Thuyết trình môn ngân hàng thương mại credit risk management of comercial banks in vietnam

Risk assessment criteria for credit listSome models applied on the credit risk analysis The system BASEL II in credit risk management... Risk assessment criteria for credit listSome mo

Credit risk management of comercial banks in

Vietnam

facts and issues

Entrepreneur

Slides

3

Part I Theory of credit risk and

credit risk management

Risk assessment criteria for credit list

Some models applied on the credit risk analysis

The system BASEL

II in credit risk management

Risk assessment criteria for credit list

Some models applied on the credit risk

analysis

The system BASEL

2 in credit risk management

Credit risk is the risk (potential) of loss that may occurred by borrower failure to response their obligations under the terms and conditions of financing contracts

Risk assessment criteria for credit list

Some models applied on the credit risk analysis

The system BASEL

2 in credit risk management

Organizational risk management

Risk measurement Risk control

Focus credit risk management

Dispersion credit risk management Viet Nam

Risk assessment criteria for credit list

Some models applied on the credit risk analysis

The system BASEL

2 in credit risk management

a Focus credit risk management model

(+) Managing risks with a fully system

banks and ensuring a long-term

competitiveness

(+) Establishing and maintaining a

risk management environment in sync,

matching with management processes

(+) Developing risk management

policies which was consist with the

whole system

(+) Suitable for large-scale banks

(-) The construction and deployment of focus management model requires banks to spend more effort and time

(-) Staffs have to have the necessary knowledges and know how to apply theories to practice

Risk assessment criteria for credit list

Some models applied on the credit risk analysis

The system BASEL

2 in credit risk management

b Dispersion credit risk management

This model does not have the separation between the functions of risk management, sales and operations Instead, the credit department performs fully three functions and responses for all loan‘s preparations.

(+) Simple organizational structure

(+) Suitable for small-scale banks

(-) A lack of depth

Risk assessment criterias for credit list Some models

applied on the credit risk

analysis The system BASEL

2 in credit risk management

a The ratio of bad debt on total loans =

Bad debt is the debt from Group 3 to Group 5

b.The ratio of provion on total loans =

This ratio is higher, the credit risk of all major credit portfolio is bigger

c The ratio of collateral on total loans

This ratio is higher, the credit risk is lower

d The ratio of risk debt on total loans

Debt risks is from group 2 to group 5

This ratio is higher, the credit risk is bigger

Risk assessment criterias for credit list Some models

applied on the credit risk analysis The system

BASEL 2 in credit risk

management

ESTIMATED LOSS EXPECTED MODEL

VALUE AT RISK

MODEL

INTERNAL CREDIT RATING MODEL

Some models applied on the credit risk analysis

The system BASEL

II in credit risk management

Basel II towards implementation of the three objectives:

- Ensure that the method for calculating safe levels of bank capital.

- Measure the separation between operational risk and credit risk

- Strengthening the governance of financial globalization banks that agreed between nations.

With 3 objectives, main content of Basel 2 are summarized on 3 key pillars:

The 1 st : Revolves around credit risk, minimum capital requirements, given the minimum capital

requirements and risk assessment methods.

The 2 nd: Regulations on banking supervision.

The 3 rd: The requirement to disclose information about banking operations for the subjects involved.

In which, the basic content of Basel II is to provide methods and principles of credit risk management, controlling bad debt, including:

- Developing suitable credit environment

- Implementing healthy credit provision

- Maintaining appropriate management process and credit monitoring

- The Basel Committee also encourages banks to develop and improve the system of internal

credit ratings.

1

SYSTEM CREDIT RISK MANAGEMENT OF TECHCOMBANK

2

CREDIT RISK

MANAGEMENT ON

TECHCOMBANK

1 System credit risk management of Techcombank

a Structure diagram of Techcombank risk management:

b Chart of risk management

Build a system of internal credit ratings assigned by customer groups: residential, medium, large

Management credit portfolio analysis and advice on the sector, comes built into the limit for each sector, construction of internal reports on credit portfolio management.

Develop tools, reporting monitoring and control of KRIs (the important risk indicators).

Periodically inspect, check quality and credit system modifications.

Develop risk management model as the model for the LGH, EAD, Pricing.

c Provision of bad debts from 2014 to 2015 and the situation of Techcombank

- Specific provision at 31/12 was determined by

loans after deducting the value of collateral has been deducted allowance rate multiplied

by classification group at 31/11 debt

- General allowance at 31/12 were up at

0.75% of total loans of the debts at 30/11 except for deposits and loans to other credit institutions and liabilities are classified in heading irrecoverable debt

Provision

Specific provision

General Provision

c Provision of bad debts from 2014 to 2015 and the situation of Techcombank

As Circular 02/2013 / TT-NHNN , Techcombank divided into

5 groups applied debt reserve ratio for each groups as follows:

Results in the management of bad debts through the bad debt ratio index

2 Credit risk management on techcombank

a Techcombank applies credit risk management model

 Firstly, focus credit risk management model helps Techcombank maintain and

implement credit policies which balance among targets

 Secondly, Techcombank is the first bank organized credit risk management system

which operated under international rules

 Thirdly, Techcombank separates the functions of marketing, customer relationship,

risk assessment independently with the credit provider decision, debt

management, monitoring

 Fourthly, Techcombank performs focus credit approval model and decentralizes credit

approval with different levels

 Finally, Techcombank holds the professional room with an independent credit

monitoring function

b Problems

 Firstly, ensuring credit and service qualities, in credit provider activities:

When network scale and business activities increased, the processing of credit

provider terms usually wastes a lot of time

=> Affects the credit activities quality and competitiveness of Techcombank.

 Secondly, credit risk management report information systems:

Banking technology system of Techcombank has yet to meet the requirements for

risk management

 Thirdly, the management structure organization structure and the control of credit risk:

The lack of staff to develop and perform procedures, regulation effectively

 Finally, The debt handling:

The work of handling overdue debts, bad debt is not good, the debt settlement

process is until continue

Entrepreneur

Slides

24

PART III Recommendations to

improve credit risk management for the commercial banking system

 Continuous improvement model of credit risk management consistent

with the conditions of personnel, operational network and its

infrastructure

 Improving the information technology system to minimize the lack of

information in the expansion and control of credit to the economy,

thereby reducing the risk of rising bad loans for the banking system.

 Promoting collaboration between others commercial banks, enhancing

the role of CIC in order to avoid cases of multiple bank lending rate a

customer to exceed the maximum limit of the customer repayment

 Monitoring and managing after the loan to be proactive to ensure that

pay, find new business opportunities and expand business opportunities.

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