DSpace at VNU: Liquidity risk management in Lienviet Commercial Joint Stock Bank

vi Liquidity risk management in Lienviet Commercial Joint Stock Bank Văn Thu Hương Khoa Quản trị Kinh doanh Luận văn Thạc sĩ ngành: Kinh doanh và quản lý; Mã số: 60 34 05 Người hướng

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Liquidity risk management in Lienviet

Commercial Joint Stock Bank

Văn Thu Hương

Khoa Quản trị Kinh doanh Luận văn Thạc sĩ ngành: Kinh doanh và quản lý; Mã số: 60 34 05

Người hướng dẫn: TS Chu Thành, ThS Hà Nguyên

Năm bảo vệ: 2010

Keywords: Quản trị kinh doanh; Quản trị rủi ro; Ngân hàng thương mại;

Quản lý tài chính

Content

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TOM TAT iv

LIST OF ABBREVIATIONS x

LIST OF TABLES xi

LIST OF FIGURES xii

INTRODUCTION 1

CHAPTER I: LITERATURE REVIEW 5

1.1 Commercial bank 5

1.1.1 Concepts 5

1.1.2 Products & services provided by commercial banks 6

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1.1.3 Roles of commercial bank in economics 6

1.2 Risk management in Commercial Bank 7

1.2.1 Risk in commercial bank 7

1.2.2 Main risks in Commercial Bank 8

1.2.3 Risk Management in Commercial Bank 8

1.3 Liquidity Risk Management in Commercial Bank 10

1.3.1 Defining liquidity risk 10

1.3.2 Basel and Basel II requirements 12

1.3.3 International Framework for Liquidity Risk Management in Commercial Bank 16 1.3.3.1 Liquidity risk tolerance 18

1.3.3.2 Strategy & Policy 18

1.3.3.3 The responsibilities to manageliquidity risk 19

1.3.3.4 Liquidity Risk Management Process 21

1.3.3.5 Contingency Planning 25

1.3.3.6 Internal Audit 27

1.4 Liquidity risk in Vietnam Commercial bank system 27

1.4.1 Some typical eventsof liquidly risk in Viet Nam before year 2006 27

1.4.2 From the beginningof year 2006 to the end of year 2007: 28

1.4.3 From the beginningof year 2008 - the end of year 2008 29

1.4.4 From the beginningof year 2009 to the ending of year 2009 30

1.4.5 The first six months of year 2010 31

1.4.6 Summarized main reasons for liquiditycrunch 32

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1.5 State Bank of Vietnam regulations 33

1.6 Practices for liquidity risk management 37

1.6.1 The Hongkong and Shanghai Bank Corporation 37

1.6.2 Asia Commercial Bank 38

CHAPTER 2 LIQUIDITY RISK MANAGEMENT IN LIENVIETBANK 4 1 2.1 Overview on LienVietBank 41 2.1.1 Introduction 41

2.1.2 Business Results 44

2.1.3 Organizati on structure 44

2.2 Liquidity risk in LienVietBank 45

2.2.1 SBV’s regulations on liquidity ratiosin theactivities of credit institution 2.2.2 Supplies of Liquidity 47

2.2.2.1 Liquid Assets 48

2.2.2.2 Loans repayment 53

2.2.2.3 Total mobilized funds and chartered capital 55

2.2.3 Measurement of Liquidity risk via Gap Analysis 59

2.2.3.1 LienVietBank’s Liquidity Gap report in VND (see table 2-11) 60

2.2.3.2 LienVietBank’s Liquidity Gap report in USD (see table 2-12) 63

2.2.4 Assessment on current status of liquidity risk 65

2.3 General situation of risk management at LienVietBank 67

2.3.1 From establishment to end 2008 67

2.3.2 For the year of 2009 68

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2.3.3 From the beginning of 2010 to now 69

2.4 Liquidity risk management in LienVietBank 69

2.4.1 Strategy and Policy 69

2.4.2 The responsibilities to manage liquidityrisk 71

2.4.3 Process of liquidity risk management 74

2.4.4 Internal Audit 75

2.4.5 Contingency Plan 75

2.5 Assessment on liquidity risk management in LienVietBank 76

2.5.1 Achievements 77

2.5.2 Drawbacks on the current liquidity riskmanagement in LienVietBank78 2.5.2.1 Strategy and policy 78

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2.5.2.2 Organization structure 78

2.5.2.3 Process of liquidity risk management and contingency plan 79

2.5.2.4 Management information system 79

2.5.2.5 Human resource 80

CHAPTER 3 RECOMMENDATIONS AND SOLUTIONS 82

3 1 Some petitions for LienVietBank 82

3.1.1 Building a culture of risk management in LienVietBank 82

3.1.2 Building Liquidity risk strategy and policy 84

3.1.3 Improving organizational structure 87

3.1.4 Building process of liquidity risk management 90

3.1.5 Building contingency plan 97

3.1.6 Improving management information system 99

3.1.7 Improving human resources 100

3.1.8 Action planning 102

3.2 Some petitions for SBV 107

3.3 Some petitions forGovernment 108

Conclusion 109

REFERENCE 110

Appendix 1 112

Appendix 2 113

Appendix 3 114

Appendix 4 115

References:

1 S.Rose, Peter, 2001, “Managing commercial banks” Ha Noi, Financial Puplisher

11

2 S.Rose, Peter and C.Hudgins, Sylvia, (2008), Bank management & Financial Services,

McGraw Hill, Singapore

3 Autorite Des Marches Financiers, (2009), Liquidity risk management guideline

HMSO, Great Britain

5 Council of Standards Australia, (1999), Risk Management, Standards Association of

Australia, Australia

DFIs

7 Basel Committee on Banking Supervision, (2008), Liquidity Risk: Management and

Supervisory Challenges, Bank for International Settlements, Switzerland

8 Basel Committee on Banking Supervision, (2008), Principles for sound liquidity risk

management and supervision, Bank for International Settlements, Switzerland

9 Bank Supervision Department, (2008), Liquidity Risk Management Guideline, The Central

Bank of Barbados

10 Citibank, (1996), Introduction to Risk Management, Training and Development Centers,

Asia Pacific

December 2008, HSBC, United Kingdom

12 Reserve Bank of Fiji, (1995), Liquidity risk management requirements for banks, Banking

supervision Policy Statement No: 9A

institutions licensed to conduct banking business under the banking act

14 Asia Commercial Bank, Annual Report, 2008, 2009, Financial Statement, June 2010

15 Vietnam Technological and Commercial Joint stock bank, Annual Report, 2008,

16 Sai gon Thuong tin bank, Annual Report, 2008, 2009, Financial Statement, June

2010

17 The Bank for Foreign Trade of Vietnam, Annual Report 2008, 2009, Financial Statement,

June 2010

18 Lien Viet Commercial Joint Stock Bank, Financial Statement, 2008, 2009, June 2010