Banking credit activities ingeneral and bad debt management of Vietnam Joint StockCommercial Bank for Industry and Trade have had a good change inrecent years.. With the desire to learn
Trang 11 The urgency of the research topic
Credit activity is one of the most important activities ofcommercial banks Bad debts are indispensable in credit activities, andmaintaining bad debts at a safe level is one of the important goals ofcommercial banks Bad debt is not only a basic cause of unsafe,increased risk provisioning, increased debt collection costs therebyreducing the bank's expected profits but also negatively affecting thesocial economic development In addition to the negative financialimpacts, bad debt also affects the reputation of the bank itself andgreatly affects the banking system The management of non-performing loans is considered an important activity for banks todetermine the causes, predict losses, and then propose measures tominimize the losses caused by bad debts as well as provide preventivemeasures to avoid Repeated bad debt in the future
Vietnam Joint Stock Commercial Bank for Industry and Trade(Vietinbank) is one of the four state-owned joint stock commercialbanks, with the largest total assets and large outstanding loans in thesystem of Vietnamese commercial banks Banking credit activities ingeneral and bad debt management of Vietnam Joint StockCommercial Bank for Industry and Trade have had a good change inrecent years In addition to the successes, bad debt managementactivities of the Bank also have limitations and obstacles: measures tohandle bad debts are not diverse; Debts sold to VAMC in the form ofspecial bonds have not yet been fully resolved In order to achievethe objectives of the Vietnam Banking Industry Development Strategy
to 2025, with orientations to 2030, the Decision 986 / QD-TTg andrequirements for compliance with Basel II standards for theVietnamese commercial banking system, Vietnam Joint StockCommercial Bank for Industry and Trade needs to have more drasticmeasures in the management management of the Bank
Trang 2With the desire to learn and analyze to contribute more scientificand practical evidences, propose solutions to improve bad debtmanagement for the bank, the PhD student has chosen the topic:
"Management of bad debts in credit activities of Vietnam Joint Stock Commercial Bank for Industry and Trade”as a topic for the doctoral
* Research tasks
- Systemizing some theories about credit, bad debt and bad debtmanagement of commercial banks according to the approach of themajor Economic Management
- Analyze the status of bad debt management in credit activities
of Vietnam Joint Stock Commercial Bank for Industry and Trade from
2012 to 2018 (according to management functions)
- Proposing solutions and recommendations to strengthen baddebt management activities in credit activities of Vietnam Joint StockCommercial Bank for Industry and Trade from 2020 to 2025
3 Research subject and scope
* Research subjects
The dissertation studies the status of bad debt management incredit activities of Vietnam Joint Stock Commercial Bank for Industryand Trade according to management functions, evaluation criteria andfactors affecting the bad debt management of the Bank
* Research scope
- In terms of contents:
The thesis studies to the approach of microeconomicmanagement, namely, the study of bad debt management in creditactivities of the system of Vietnam Joint Stock Commercial Bank for
Trang 3Industry and Trade (not study bad debts arising from other activitiessuch as payment, investment) Macro management - state management(of the State Bank) for bad debts at commercial banks is considered interms of influencing factors.
- In terms of space:
The dissertation compares with a number of other commercialbanks such as: Banks representing joint stock banks without State ownedcapital (ACB, Sacombank, Eximbank, MB, SHB, VPBank, Hdbank),banks representing State-owned commercial banks (BIDV, VCB)
- In terms of time:
+ The length of the dissertation is from 2012 to 2018
+ Time to apply solutions from 2020 to 2025
4 New contributions of the thesis
* New contributions in academia and theory
The thesis studies and establishes the content of management ofbad debts (MBD) in credit activities according to the approach of themajor of economic management based on the functions ofmanagement (Building and issuing policies and strategies for bad debtmanagement and bad debt management process; Organizationalstructure of bad debt management apparatus; Organize theimplementation of management activities), of a commercial bank Thestudy draws some lessons that can be applied to Vietnam Joint StockCommercial Bank for Industry and Trade (Vietinbank) from theexperience in MBD management of BIDV and Vietcombank
* New conclusions on practical assessment
Summarizing the results of analyzing the status of MBD of commercial banks of Vietinbank from secondary information sources and the results of interviews with experts, the author of the thesis said that: (i) The process of implementing the bank's MBD policies are stillinadequate; (ii) The division specialized in managing separate bad debts is unclear; (iii) Methods of measuring bad debt are still simple
Trang 4and the specific level of losses cannot be determined; (iv) The use of MBD tools and measures is limited.
* New suggestions on policies and solutions
The thesis proposes 4 groups of solutions: (i) Continue toimprove the formulation and issuance of policies, strategies formanaging bad debts and the process of managing bad debts; (ii)Continue to improve the organizational structure of bad debtmanagement system; (iii) Improve the organization of implementation
of the bad debt management activities; (iv) Other solutions Of which,some key solutions to focus on settlement are: Improving the earlywarning system; Completing the internal credit classification and therole of CIC well; Complete quantitative evaluation and rankingcombined with qualitative; The role of Asset Management CompanyAMC (of Vietinbank) in dealing with bad debts; Complete models andorganization of risk management mechanism with the expectedmodels and organization of credit (with changes in the organizationalstructure of parts of TSC) Building and improving the systemindicators of valuation of credit risks
5 The thesis structure
Chapter 1: Overview of research and research methods
Chapter 2: Theoretical basis for bad debts and management ofbad debts in credit operations of commercial banks
Chapter 3: Actual situation of bad debts and management ofbad debts in credit activities of Vietnam Joint Stock Commercial Bankfor Industry and Trade
Chapter 4: Orientations and solutions to enhance bad debtmanagement in credit activities of Vietnam Joint Stock CommercialBank for Industry and Trade
Chapter 1 OVERVIEW OF RESEARCH AND METHODS
RESEARCH 1.1 Overview of relevant studies and research gaps
Trang 51.1.1 Overview of domestic and foreign studies related to the thesis topic
1.1.1.1 Studies on credit risk management
- Larry D Wall (Determinants of the Loan Loss Allowance:Some Cross-country Comparisons, 2004)
- Asokan Anandarajan, Iftekhar Hasan, Ana Lozano-Vivas(Loan loss provision decisions: An empirical analysis of the Spanishdepository institutions, 2005)
- Rossi, S.P.S., Schwaiger, M.S., and Winkler, G (How loanportfolio diversification affects risk, efficiency and capitalization: Amanagerial behavior model for Austrian banks, 2009)
- Nguyen Duc Tu (Credit risk management at Joint StockCommercial Bank for Industry and Trade of Vietnam, 2012)
- Nguyen Tuan Anh (Credit risk governance of Vietnam Bankfor Agriculture and Rural Development, 2012)
1.1.1.2 Studies on bad debts and factors affecting bad debts
- Mohd Zaini Abd Karim, Sok-Gee Chan, Sallahudin Hassan(Bank efficiency and non-peforming loans: evidence from Malaysiaand Singapore, 2010)
- Raphael Espinoza and Ananthakrishnan (NonperformingLoans in the GCC Banking System and their Macroeconomic Effects,2010)
- Nguyen Thi Thu Dong (Improving credit quality at JointStock Commercial Bank for Foreign Trade of Vietnam in theintegration process, 2012)
- Roland Beck, Petr Jakubik and Anamaria Piloiu Performing loans What matterSin addition to the economic cycle, 2013)
(Non Alwyn Jordan and Carisma Tucke (Assessing the Impact ofNonperforming Loans on Economic Growth in The Bahamas, 2013)
- Rabeya Sultana Lata (Non-Performing Loan and Profitability:The Case of State Owned Commercial Banks in Bangladesh, 2015)
Trang 6- Moh Benny Alexandri and Teguh Iman Santoso (NonPerforming Loan: Impact of Internal and External Factor: Evidence inIndonesia, 2015).
- Nguyen Thi Hong Vinh (Bad debt of Vietnam commercialbanking system, 2017)
1.1.1.3 Research on bad debt management of commercial banks
- Nguyen Thi Hoai Phuong (Managing bad debts in Vietnamesecommercial banks, 2012)
- Nguyen Thi Thu Cuc (Managing bad debts in Vietnam Bankfor Agriculture and Rural Development, 2015)
- Tran Thi Thanh Diep (Managing bad debts in Vietnam JointStock Commercial Bank for Industry and Trade, 2017),
1.1.2 Research gaps and scientific and practical values of the thesis are inherited
1.1.2.1 Research gap
Firstly, overseas studies are done in highly developedeconomies and banking industries There, the market conditions, themanagement model, the legal corridor governing the economy and theinternal conditions of the banks are very different from thecharacteristics of the Vietnamese economy and commercial bankingsystem Male present
Secondly, a number of domestic researches conducted in theprevious periods (works of Nguyen Duc Tu (2012) and Nguyen ThiHoai Phuong (2012)): old data information, while the businessenvironment There have been changes in business, legal policies andmanagement level Although, past and elaborate past studies havepractical value during the period of time when the topic is published,
it may not be completely suitable for the current context
Thirdly, most published studies have approached in theperspective of Finance - Banking (studying credit risks/bad debtmanagement process from identification, risk measurement,classification to debt settlement bad), not researching from the
Trang 7perspective of the approach of Economic Management (researchingmanagement content according to management functions:
(1) Develop and issue policies, strategies for managing baddebts and procedures for managing bad debts; (2) Organizationalstructure of bad debt management apparatus; (3) Organize theimplementation of bad debt management activities
Thus, it can be affirmed that in the published studies there arevery few comprehensive studies on bad debt management in creditactivities of Vietnam Joint Stock Commercial Bank for Industry andTrade according to the management's functions during the period.most recently (2012-2018)
From the comments above, the author of the thesis say some ofthe following gaps have helped the author study in order to implementthe thesis topic well:
- The theory of content, evaluation criteria and factors affectingthe bad debt management of a commercial bank according to theapproach of the major economic management
- The situation of bad debts and bad debt management atVietnam Joint Stock Commercial Bank for Industry and Trade(according to management functions) for the period 2012-2018
- Solutions to complete and strengthen management of bad debts
of Vietnam Joint Stock Commercial Bank for Industry and Trade
1.1.2.2 Scientific and practical values of the thesis are inherited
In the process of researching and implementing the thesis, thePhD student has developed a number of theories on bad debts andcredit risk management of commercial banks; Reference to sources ofinformation and data drawn from the research of Nguyen Duc Tu(2012) and Tran Thi Thanh Diep (2017)
1.2 Research questions
From the above synthesis and analysis, the thesis will focus onthe reply to the following questions:
Trang 8- What does Management of bad debts includes? Which criteria areused to assess the status of bad debt management of commercial banks?
- How is the situation of bad debt management at Vietnam JointStock Commercial Bank for Industry and Trade? What are the mainfactors affecting the management of bad debts in credit activities atVietnam Joint Stock Commercial Bank for Industry and Trade?Advantages, limitations and causes of the limitations andshortcomings in the management of bad debts at Vietnam Joint StockCommercial Bank for Industry and Trade?
- What measures should be done in management of bad debts inorder to prevent and control bad debts in Vietnam Joint StockCommercial Bank for Industry and Trade in the coming years?
1.3 The research method of the thesis
1.3.1 Method of collecting information and data
* Primary information
Primary information was collected by in-depth interviewmethod to make appropriate assessments and assessments of thecontent presented in the thesis In addition to the objective subject, theauthor interviewed a number of subjects who are managers, experts ofState inspection and supervision agencies of the provincial / municipalState Bank branches (Appendix 7)
* Secondary information
PhD student conducted secondary information on the status ofcredit operations, bad debts and bad debt management at VietnamJoint Stock Commercial Bank for Industry and Trade (2012-2018)(credit regulations, policies and principles, reports about bad debt ofthe bank) Websites of SBV, Vietnam Joint Stock Commercial Bankfor Industry and Trade, and other commercial banks,
1.3.2 Method of aggregating and processing information and data
* Processing primary information
For the primary information collected by the method of in-depthinterview with experts, the PhD student proceeded to transfer the
Trang 9information data from the interview to the word file format Next, thedata is screened, analyzed, synthesized and used in some topics.The results of the research are based not only on the summary
of the interviewee's opinion on each specific content but also on thegeneral assessment to draw comparisons with the qualitative analysisresults through secondary data collected (Appendix 4)
The main method used in the thesis is a qualitative method incombination with in-depth interviews with experts, economicmanagers, experts, chief experts, and senior experts of the StateAdministration Committee of the State Bank, branch of provinciallevel/city
* Processing secondary information
With secondary information collected, postgraduate usedstatistical research, comparison, analysis and synthesis methods; usingsupporting tools such as graphs, tables, tables to analyze bad debtmanagement activities in credit activities of Vietnam Joint StockCommercial Bank for Industry and Trade, based on that evaluation,comparison, to draw the results discuss about management activities
in credit activities of Vietnam Joint Stock Commercial Bank forIndustry and Trade In addition, postgraduate uses logical reasoningand methodology
Trang 101.4 Research process of the thesis
Figure 1.1 Research process of the thesis
(Source: Illustration of the author)
Overview of literature reviewKey words: bad debts, bad debt management, identifying research gap
Determining research problemsBad debt management
Determining research objectives and
questionsSystemizing theoretical basis – analysis of
current situation – measures to complete
Systemization ad development of theoretical
basisTheories on bad debts and bad debt
Proposing orientations and solutions
Trang 11* Process of collecting and processing primary data
Figure 1.2: Process of collecting and processing primary data
(Source: Illustration of the author)
Figure 1.3 Process of collecting and processing secondary data
(Source: Illustration of the author)
Propose solutions and experiences
Collecting data on bad debt management of
Vietinbank and some commercial banks
Analyse, evaluate current situation – dawning
Propose sulutions
Analyzing and assessing current situation of bad debt management in VietinbankCollecting interview resultsInterviewingPrepare questions for interviewDetermining research sampleResearch Preparation
Trang 12Chapter 2 THEORETICAL BASIS FOR BAD DEBT AND BAD DEBT MANAGEMENT IN CREDIT ACTIVITIES OF
COMMERCIAL BANK 2.1 General arguments about bad debts in credit activities
of commercial banks
2.1.1 Concepts of bank credit and bad debt
2.1.1.1 Bank credit and credit risk
* Banking credit concept
Bank credit is a credit relationship between two parties,necessarily on one side as a bank, on the other side as an individual,
an enterprise or other organizations This is essentially a transfer ofthe right to use capital between a bank lender and a credit recipient for
a specified period of time Upon the expiry of the agreement, thecreditee must repay the creditor the original value and the addedvalue
* Credit risk
Credit risk is a type of risk arising in the process of a bank'sloan, manifested by the fact that customers cannot pay debts or paydebts on time or inadequately to the bank Thus, when the customer isdue in due payment or does not pay or does not fully pay, it meansthat credit risk has occurred
2.1.1.2 The concept of bad debt
According to previous studies, the concept of bad debt and how
to identify bad debt are complex and diverse
The term "bad debt" in English is "bad debt", is performing loan", or "doubtful debt" According to Basel Committee,According to the Circular No 02/2013/TT - NHNN dated January 21,
"non-2013 of the State Bank of Vietnam, according to PHD candidate’sopinion, bad debt is a loan that is overdue and and / or principalrepayment under an agreement over 90 days and doubt the borrower'sability to repay the debt Specifically, according to Article 6 or Article
7 of Decision 493/2005 / QD-NHNN, bad debts are debts of groups 3,
4 and 5, including substandard debts, doubtful debts, and potentiallyirrecoverable debts