Completing the credit rating system of Bank for Agriculture and Rural Development of Vietnam - 1





Major: Finance - Banking Code: 60340201


Scientific instructor:  Assoc.Prof.Dr. Truong Quang Thong

City. Ho Chi Minh - Year 2015


I hereby declare that this is my own research work, with the support of my guide and reference to the documents I have listed in the list of references.

The research contents and research results in this topic are honest and have never been published in any works.

City. Ho Chi Minh, date of 2015


Pham Thi Ngoc Phuong


Side page cover Acknowledgment of Contents

List of symbols and abbreviations List of tables and figures


Chapter 1: Overview of credit ratings at commercial banks 4

1.1. Credit and credit risk 4

1.2. Credit rating overview and credit rating system 5

1.3. Some 13 . credit rating models

1.4. Experience in credit ratings of banks in the world, auditing organizations and Vietnamese commercial banks 15

Chapter 2: Status of credit rating system of Bank for Agriculture and Rural Development of Vietnam 22

2.1. Bank for Agriculture and Rural Development of Vietnam 22

2.1.1. Introducing Agribank 22

2.1.2. Current status of credit activities of Agribank 24

2.2. Agribank's credit granting process 27

2.3. Credit rating system of Agribank 30

2.3.1. 30 . rating method

2.3.2. 30 rated object

2.3.3. Principle of operation 31

2.3.4. Scoring process 31

2.4. Comparing Agribank's rating system with other commercial banks in Vietnam 44

2.4.1. Credit rating system of ACB 44

2.4.2. Vietcombank's credit rating system 47

2.5. Evaluation of Agribank's credit rating system 51

Chapter 3: Solutions to improve the credit rating system of Bank for Agriculture and Rural Development of Vietnam 61

3.1. Agribank's development orientation to 2020 62

3.2. Solution to complete Agribank's credit rating system 64

3.3. Some proposals to improve Agribank's credit rating system 75




ACB: Asia Commercial Joint Stock Bank

Agribank : Bank for Agriculture and Rural Development of Vietnam Financial statements : Financial statements

CBTD: Credit officer

CIC : Credit Information Center DN : Enterprise

SOEs : State-owned enterprises Foreign investment : Foreign investment Cooperatives : Ranking system

IPCAS : Customer accounting and payment system Customer : Customer

NCD : Scorer SBV : State Bank

Vietnam Bank for Agriculture and Rural Development : Bank for Agriculture and Rural Development of Vietnam Commercial Bank : Commercial Bank

PLN : Classification of Joint Stock Commercial Debt : Joint Stock Commercial Credit Institution : Credit Institution Special Asset : Collateral

TTKH : Customer information

Center for Prevention and Treatment of Risks : Center for Prevention and Handling of Risks People's Committee : People's Committee

VCB : Joint Stock Commercial Bank for Foreign Trade (Vietcombank) XHKH : Customer Rating

XHTD : Credit Rating XHTD Internal : Internal Credit Rating

Table 1.1: Factors that create credit risk in the Bank 5

Table 1.2: Proportion of evaluation criteria in the FICO score model 14

Table 1.3: E&Y's individual scoring criteria 18

Table 1.4: E&Y's corporate financial scoring criteria 18

Table 1.5: Combined Credit Rating Matrix of E&Y 19

Table 2.1: Agribank's debt rating and classification 33

Table 2.2: Scoreboard of collateral 35

Table 2.3: Individual customer risk assessment matrix 36

Table 2.4: Score weight in corporate customer scoring 37

Table 2.5: Determination of enterprise size 39

Table 2.6: Financial indicators 41

Table 2.7: Weight of non-financial scores of customers who have a credit relationship 42

Table 2.8: Weight of non-financial scores for new customers who have a credit relationship for the first time 42

Table 2.9: Comparison of Agribank's credit system with ACB and Vietcombank 50

Table 3.1: Percentage of individual customer scores 66

Table 3.2: Percentage of financial score of corporate customers 66

Figure 2.1: Growth chart of outstanding loans of Agribank and the banking system over 24 years

Figure 2.2: Graph of bad debt of Agribank and the banking system over the years 25

Figure 2.3: Agribank's customer scoring process 32


1. Reason for choosing the topic

Credit activities are the most profitable activities of banks. However, in recent years, credit activities of Vietnam's commercial banks have faced many risks, causing bad debts of the banking system to increase rapidly. Bad debt erodes the equity of banks, many banks have small scale, weak risk management, have to merge into other banks. Therefore, it can be said that credit risk management is vital for banks.

Commercial banks have built their own internal credit rating system to assess and rank customers in order to apply appropriate policies, screen customers well to grant credit, thereby improving quality. credit, minimizing risk.

The internal credit rating of the Bank for Agriculture and Rural Development of Vietnam has only been applied since the end of 2011. Therefore, there are still many issues that need to be studied to improve the credit rating system in order to improve the credit rating. standardize the classification of debts, make provision for risks, towards the goal of maximizing profits and ensuring the stability of the bank's operations.

The topic of internal credit rating is not a new topic, many people have done it with different banking systems. Bank for Agriculture and Rural Development of Vietnam started to apply the internal credit rating system from October 2011. However, when applying the debt classification according to Circular 02/2013/TT-NHNN, there is still a difference between the debt classification under Article 10 (based on the number of days overdue of principal and interest) and Article 11 (according to credit rating results).

In addition, the credit rating criteria between banks are still inconsistent, leading to differences in customer classification and risk provisioning. Therefore, it is necessary to study the internal credit rating system of the Bank for Agriculture and Rural Development of Vietnam, compare it with other banks to perfect the internal credit rating system, and support the banks. deciding on credit granting, implementing customer policies, managing credit risks, classifying debts and making provision for credit risks in the Agribank system. The author's analysis focuses on evaluating Agribank's internal credit rating system with the State Bank's documents in the context of the banking system's many risks such as the current period, the actual level of performed according to Basel regulations and compared with other commercial banks.

2. Research objective

Research topics to:

(1) Overview of the theoretical basis of credit, credit risk and credit rating.

(2) Analyze the current status, identify the advantages and limitations of the internal credit rating system of the Bank for Agriculture and Rural Development of Vietnam

(3) Proposing some solutions to improve Agribank's internal credit rating system.

3. Object and scope of research

The object of the research is the credit rating system of the Bank for Agriculture and Rural Development of Vietnam.

Research scope: The topic is limited to studying the credit rating system of Agribank from 2011 to 2013 because Agribank has just implemented the credit rating system during this time.

4. Research Methodology

The thesis uses statistical methods, qualitative analysis to analyze and evaluate the current status of the internal credit rating system of Agribank.

Using the comparative method to compare with the credit rating evaluation standards, compare with the credit rating system of other commercial banks to provide solutions to improve the credit rating system by Agribank.

5. Structure of the thesis

The layout of the research paper "Improving the internal credit rating system of Bank for Agriculture and Rural Development of Vietnam" consists of 3 chapters:

Chapter 1: Overview of credit ratings at commercial banks

Chapter 2: Status of credit rating system of Bank for Agriculture and Rural Development of Vietnam.

Chapter 3: Solutions to improve credit rating system of Bank for Agriculture and Rural Development of Vietnam.

6. Scientific and practical significance of the topic

Researching and analyzing Agribank's internal credit rating system; Compared with international standards and regulations of the State Bank and other commercial banks to propose solutions to improve Agribank's credit rating system, improve the effectiveness of risk management. credit risk.



1.1. Credit and credit

1.1.1. Credit concept

The term “Credit” is difficult to give a general definition. However, from a banking perspective, and specifically its function, credit is understood:

Credit is a transaction of assets (money or goods) between a lender (banks and other financial institutions) and a borrower (individuals, businesses and other entities), in which the party The lender transfers the property to the borrower for use within a certain period of time as agreed, the borrower is responsible for unconditionally repaying the principal and interest to the lender when the payment is due.

1.1.2. Credit risk

According to the Basel Committee (under the Bank for International Settlements), credit risk is the possibility that a borrower or a counterparty will not be able to fulfill its obligations according to committed terms. The risk of loss for a bank is the default of the obligor in a contract, where default is defined as any serious breach of a contractual obligation to repay the debt and interest. .

According to Circular No. 02/2013/TT-NHNN dated January 21, 2013 of the Governor of the State Bank of Vietnam: “ Credit risk in banking activities  (hereinafter referred to as risk) is loss is likely to happen to the debt of a credit institution, foreign bank branch due to the customer's failure to perform or inability to perform part or all of his/her obligations as committed.

According to a study by KPMG surveying the Vietnamese banking industry in 2013, the factors that create bank credit risk include two factors: external factors and internal factors.

Table 1.1: Factors that create credit risk in the Bank

External factors

Intrinsic factors

Macroeconomic factors

Credit model is not rigorously designed

Regulatory environment

Concentrated portfolio



Operating environment

Lack of credit control


Inadequate monitoring process


Failure in the credit review process

Source: KPMG Vietnam

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Completing the credit rating system of Bank for Agriculture and Rural Development of Vietnam - 1

In the past and present period, the Vietnamese banking system has faced many difficulties and challenges due to negative impacts from external factors as well as weaknesses of internal factors, accumulated over time. This is the time when it really emerges. We see that both external factors and internal factors have components that are "cheating" factors. This is a factor related to people, to ethical issues in the profession. And is the cause of the biggest risk to the banking system of Vietnam in the recent period.

1.2. Credit rating overview and credit rating system

1.2.1. The concept of credit rating

Credit rating is one of the effective credit risk management tools that commercial banks have been applying when granting credit to customers. Depending on the bank, the term "credit ratings" has different names. Some banks call it "internal credit rating", some banks call it "credit scoring", some banks call it "credit rating"... but the essence is to

assess the creditworthiness, future repayment ability of customers based on the rating system.

Thus, credit society of borrowers is the assessment by commercial banks of the financial capacity, current operating situation and future development prospects of rated customers, thereby determining the level of risk of default. debt and ability to repay in the future.

1.2.2. Credit Rating System

According to Circular 02: The internal credit rating system is a system consisting of sets of financial and non-financial indicators, processes for assessing customers on the basis of qualitative and quantitative financial, financial situation, etc. business, management, reputation of customers. An internal credit rating system must be built for each different type of customer, including those subject to credit restrictions and their related people.

1.2.3. Subject of credit rating

The object of credit society includes parameters and data of customers participating in loans at commercial banks such as: financial information from financial statements of enterprises, non-financial information (experience of management board) , internal control environment, dependence on partners...), information on borrower's identity, information on debt repayment ability, etc. Commercial banks do not use credit results to show the value of borrowers. borrowers, but only provide a current opinion based on risk factors, thereby having an appropriate credit policy and loan limit. A borrower's high rating does not indicate the ability to fully recover principal and interest, but only a basis for making an informed credit decision, adjusted for the expected level of risk. Credit risk is related to the borrower customer and all loans made by that customer.

Borrower ratings mainly predict the level of risk a bank will face when deciding to grant credit. The basis of this degree determination is based on past and present information and an assessment of future possibilities. The customer evaluation information includes:

- Group financial data related to customer's financial ratios.

- The group of non-financial qualitative data, depending on the bank, may be related to the management level, the ability to research and develop new products, the data and the growth ability of the industry...

- A group of warning data related to signs of default, deposit balance, overdraft limit... Loan ratings are based on borrower ratings and factors including including collateral, loan term, total outstanding balance at credit institutions, financial capacity... The risk of a loan is measured by the expected risk probability.

1.2.4. Credit Rating Methods

There are two methods for ranking: expert method, mathematical model method. Rating agencies can use either method or a combination of both for credit rating (Combining both expert method and mathematical modeling method).

- Expert method 1 : a team of experts will assess the debt solvency of the rating object. Through information collected in corporate reports, market information, interviews and discussions with relevant people, a team of experts assesses the financial status, business activities, policies of the company. customers' risk management policies and strategies, thereby providing the final credit rating.

1  Expert Method: Analyst Driven Ratings

Date published: 11/04/2022
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