in the territory of that country but also across the world Basel Committee regularly holds discussions revolved around the international cooperation to reduce the gap in banking supervision, improve the quality of banking supervision worldwide

In 1988, the Basel Committee on Banking Supervision has approved a first text named the capital of the Basel Convention (the Basel Capital Accord or Basel I) with effect from 1992, according to BIS (2015) requirements the internationally active banks to hold a minimum amount of capital to be able to deal with the risks that may occur This minimum level of capital is a certain percentage of the total capital of the bank and also be understood as the minimum capital risk weighted according to the bank Specifically, Basel I required a framework to measure credit risk with a minimum capital standard of 8%, Basel I is not only popular among the member states which are also common in most other countries of the international banking activities

By 1996, the Basel I is amended with lots of new features However, the Treaty still had several drawbacks

To overcome the limitations of Basel I, May 6/1999, the Basel Committee has proposed a new measurement framework with three main pillars, including: (i) minimum capital requirements based on Basel I inherited; (ii) The supervisory review

of the internal assessment process and the capital adequacy of financial institutions; (iii) Effective use of information disclosure to transparent market rules, in addition to monitoring To Date 26/06/2004, the International Covenant on new Basel capital (Basel II) was officially issued

1.2.1.2 The basic contents of Basel II

The objective of Basel II in order to improve the quality and stability of the

international banking system, creating and maintaining a level playing field for banks operating on an international level, promoting the adoption of more stringent practices

in the field of risk management

Basel II using the concept of "three pillars":

Pillar I: related to the maintenance of capital required Accordingly, the rate of

minimum required capital (CAR) is still 8% of total assets as Basel I Risk However, risk is calculated according to three main factors that banks face: risk credit and operational risk (or risk activities) and market risks Compared with Basel I, the calculation of cost of capital for credit risk with major modifications, for market risk with small changes, but the new version is purely for operational risk, risk weights of Basel II includes multiple levels (from 0% -150% or more) and are sensitive to the level of credit ratings

Pillar II: concerning the policy banks, Basel II give policy-makers the "tools" better

than Basel I pillar also offers a solution framework for the risk that banks face, such as systemic risk, risk strategic, reputation risk, liquidity risk and legal risk, but the treaty summarized as "residual risk" (residual risk)

Basel II emphasizes four principles of the revision monitoring, including:

First, banks need to have a process for assessing the level of internal capital adequacy

according to risk categories and to get a proper strategy to maintain capital levels that

Second, the monitoring organization should review and assess the determination of the

level of internal capital and bank's strategy, as well as the ability to monitor and ensure compliance with the minimum capital ratio; supervisory authorities should implement a number of appropriate monitoring procedures if they are not satisfied with the outcome

of this process

Third, supervisory authority recommended banks to maintain higher capital levels to a

minimum in accordance with regulations

Fourth, the supervisory authority should intervene at an early stage to ensure the bank's

capital level is not reduced below the minimum prescribed and may require amendment immediately if capital is not the only well above the minimum

Pillar III: banks must publish information appropriately according to market

principles Basel II gives a list of requirements to force banks to publish information, from the information on the capital structure, capital adequacy level to all information related to the sensitivity of banks to risk credit risk, market risk, operational risk and assessment procedures of the bank for each type of risk

Thus, the development of the Basel Convention and the organization in place, the commercial banks are required increasingly operate more transparently, ensuring prevention funds for types of riskier and therefore, hope to minimize the risks

1.2.2 Liquidity risk management under Basel II Accord

Basel I just focus on a risk management factor is the percentage of single minimum capital requirement, which is not, interested in these types other risks, including liquidity risk The financial crisis and the global economy in history shows that the banks faced difficulties in the crisis, even collapse, due to erroneous views and deficiencies in basic principles liquidity risk management Recognizing that, in September 2008, the Basel Committee issued "Guidelines for monitoring and risk management, strong liquidity," with a total of 17 principles

These principles have provided direction detailed instructions for monitoring and risk management, liquidity and improve risk management activities in this important field

1.2.2.1 Identify liquidity risk management

Principle 1: Each bank is responsible to closely manage liquidity risk Each bank

should establish a risk management framework liquidity essential to maintain adequate liquidity, including the financial capital reserve buffer, the liquid assets of high quality,

to stand in the period tough, even in the event of a loss, or the funding sources are secured or not secured weakened According to BIS (2008), the supervisory authorities

should reach that goal both aspects of liquidity risk management and liquidity status of

a bank and should have instant response if that weaker banks either aspects in order to protect depositors and to limit the damage that can occur to the entire financial system

This principle requires banks need to build a framework for liquidity risk management, comprehensive and effective too This risk management framework was incorporated synchronized in the risk management processes of the entire bank At the same time, banks should not let the competitive pressures affecting the integrity of the work of liquidity risk management, control functions, the quota system and the level of liquidity reserves of banks

Build structures for the management of liquidity

Principle 2: 'Each bank should agree to limit liquidity risk consistent with the business

strategy of the bank and the location of the financial system' (BIS 2008, p.13) The Bank must define tolerance liquidity risk; this definition must be consistent with the business strategy of the bank The Board has ultimate responsibility for liquidity risk and risk management approach in bank liquidity, and so the Board must provide liquidity risk appetite for the entire row Liquidity risk appetite, so:

First, determine the level of liquidity risk that banks can accept, this level must be

consistent with the business strategy, the role of the financial system and to counter light situation and financial ability of banks to mobilize capital

Second, banks must ensure that liquidity management an effective way in normal

conditions and the management must ensure banks can operate in times of crisis lasted

Third, be clearly defined so that all leaders can understand the relationship between

risk and return Bank may raise the possibility of his risk tolerance parameters by qualitative or quantitative

Principle 3: Senior executives of banks need to develop strategies, policies and risk

management processes matching liquidity risk limits and to ensure that banks maintain adequate liquidity resources necessary The senior leaders need to constantly monitor

the liquidity of the bank and periodically report to the Executive Board BIS (2008) suggested that the bank's executive board should periodically at least one annual review and approve the strategy, policies, and methods related to basic management of bank liquidity and ensuring that the senior leadership of the bank perform liquidity risk control effectively, which includes:

- Decide the organizational structure, role responsibility and control the management of liquidity risk for the whole bank;

- Ensure the effective liquidity reserves and in accordance with the bank

- Identifying specific process and the approval of the exceptions in the policies and limits, including reporting procedures and the processing of the cases exceeding the limit;

- Regular review of strategic capital mobilization occurs any change in the environment inside and outside

- Familiarity with the components, characteristics and diversity of assets and sources of bank deposits

- Close monitoring trends and developments of the market, these factors can cause difficulties in managing liquidity risk;

- Communication structure of liquidity risk management broadly in BIDV;

For the Board of directors, 'need to regularly check the report on the liquidity status of banks' (BIS 2008, p.15) BOD can be notified immediately for new or urgent problems of liquidity These issues include increasing funding costs or raise the level

of concentration, increased levels of liquidity gap, the exhaustion of alternative sources

of liquidity, excess cases strictly limited to important, significant deterioration of liquidity reserve level, or to changes in external market conditions that these changes can signal future difficulties Board Executive Board should ensure the implementation

of appropriate corrective actions to address these issues

In addition, all business units perform activities that affect the liquidity of the banks have full understanding of risk management strategies liquidity and business operations must comply with the policies, procedures, limits and steps to control liquidity risk has been approved

Principle 4: Each bank should carefully calculate liquidity costs, benefits and risks of

liquidity in the internal pricing, performance evaluation and in the adoption of new products in the key business areas banks (including the internal operations and balance sheet tables), so that evaluation obtained resources from the risk-taking business considering possible losses if encountered liquidity risk that business activities that could cause the whole bank, according to BIS (2008) Leaders must ensure the liquidity management process of the bank including the liquidity measure the cost, benefit profit and liquidity risk in all key business operations Information on the cost

of liquidity, profitability and liquidity risks must be clearly allocated for activities related to the liquidation costs are allocated in line with the state holding, category or individual transactions

The cost allocation, profitability and liquidity risk to consider factors related to the holding period of the asset is expected and liabilities, the characteristics of market liquidity and any other relevant factors, including the benefits of access to the stabilization funds, as a number of private deposits The cost, profitability and liquidity risk to be determined clearly specified in the approval process of new products In particular, a new product is defined as a product was first launched by the Bank or, as a variation of an existing product with significant changes compared to existing products

1.2.2.2 Measurement of liquidity risk

Principle 5: Each bank should have a strict process to identify and measure, monitor

and manage liquidity risk This process should be a framework necessary to build a complete cash flow from information assets, liabilities and off-balance sheet assets in a particular time

According to this principle, banks should issue a Framework for liquidity risk management are documented, including the provisions on the procedure to identify, measure, monitor and control liquidity risk

For liquidity risk measurement, according to BIS (2008), the bank must

implement the cash flow forecasts in a flexible manner and include realistic assumptions about the behavior of the parties may be relevant and must be made at the level certain specific The assumptions in the cash flow estimates must be consistent, documented, reviewed and approved periodically

The Bank must assess "the degree of change" (stickiness) of the resources mobilized,

in particular, reviews price view that resources mobilized rapidly depleted in the crisis conditions For example, factors affecting the "rate of change" of personal deposits, sensitivity to changes in interest rates, geographical location of depositors and the deposit channel The calculation to analyze the level of "cash flow gap," also known as

"liquidity gap", based on assumptions about the future behavior of assets, liabilities and off-balance sheet items , and then can be used to calculate the aggregate level of excess

or shortage of liquidity of banks in a certain period of time

In addition, BIS (2008) also recommended that banks should take into account the cash flows related to derivative contracts in the liquidity risk reporting, which, including the ability of the partners require additional collateral in the case of a credit rating or credit bank credit for reduced or in cases of underlying asset prices For the committed undisbursed credits, letters of credit and credit guarantees, banks are required to determine the cash flow in normal conditions and in conditions of crisis Similarly, liquidity issues can occur when banks are too dependent on credit commitments or guarantees from other organizations provide

For foreign currency liquidity risk, banks need to beat overall rates of foreign

currency liquidity needs and determine the level of foreign currency liquidity gaps are acceptable, by performing analysis for each currency that the bank has a large

proportion of transactions, and thereby consider the potential impact of the crisis period

Liquidity gap in reporting foreign currency liquidity risk should consider the following contents, specified by BIS (2008): (a) The ability to mobilize the bank's capital in the foreign exchange market; (b) The level of foreign exchange reserves of the domestic market; (c) Ability to swap currency with surplus liquidity surplus to a shortage of foreign currency, and between the member units; and (d) The ability to convert the main currency that banks hold, which has to consider the possibility of loss

or possibility of completely closing market foreign exchange swaps for pair a certain amount

For intraday liquidity management activities, banks need to understand and

have the ability to manage the flow of money from the bank payment services; custody and agents activities can affect cash flows of bank Due to the total value of customer payments (cash inflows and cash outflows) can often be very large, so the unexpected change of the cash flow that can lead to the phenomenon of large amounts of money to

be sent and / or drawn or major capital withdrawal from the commitment / credit line, which may affect the overall liquidity conditions in the day and the night of the bank

For early warning systems, bank should build early warning systems to identify

the signs, the risk increases from the state of liquidity risk from the demand or potential mobilization of banks The early warning signs must identify adverse trends and the role and enabled the analysis and response actions can be done to minimize the risks of the bank for the risks is growing

BIS (2008) provide a number of early warning signs may be qualitative or quantitative (which may include but not limited to) that the bank can be deployed, including: increased liquidity gap; repeat violations or asymptotic limit internal or statutory limits; assets rapid growth, especially when funded by liabilities that have high volatility; unfavorable trend or major risks arising from a specific product line, such as increasing the debts are not paid on time; increase the acquisition of the

certificate of deposit before maturity; the concentration of assets or liabilities increase; deterioration substantial profits, asset quality and overall financial condition of the bank

For the limit system, banks have to set internal limits for liquidity risk control and

regularly review these limits and reporting processes corresponds to a higher level These limits must be used to manage daily liquidity under normal conditions (example limits on the cumulative cash flow max) The framework of the bank's limits should include limits to ensure that the bank can continue to operate normally during periods

of market crisis, banking crisis, and combined 2 elements crisis

For reporting system, banks need a "management information systems" (MIS -

management information system) to provide reliable information in a timely manner and bring predictability to state Status of bank liquidity to the Board, the Executive Board, and the management staff is concerned MIS should be able to:

- Covers are all sources of liquidity risk occur including potential risks, related problems and risks arising from new business activities In addition, MIS is capable of providing detailed information and timelier in cases of crisis;

- Calculate the liquidity status of all currency that the bank has business operations - under each separate currency and aggregate all currencies;

- Calculation of the liquidity status of the day, every day for shorter periods of time, and then for the further period;

- Used to manage daily liquidity, supervision of compliance with policies, procedures and limits have been set

Leaders should agree on a set of criteria reports, indicating the scope, method and frequency of reporting to the receiving party (such as the BOD, ALCO Committee) and the parties responsible for preparing the report to support the liquidity risk supervision Bank must specify the thresholds and reporting guidelines leading to a higher level, the BOD and the supervisory authority

Principle 6: Each bank should actively monitor and supervise liquidity risk level and

raising capital needs of each subordinate unit, the business sector, and each coin, taking into account the legal restrictions, business regulations and the transfer of liquidity sources

For liquidity risk management of whole bank, BIS (2008) stipulated banks to

actively monitor and control liquidity risk and capital needs in and across legal entities, business units banking and currency, which must consider the legal restrictions, regulations and restrictions in the transfer of funds Bank to actively monitor and control liquidity risk in granting separate legal units and branches of foreign banks and subsidiaries, and the entire organization, applying synthetic procedures data on different systems to build a comprehensive report on liquidity risk across the system and identify the difficulties and constraints in the transfer of capital within the organization

Bank must set internal limits to minimize the risk of spread of the crisis, as well

as the limit at the level of subsidiaries and branches to limit the dependence of the member units to mobilize external funding sources groin Internal limits have been established for each major foreign currency by the bank at risk For the conversion of foreign currency is difficult, banks need to set stricter limits, especially in a crisis The quota must be set up to monitor various levels mobilized: (a) under the partnership; (b)

in the form of mobilization on the market with collateral or unsecured; (c) kind of product; (d) the term; (e) currency; (f) the geographical location

Principle 7: Each bank should establish a fund mobilization strategies that can

diversify effectively mobilize resources and term deposits Banks should continuously maintain their existence in the market raising capital that banks that choose to participate and build long-term relationships, the bond with the holders of capital to gradually improve diversity of funding sources The bank also should regularly reassess its ability to raise capital quickly from each source Since then identify the key

factors affecting the ability to mobilize their capital, and monitor these factors closely

to ensure the estimates of capital mobilization capacity is still valuable

Banks should have a diversified resources mobilized both in the short, medium and long term Diversification targets should be part of the plan to raise capital medium and long term and must be consistent with the process of budgeting and business planning Need to make a check deposit diversified in accordance with the norms relating to: (a) Partnership; (b) Capital Assets used to guarantee versus unsecured funding; (c) engine type; (d) Term; (e) Currency; (f) market (geographical region) Banks should regularly evaluate and test the funding sources to assess the effectiveness in providing liquidity short, medium and long term

As usual liquidity risk management, banks should maintain the current continuous presence in the capital markets have chosen and maintained close relationships with capital providers The market penetration may include the development of the property sales market or strengthen agreements that banks can borrow unsecured or secured Bank to participate actively in the market related to their mobilization strategy

1.2.2.3 Controlling liquidity risk management

Principle 8: Each bank should actively manage liquidity risks in the day and needed

liquidity to meet payment demands and obligations already committed in a timely manner both in normal business conditions and the financial situations of stress, to perform good functions and obligations of payment commitments

According to BIS ( 2008), the goal of the day liquidity management should ensure that banks have the ability to: (a) identify and define the order of priority of payment obligations important to the specific time and can meet this obligation when necessary (e.g the obligations required to be paid by other payment systems, the obligations related to the operation of the market such as business transactions or liquidate funds interbank clearing, and critical payments can affect business activities and reputation of the bank); (b) the payment of other obligations less important as soon as possible