MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMIC HO CHI MINH CITY
Luong Minh Khoa
FINISHING THE CUSTOMER CREDIT RATE SYSTEM AT LIEN VIET POST COMMERCIAL BANK
Specialization: FINANCIAL ECONOMY – BANKING
Code : 60.31.12
MASTER THESIS OF ECONOMY
SCIENTIFIC GUIDE: Assoc. Dr. PHAM VAN NANG
HO CHI MINH CITY – 2011
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Completing the credit rating system of corporate customers at Lien Viet Post Commercial Joint Stock Bank - 2 -
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SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
GUARANTEE
I hereby declare that the topic “IMPLEMENTATION OF THE CREDIT RATE SYSTEM OF CORPORATE CUSTOMERS AT LIEN VIET Post Commercial Joint Stock Bank” is the result of my study and research work. The data and results stated in the thesis are accurate and truthful. I will be responsible for the content I have presented in this thesis.
The topic uses some sensitive data and information of domestic commercial banks, and I hope the relevant credit institutions will sympathize and support so that the thesis can be completed.
Luong Minh Khoa
THANK YOU
Pursuing and achieving academic achievements is the dream of many people. For myself, my undergraduate and graduate studies at Ho Chi Minh City University of Economics have helped me to acquire a lot of knowledge and economic achievements of the world. From there, I was able to expand my awareness, worldview and life view, helping my life to be more expansive and full of feelings. I sincerely thank the teachers of the University of Economics Ho Chi Minh City, who helped me to continue writing my dream of life.
This thesis was made and completed thanks to the dedicated and responsible guidance of the instructor. I have great respect and sincere thanks to Prof. Dr. Pham Van Nang – Former Rector – University of Economics Ho Chi Minh City.
I would also like to thank Mr. Le Vinh Khuong, Mr. Vo Tran Nhat Linh and Mr. Le Tat Thanh, the administrator of the website www.rating.com.vn, who provided materials to help me complete my thesis.
Besides, to thank the silent contributors in life, I thank my mother and wife, who are always beside me, encouraging and supporting me so that I can continue to fulfill my dreams.
Once again, my regards and thanks to everyone!
SALARY OF MINISTRY
TABLE OF CONTENTS
LIST OF SIGNS, ABBREVIATIONS
LIST OF TABLES
INTRODUCE
1. Reason for choosing the topic …………………………………………………………………………. …………01
2. Research problem overview ………………………………………………………………………. …………02
3. Objectives, subjects and research methods …………………………………………04
4. Dissertation structure …………………………………………………………….. …………06
5. The practical significance of the topic ………………………………………………………… ……….06
CHAPTER I: SOME GENERAL ISSUES ABOUT COMPANY CREDIT RATES AT commercial banks
1.1 Credit rating overview ……………………………………………………………….. ……..07
1.1.1 Credit rating concept …………………………………………………………….. ……….07
1.1.2 Subjects of credit rating …………………………………………………… ………07
1.1.3 Importance of credit rating ………………………………………………. .09
1.1.3.1 Credit risk …………………………………………………………….. ………….09
1.1.3.2 Damage from credit risk ………………………………………………………. ……………….ten
1.1.3.3 The role of credit ratings in risk management ……………………….11
1.1.4 Principles of credit rating …………………………………………………………….. …………11
1.1.5 Credit rating model ……………………………………………………………….. …………….twelfth
1.1.6 Credit rating method according to the scoring model …………………………..12
1.1.7 Credit rating process. …………………………… …..13
1.2 Some researches and experiences on credit society in the world …………13
1.2.1 Credit Rating System of S&P, Moody’s and Fitch …………14
1.2.2 Edward I. Altman’s DN Credit Score Model …………………………………………16
1.2.3 Similarities Between Edward I. Altman’s Credit Score Model and Standard & Poor’s Credit Rating……………………………………….20
1.3 Experiences of credit society of some commercial banks in Vietnam …………21
1.3.1 CIC’s credit rating system ………………………………… ..21
1.3.2 Vietinbank’s Credit Rating System……………………………………………..21
1.3.3 Vietcombank’s Credit Rating System ………….22
1.3.4 ACB’s credit rating system …………………………………………………… .25
1.3.5 Lessons from experience in credit policy for LienVietPostBank ………………………………… 27
1.4 Significance of perfecting the CBA system for business customers
NHMs …………………………………………………………………………… …………………………… 28
CHAPTER II: SITUATION OF LIENVIETPOSTBANK’S CREDIT RATE SYSTEM
2.1 Overview of LienVietPostBank’s business activities …….30
2.2 LienVietPostBank’s credit policy …………………………………………31
2.3 Principles of grading and use of the results of credit scoring …………………………………………32
2.4 Credit scoring model of LienVietPostBank’s business customers …………33
2.4.1 Scoring model of corporate credit at LienVietPostBank’s branch………………………………………………………. ……………………………34
2.4.2 Periodical summary of corporate credit society at the head office of LienVietPostBank………………………….. ……………………………39
2.5 Research on some situations of credit rating of corporate customers of LienVietPostBank ………………………………………….. ………39
2.5.1 The first case study: The enterprise has been rated A but tends to incur overdue debts …………………………………………………………… ..40
2.5.2 Second case study: The enterprise is classified as BBB and has incurred overdue debt. ……………………………43
2.6 Evaluation of the internal credit system of LienVietPostBank’s corporate customers .46
2.6.1 Accomplishments …………………………………………………………………………. …………47
2.6.2 Existing limitations that need to be overcome ………………………………… ….48
CHAPTER III: SOLUTIONS TO COMPLETE LIENVIETPOSTBANK’S CREDIT RATE SYSTEM
3.1 Objectives of improving the credit rating system of LienVietPostBank’s corporate customers……………………………………………………….. ….52
3.2 Proposing to amend and supplement the credit rating model of LienVietPostBank’s corporate customers……………………………53
3.2.1 Guidelines of the State Bank on corporate credit rating model ………………………….. ………….53
3.2.2 Proposal to amend and supplement LienVietPostBank’s corporate credit rating scoring model ………… …………55
3.3 Verification of LienVietPostBank’s credit rating model for corporate customers after adjustment …………………………………………68
3.4 Solutions to improve the credit system of corporate customers at Lien Viet Post Commercial Joint Stock Bank. ……………………….74
CONCLUDE………………………………………… …………………………… ………78
REFERENCES
APPENDIX I: STANDARDS FOR CALCULATION OF LIENVIETPOSTBANK’S BUSINESS CREDIT SOLUTION
APPENDIX II: RESULTS OF COMPANY CREDIT ASSOCIATION OF COMPANY B BY LIENVIETPOSTBANK’S MODEL
APPENDIX III: STANDARDS FOR CHARACTERISTICS OF ENTERPRISE CREDIT ASSOCIATION AS INSTRUCTIONS OF THE SBV
APPENDIX IV: Criteria for calculating the score of the enterprise credit society according to the PROPOSED Amendments and Supplements of the RESEARCH TOPIC
APPENDIX V: FINDING RESULTS OF COMPANY BUSINESS CREDIT ASSOCIATION OF COMPANY A BY MODEL MODIFIED AS PROPOSED BY THE RESEARCH TOPIC
APPENDIX VI: THE BLACK Swan Theory
LIST OF SIGNS, ARRIVALS
Symbols Interpretation
1. ACB Asia Commercial Joint Stock Bank
2. Basel Treaty on Banking Supervision
3. Evaluators Evaluators
4. CIC Credit Information Center of the State Bank
5. Joint Stock Company Joint Stock Company
6. Enterprise Enterprise
7. SOEs State-owned enterprises
8. Foreign investment Foreign-invested enterprises
9. Fitch Fitch Investors Service
10. LienVietPostBank Lien Viet Post Commercial Joint Stock Bank
11. Moody’s Moody’s Investors Service
12. SBV State Bank of Vietnam
13. Commercial banks Commercial banks
14. ROA Return on total assets
15. ROE Return on Equity
16. SEC US Securities and Exchange Commission
17. S&P Standard & Poor’s
18. Credit institutions Credit institutions
19. Joint Stock Commercial Joint Stock Company
20. Vietcombank Joint Stock Commercial Bank for Foreign Trade of Vietnam
21. Vietinbank Vietnam Joint Stock Commercial Bank for Industry and Trade
22. XHTD Credit Rating
LIST OF TABLES
Page Table
Table 1.1: S&P and Fitch’s Long-Term Credit Rating System …………14
Table 1.2: Moody’s long-term debt instrument rating system …………………………………………………… …………………………… ……..15
Table 1.3: Correlation between Altman’s adjusted Z” index and S&P’s rating symbology ………… …………20
Table 1.4: Weighted scores of financial and non-financial criteria for scoring Vietinbank’s corporate credit ………………………………… ……………..22
Table 1.5: Weighted scores of non-financial indicators to score Vietcombank’s corporate credit ……………………………………………………….. …………23
Table 1.6: Weighted scores of financial and non-financial indicators for scoring Vietcombank’s credit rating ………………………………………………………… …………24
Table 1.7: Vietcombank’s corporate rating symbol system …………25
Table 1.8: ACB’s credit socialization system …………………………………………………………………. ………26
Table 1.9: ACB’s credit classification system …………………………………………………………….. …..27
Table 2.1 Summary of LienVietPostBank’s performance in recent years …………………………………………………………… ………………………………………….thirty first
Table 2.2: Guidelines for calculating some financial analysis criteria in LienVietPostBank’s corporate credit scoring …………………………………36
Table 2.3: Weighted scores of non-financial indicators for scoring LienVietPostBank’s corporate credit ………………………………………………. ..37
Table 2.4: Weighted scores of financial and non-financial criteria for scoring LienVietPostBank’s corporate credit rating …………………………………………………… 37
Table 2.5: LienVietPostBank’s corporate credit system symbology …………………………………………………… ………….38
Table 2.6: Status of classification and bad debt of the researched enterprise group ………………………………………………………. ……………………….40
Table 2.7: Summary of the 2010 balance sheet of JSC A……………..41
Table 2.8: Scoring of financial indicators of Joint Stock Company A ………….42
Table 2.9: Weighted Score of Non-Financial Indicators of Joint Stock Company A …………42
Table 2.10: Summary of the 2010 balance sheet of JSC B …………44
Table 2.11: Weighted Scores of Non-Financial Indicators of Joint Stock Company B …………45
Table 2.12: Weighted scores of financial and non-financial indicators for credit rating of Joint Stock Company B ………………………………………………………… …………45
Table 3.1: Scoring scale and weighting criteria for scoring and ranking enterprises according to Decision 57/2002/QD-NHNN………………………. ….53
Table 3.2: The notation system for ranking enterprises according to Decision 57/2002/QD-NHNN……………………………………………………… ……………………….54
Table 3.3: Scoring of financial indicators of corporate credit according to the proposed amendment of the topic ………………………………………………………… ……………………………56
Table 3.4: Scoring indicators for predicting financial difficulties, credit society according to the proposed amendment of the topic …………………………………………………………… ……….57
Table 3.5: Scoring of non-financial information indicators of corporate credit according to the proposed amendment of the topic. ………..59
Table 3.6: Summary score of the enterprise credit society according to the proposed amendment of the topic ………………………………………………………… …………………………… ……. 66
Table 3.7: Evaluation of the debt payment situation of enterprises according to the proposed amendment of the topic. ………………………………………….sixty seven
Table 3.8: Business loan classification matrix according to the proposed amendment of the topic ………………………………………………………… …………………………… ….sixty seven
Table 3.9: Scoring of the financial indicators of JSC B by the revised model proposed by the thesis. …………68
Table 3.10: Determining the default risk index of Joint Stock Company B by Altman’s Z-score statistical function. …………69
Table 3.11: Scoring criteria for forecasting financial difficulties of JSC B by the modified model proposed by
topic………………………………………… ……………………………69
Table 3.12: Scoring of non-financial information indicators of Joint Stock Company B by the modified model proposed by the topic ………………………………………………………… ……70
Table 3.13: Summary score of corporate credit society of Joint Stock Company B by the modified model proposed by the topic ………………………………………………………… ………..seventy three
I.1: Scoring of LienVietPostBank’s enterprise scale ………….Appendix I
I.2: Identifying enterprises by fields and business lines of LienVietPostBank ………………………….. ……………..Appendix I
I.3: Scoreboard of financial indicators of enterprises in the Agriculture, Forestry and Fisheries sector according to LienVietPostBank……………………….Appendix I
I.4: Scoreboard of financial indicators of enterprises in the Trade – Service sector according to LienVietPostBank ………….Appendix I
I.5: Scoreboard of financial indicators of enterprises in the heavy industry group according to LienVietPostBank………………………. ..Appendix I
I.6: Scoreboard of financial indicators of enterprises in the light industry group according to LienVietPostBank………………………. ….Appendix I
I.7: Scoreboard of financial indicators of enterprises in the capital construction investment sector according to LienVietPostBank …………………..Appendix I
I.8: Scoreboard for assessment of criteria group of management qualifications and internal environment according to LienVietPostBank ………………………….. ………..Appendix I
I.9: Scorecard for assessment of criteria group of factors outside the enterprise according to LienVietPostBank ………………………………………………………… ………Appendix I
I.10: Scoreboard for assessment of the relationship with credit institutions according to LienVietPostBank ………………………………………………………… …………Appendix I
I.11: Scoreboard for evaluation of criteria group Operational characteristics of enterprises according to LienVietPostBank ………………………….. ….Appendix I
II.1: Scoring the financial indicators of Joint Stock Company B………..Appendix II
II.2: Scoring Management qualifications and internal environment of JSC B……………………………………………………….. ……………………………Appendix II
II.3: Scoring External factors of Joint Stock Company B ……….Appendix II
II.4: Scoring the Bank Relationship of Joint Stock Company B …………Appendix II
II.5: Scoring Operational characteristics of enterprises of JSC B ………………………………………………………. …………………………… ……Appendix II
III.1: Standards for assessing financial indicators of enterprises in the agriculture, forestry and fishery sectors according to Decision 57/2002/QD-NHNN………………………….. ………………………. Annex III
III.2: Evaluation criteria of financial indicators of commercial service enterprises according to decision
57/2002/QD-NHNN………………………. ……………… Annex III
III.3: Standards for evaluating financial indicators of construction enterprises according to Decision 57/2002/QDNHNN ………………….. …………………………… ………. Appendix III
III.4: Standards for evaluating financial indicators of industrial enterprises according to Decision 57/2002/QDNHNN ………………….. …………………………… ……….Appendix III
IV.1: Criteria for evaluating financial indicators of enterprises in the Agriculture, Forestry and Fisheries sector according to the proposed amendment of the topic ………………………………………….. …………………………… Appendix IV
IV.2: Standards for evaluating financial indicators of enterprises in the Trade-Service sector according to the proposed amendment of the topic…………… …………………………… ….. Appendix IV
IV.3: Standard for evaluating financial indicators of enterprises in the heavy industry group according to the proposed amendment of the topic…………………………. …………………………… ……… Appendix IV
IV.4: Standards for evaluating financial indicators of light industry enterprises according to the proposal for amendment of the topic ………… Annex IV
IV.5: Criteria for evaluating financial indicators of enterprises in the CB Construction Investment industry according to the proposed amendment of the topic ……. Appendix IV
V.1: Scoring the financial indicators of Joint Stock Company A by the revised model proposed by the topic……………………….. …………Appendix DR
V.2: Determining the default risk index of JSC A by Altman’s Z-score …………………………………………. ……….Appendix DRAW
V.3: Scoring indicators for forecasting financial difficulties of Joint Stock Company A by the revised model as proposed by the topic…………… …………………………… ……………..Appendix DR
V.4: Scoring the non-financial information indicators of Joint Stock Company A by the revised model as proposed by the topic……………Appendix DRAW
V.5: Summary score of corporate credit society of Joint Stock Company A by the revised model as proposed by the topic ………………………………………….. …Appendix V Black Swan Theory …………………………………………………………………. ……………… Annex VI
HEADING
1. Reason for choosing the topic
Currently, the world is going through an economic recession with a deep level only after the great economic crisis of 1929 which mainly originated from the financial crisis in 2008 in the US and the public debt crisis in 2010. , 2011 in the euro zone.
Meanwhile, Vietnam’s economy is entering a period of stable growth after international economic integration and is a member of the World Trade Organization (WTO). Although the level of WTO accession has not been extensive, however, the effects of the world economy still have a clear impact on many aspects and aspects of our country’s economy.
One of the reasons for the current economic crisis is the accuracy of the credit rating reports of borrowers (individuals, businesses and financial institutions), the bond rating corporate bonds and national credit rating reports. It is not until the 2008 financial crisis that people talk about the accuracy, objectivity and truthfulness of credit rating results given by big names in the credit rating field. published in the world.
In the current Vietnamese commercial banking system, Lien Viet Post Commercial Joint Stock Bank was established in 2008, the first bank established after 15 years of discontinuing establishment license. Therefore, LienVietPostBank’s operating time is quite short compared to the common “age” of other commercial banks. Right in 2008, Lien Viet Post Commercial Joint Stock Bank issued regulations on internal credit ratings of borrowers including individual customers, corporate customers and financial institution customers. By 2011, after 3 years of operation, the ratio of overdue debt and bad debt of the whole system of Lien Viet Post Commercial Joint Stock Bank had increased significantly with the respective rates of 3.14% and 2.05. % of total loan balance as of September 30, 2011. The above ratios have exceeded the allowable limit of the State Bank and the overdue debt ratio of the bank itself. With the top priority for safety and stability in credit activities, the administrators of LienVietPostBank have had additional regulations on the credit rating system of borrowers. Although LienVietPostBank’s internal credit rating system has more corrections and improvements than the previous system, the credit system in general and corporate credit in particular still has some limitations that need to be improved. and more complementary.
The topic “Improving the credit rating system of corporate customers at LienVietPostBank” has shown how to evaluate the internal credit rating system of corporate customers at Lien Viet Post Commercial Joint Stock Bank, the current status and potential issues. Proposals to help improve the above system.
2. Research problem overview
2.1 World
The world’s major credit institutions and credit rating agencies, when granting credit to any customer or according to professional requirements, one of the first things to do is to assess the credit rating of a particular customer. that customer, regardless of whether the customer is an individual, a business, or a country. With their long history of operation, the credit rating system and process of these financial institutions have been updated and perfected over many decades, so these systems are fully appreciated. aspects, prospects, and risks of the rated audience.
The world’s leading credit rating agencies including Fitch Ratings, Moody’s and Standard & Poor’s often update and revise their credit rating systems through research and scientific reports of those There are big names in the field, including Edward I. Altman with the Z-score (credit score model), the Probit regression model pioneered by Frankel and Rose (1996) and the structural model Merton’s composite risk model, which is being used effectively in many countries around the world to predict bankruptcy risk and credit risk rating.
2.2 Domestic
With the goal of approaching international standards such as Basel in risk management of modern banks, the State Bank of Vietnam issued Decision No. 57/2002/QDNHNN dated January 24, 2002 on pilot implementation of a distribution scheme. Analysis and classification of corporate credit. The SBV also requested to strengthen the control of bad debts of commercial banks through Decision No. 493/2005/QD-NHNN dated April 22, 2005 on debt classification, setting up and use of provisions to deal with risks. credit risk.
HEADING
1. Reason for choosing the topic
Currently, the world is going through an economic recession with a deep level only after the great economic crisis of 1929 which mainly originated from the financial crisis in 2008 in the US and the public debt crisis in 2010. , 2011 in the euro zone.
Meanwhile, Vietnam’s economy is entering a period of stable growth after international economic integration and is a member of the World Trade Organization (WTO). Although the level of WTO accession has not been extensive, however, the effects of the world economy still have a clear impact on many aspects and aspects of our country’s economy.
One of the reasons for the current economic crisis is the accuracy of the credit rating reports of borrowers (individuals, businesses and financial institutions), the bond rating corporate bonds and national credit rating reports. It is not until the 2008 financial crisis that people talk about the accuracy, objectivity and truthfulness of credit rating results given by big names in the credit rating field. published in the world.