Through this model, LienVietPostBank conducts credit scoring for each customer to serve as the basis for deciding credit limit. This is one of the tools to help LienVietPostBank improve the credit quality of the bank, help quantify the risks when handling loan applications, and limit risks in the credit granting process, especially for customers. new products, enhancing the effectiveness of credit risk management. LienVietPostBank’s corporate credit system also brings many benefits to customers, improving the bank’s competitiveness.
Transaction processing time will be faster through automatic scoring. Customers with good ratings will receive preferential credit policy, especially for customers with good credit history and high ratings can apply for credit incentives including loosening lending conditions, reducing interest rates, loosening collateral requirements and other incentives. LienVietPostBank’s corporate credit system is also a filter for customers with low credit rating (ranked from B, CCC down to C), depending on the level of credit risk rating for LienVietPostBank to gradually increase the number of customers. requirements on loan conditions and collateral, and even measures to focus on early debt collection.
In addition to the debt rating and classification function, the corporate credit socialization system also has the function of supporting loan decision making, allowing direct provisioning.
According to the roadmap to modernize banking standards, LienVietPostBank will complete the corporate credit system towards the goal of qualitatively classifying debts. After being approved by the State Bank of Vietnam, the Bank will proceed to apply the provisioning according to Article 7 of Decision 493/2005/QD-NHNN dated 22/04/2005 on debt classification, provisioning and use provision to handle credit risks to meet the increasing requirements on risk management of commercial banks. 2.6.2 Existing limitations that need to be overcome
LienVietPostBank’s corporate credit scoring model has some limitations, inconsistencies and overlaps between financial and non-financial criteria.
According to the model, a group of financial indicators that measure profitability, including Net Profit Margin, which measures business performance based on after-tax profit, can lead to deviations if a business is running out of money. tax incentives apply. This financial indicator should use profit before tax to measure and compare with industry average, and is called Gross Profit Margin. The financial indicators part lacks the criteria of retained earnings for reinvestment, showing the development ability and internal potential of the business.
In addition, the group of non-financial indicators being used by LienVietPostBank is relatively appropriate and at an acceptable level. Among these groups of indicators, the indicator of Information provision at the request of Lien Viet Post Bank in the past 12 months is not very close to measuring the risk of default of enterprises. Or there is an indicator that is being calculated backwards such as the level of credit relationship with LienVietPostBank, if the level of credit relationship is higher or the business only has a credit relationship at LienVietPostBank, the score is the highest.
In fact, the more efficient, large-scale, and diversified businesses are, the more likely they are to establish credit relationships with many credit institutions in order to seek the best credit incentives and diversify capital sources. bank loans and avoid depending on a single commercial bank. In addition, there are also overlapping indicators such as Number of times of debt restructuring in the past 12 months at credit institutions, Number of times of late payment of interest in the past 12 months at credit institutions, Number of times of insolvency/late payment commitments in the past 12 months. In the past 12 months at credit institutions, the enterprise’s debt repayment history with Lien Viet Post Bank.
LienVietPostBank’s corporate credit model has divided the size of enterprises into three levels: large, medium and small; corresponding set of financial expenditures for each enterprise size. However, this model of credit society has not divided enterprises converted from individual business households to expanded, ie very small-scale enterprises, because this type of business has different business characteristics compared to large-scale enterprises. normal tissue.
LienVietPostBank’s corporate credit model still lacks identification and scoring between audited and unaudited enterprises. The undivided model of ownership leads to different nature and performance among the three types of enterprises (state-owned enterprises, foreign-invested enterprises, other enterprises) but no criteria Different ratings for these businesses.
The limitations in LienVietPostBank’s CBA model are mainly caused by the bank’s internal resources. As a commercial bank operating for just over 3 years, over time, LienVietPostBank will gradually improve its credit system to move towards standards for integration with the international financial environment.
Conclusion of the research issues of chapter II:
In this chapter, the topic introduced the overall process of formation and development, assets situation, business results, especially the credit performance of LienVietPostBank.
In addition, the topic has gone into depth to present the current status of the enterprise credit society model of LienVietPostBank, combined with the analysis of two actual credit society situations at the bank to serve as a basis for evaluating the current credit society model with negative feedback. accurately reflect the rating of the business or not.
From there, the thesis compares with credit socialization models in the world and in Vietnam, to show the achievements and limitations that need to be supplemented and modified in order to perfect the corporate credit system of LienVietPostBank with the revised and supplemented model. presented in Chapter III of the thesis.
CHAPTER III: SOLUTIONS TO COMPLETE LIENVIETPOSTBANK’S CREDIT RATE SYSTEM
In the banking business, it is inevitable that commercial banks deal with credit risk, and acknowledging a natural risk ratio is a reasonable objective environment, demanding requirements for banks. Bank governance is how to limit risk at a lowest acceptable rate. In Vietnam, for the most effective credit risk management, commercial banks need to effectively apply credit risk quantification models such as Altman’s quality model and Z-score model. These models are considered as effective support tools for making the right decisions before granting credit. Besides, it is also necessary to support measures such as setting up a risk reserve fund, decentralizing credit judgments, training professional staff, inspecting and monitoring credit activities, which will help the system of commercial banks in Vietnam. Vietnam develops stronger on the way of integration into regional and world financial markets.
Risk management in accordance with international practices is always one of the topics that receive the attention of commercial banks. The State Bank has issued regulatory documents and guidelines on credit risk management including Decision 493/ 2005/QD-NHNN and Decision 18/2007/QD-NHNN amending and supplementing in which stipulations on classification of debts according to qualitative standards (Article 7) and a roadmap that requires commercial banks to submit internal credit society schemes for the State Bank to consider and approve has shown the determination to improve the quality of credit risk management of commercial banks.
Each commercial bank has its own experience and business conditions, so the corporate credit rating system will have different characteristics in terms of evaluation criteria and number of ratings. It is almost impossible to establish a standard of corporate credit society for all commercial banks. Therefore, commercial banks will have to build their own internal credit society system in accordance with their own characteristics and refer to the guidance of the State Bank, and the experience of commercial banks and rating organizations in the country as well as in the world. .
The requirement for the credit system of commercial banks is to allow flexible changes to suit the changing business environment. In addition, along with the process of perfecting the corporate credit model of commercial banks, it is also necessary to pay attention to the role of experience and expertise of the operational staff.
LienVietPostBank’s internal corporate credit system has relatively reflected the credit quality according to international practices. The results of credit socialization of corporate customers are one of the bases for LienVietPostBank to make credit granting decisions, provide solutions to handle and control bad debts. However, this system needs to be considered and adjusted to be more suitable for the current changing and rapidly changing business environment.
3.1 Objectives of improving the credit rating system of LienVietPostBank’s corporate customers
The goal of LienVietPostBank’s corporate credit system is first of all to control credit risk more effectively when the rating results reflect the risk level of the credit portfolio. correct credit granting decisions. In addition, the adjusted corporate credit system must ensure consistent credit management throughout the system, which is the basis for LienVietPostBank to forecast credit losses for each customer group. develop appropriate credit strategies and policies.
Completing the corporate credit system also sets requirements that are both in line with international practices but not far from the unique business conditions of LienVietPostBank, while ensuring flexibility that can be adjusted in line with the needs of customers. changes in business conditions in the future, the results of internal ratings of corporate customers must take into account the forecast of the risk of default leading to the inability to fulfill financial obligations to the bank, the The criteria for scoring the enterprise credit society in the model must ensure that it is not too complicated and close to reality for professional staff to trust and use.
In addition, completing the internal credit system of corporate customers also sets the goal of classifying debts and setting up provisions for credit risks to meet international standards at the request of the State Bank.
3.2 Proposing to amend and supplement the credit rating model of LienVietPostBank’s corporate customers
From the research results on modern credit rating models in the world and in the country, detailed in Chapter I, along with the assessment of the actual situation of the achievements as well as the shortcomings that need to be overcome. The restoration of the corporate customer credit system that is being applied at LienVietPostBank as presented in Chapter II, the thesis will propose some additional amendments to improve the bank’s own corporate credit system.
3.2.1 Guidelines of the State Bank on the model of enterprise credit society
The evaluation criteria used in the enterprise credit society model in Decision 57/2002/QD-NHNN are financial ratios classified into three groups of enterprise sizes, namely large, medium and small.
Each size group will be scored according to a system of eleven financial indicators, equivalent to four groups of Agriculture – Forestry – Fisheries, Trade and Services, Construction, and Industry (the scoring method for each indicator is presented in the following table). detailed in Tables III.1, III.2, III.3, III.4 of Appendix III.The weight and grading scale are determined as in Table 3.1.
Table 3.1: Scoring scale and weighting criteria for scoring and ranking enterprises according to Decision 57/2002/QD-NHNN
|The target||Important number||Ladders rating score|
|Only Liquidity spending||A||REMOVE||OLD||EASY||After EASY|
|Short solvency term||2||5||4||3||2||first|
|Only activity target|
|Inventory rotation warehouse||3||5||4||3||2||first|
|Average collection period||3||5||4||3||2||first|
|Asset utilization ratio||3||5||4||3||2||first|
|Only debt balance|
|Overdue debt/Total outstanding balance Bank||3||5||4||3||2||first|
|Only spending income|
|Earnings before tax/Sales collect||2||5||4||3||2||first|
|Income before tax/Total asset||2||5||4||3||2||first|
|Income before tax/Capital Owner||2||5||4||3||2||first|
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Based on the score obtained for the credit society of enterprises in six categories, they are ranked from high to low, starting from AA to C as shown in Table 3.2. The maximum score achieved by enterprises is 135 points, the minimum is 27 points, the distance between the levels of credit union is determined by the formula:
Business Credit Type Gap = Maximum Score – Minimum Score / Number of Business Credit Types
Table 3.2: Notation system for ranking enterprises according to Decision 57/2002/QD-NHNN
|Score||Ranking type||Internal> content|
|117-135||AA||Business enterprise very good business, high efficiency and good prospects. Low risk|
|98-116||A||Business enterprise business is effective, financially sound, has growth potential. Low risk.|
|79-97||BB||Business enterprise Effective business with growth potential. However, there are certain limitations on financial resources and potential risks. Low risk.|
|60-78||REMOVE||Business enterprise The business is inefficient, has low financial autonomy, and has potential risks. Medium risk.|
|41-59||CC||Business enterprise business with low efficiency, weak finances, lack of financial autonomy. Risks high risk.|
|<41||OLD||Business enterprise prolonged loss of business, weak financial situation, inability to self-finance major risk of bankruptcy. Very high risk.|
(Source: State Bank of Vietnam)