The bad debt ratio was 1.44%, down 0.4% compared to the end of 2015. In particular, the risk reserve fund balance was almost equal to the total bad debt balance. [18]
VCB's debt handling has been focused and directly involved from the head office, instead of mainly depending on the handling results of direct units in the localities.
Bad debt management methods
Vietcombank has taken measures to manage bad debts.
more effectively. Specifically:
Risk measurement method
There are 2 methods of risk measurement; Qualitative measurement method and Quantitative measurement method. VCB has applied Quantitative measurement method as a risk management method based on software to enter and run data systematically, and based on risk measurement techniques according to international practices. Advantages Quantitative measurement method accurately determines the risk probability of each type of bank asset in the period, as well as each type of credit and each type of investment, allowing banks to measure risk components based on their actual operating status and thereby calculate more accurately the minimum amount of capital they need to hold, contributing to ensuring the safety of banking operations as well as bringing about remarkable progress in the method of risk management.
Building a centralized RRTD management model
This model is built on the main principle of separating three functions: business function, risk management function and operational function. The separation between the three functions above aims to minimize risks at the lowest level while maximizing the professional skills of each credit officer position. This model has the advantage that all decisions on over-limit loans are centralized and the central authority will make the final decision. This will limit risks for the entire system. Separating the functions of credit activities will enhance the specialization of each department, ensuring that appraisal and judgment are independent and accurate.
Bad debt handling
Vietcombank uses many measures, fines for overdue debts and transfers to appropriate debt groups, handles collateral, reduces or waives interest, sets up and uses risk reserves, sells debts, initiates lawsuits, requests to open bankruptcy proceedings, requests the state and government to provide resources to handle or cancel debts, coordinates with the Debt Management and Asset Exploitation Company, converts debts into contributed capital, clears off-balance sheet debts, and releases debts to handle risks. All bad debts arising at Vietcombank are thoroughly handled.
1.2.3.2. Bad debt management Vietnam Joint Stock Commercial Bank for Industry and Trade
In the past 5 years, the bad debt ratio of Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) has always been low at approximately 1%. Vietinbank has focused on promoting bad debt management. Therefore, the bank has controlled and prevented the increase of bad debt. Vietinbank's bad debt is reflected in. Similar to VCB, in recent years, Vietinbank has also tried to apply all measures to collect debt, reduce bad debt in order to move towards equitization and integration with the international economy. Bad debt management methods applied by Vietinbank in recent years. Risk measurement by quantitative methods, building a centralized RRTD management model, dual control, tightening credit processes, and approving loans centrally at the head office. Thus, Vietinbank uses a very large reserve fund in its bad debt handling measures. Vietinbank also proactively handles bad debt using classic solutions such as debt rescheduling, debt extension, debt restructuring, etc., handling RRTD reserves, handling assets, and combining them with new solutions such as selling debt to VAMC. Thus, with the results achieved in bad debt management of Vietinbank, bad debt is always at approximately 1%, which is an example for the Bank for Agriculture and Rural Development of Vietnam (Agribank) to learn from.
1.2.3.3. Lessons learned for bad debt management activities at Vietnam Bank for Agriculture and Rural Development - Quang Binh Branch
Agribank always has the highest bad debt compared to other large commercial banks in Vietnam. From the study of bad debt management of large commercial banks in Vietnam, the following experiences can be drawn:
- Large credit growth, combined with weaknesses in risk management, leads to loss of control over credit activities, and large bad debts. Separating credit activities functions will enhance the specialization and independence of each department, demonstrating cross-monitoring.
- Reality shows that the trend of international integration is an inevitable rule. Bad debt management should follow the trend of international standards and practices, in that roadmap Agribank needs to apply bad debt management measures from a modern perspective.
- Develop management and operation regulations in accordance with international standards such as risk management, asset and liability management, provisioning, capital management, internal inspection and audit; develop modern credit procedures and credit handbooks in accordance with international standards.
After studying the current situation of bad debt as well as bad debt management methods of some large domestic commercial banks, combined with the specific characteristics of Agribank Nghe An branch, the author would like to give some directions as follows:
Firstly, it is necessary to establish a credit classification system early in the process of quantifying credit risk, in order to improve the ability to manage credit risk, focus on effectively handling bad debts while focusing on preventing and avoiding bad debts arising in the future. Bad debt handling needs a specific roadmap and must comply with the set deadline.
Second: It can be seen that the solution to handle bad debt of large domestic commercial banks is through an intermediary organization, which is the asset management company of the bank, the debt trading company or the debt handling agency under the government. Agribank Nghe An branch needs to analyze bad debt regularly and promptly make appropriate decisions on bad debt handling.
Third: Make full provisions for the RRTD reserve fund and use the reserve fund
RRTD room to handle bad debt.
Fourth: Bad debt settlement must go hand in hand with preventing bad debt from recurring in the future. Preventing the risk of bad debt for Agribank Nghe An branch requires comprehensive solutions and appropriate credit policies.
Fifth: Separation between three functions: business function, risk management function and operational function. The separation between the three functions above aims at the primary goal of minimizing risks to the lowest level while maximizing the professional skills of each position of credit officers.
CONCLUSION OF CHAPTER 1
Chapter 1 deals with the following main theoretical contents:
One is to systematize theoretical issues on credit for enterprises.
Small and medium enterprises at Commercial Bank.
Second, systematize the basic contents of bad debt at commercial banks. Here, the thesis has discussed and completed the basic theoretical issues such as: Concept, classification, nature and criteria for assessing bad debt at commercial banks.
Third, the concept, influencing factors and content of bad debt management at the
Commercial Bank.
Fourth, the experience of bad debt management that some large domestic commercial banks have implemented, from which lessons can be drawn for bad debt management activities at the Bank for Agriculture and Rural Development of Vietnam - Quang Binh Branch.
The above are basic issues that serve as a basis for analyzing the current situation and proposing solutions.
solutions are implemented in the following chapters.
CHAPTER 2
CURRENT STATE OF BAD DEBT MANAGEMENT FOR ENTERPRISES
SMALL AND MEDIUM AT AGRIBANK QUANG BINH
2.1. Overview of Agribank Quang Binh
2.1.1. The formation and development process of Agribank Quang Binh [4]
The predecessor of today's Agribank Quang Binh is Dong Hoi Industrial and Commercial Bank of Binh Tri Thien province, established on March 26, 1988 under Decree 53/HDBT of the Chairman of the Council of Ministers (now the Prime Minister). Agribank Quang Binh is a special state-owned enterprise, organized according to the model of a State Corporation led by the Board of Members and the General Director, is a dependent accounting member unit, has its own balance sheet, operates for profit, is an authorized representative of Agribank, has the right to business autonomy according to decentralization, and is bound by obligations and rights towards Agribank.
In Quang Binh province, Agribank Quang Binh is a large-scale commercial bank, always in the top in terms of mobilized capital, outstanding credit, and network system. Agribank Quang Binh performs most of the financial and monetary operations such as: receiving deposits and payments, credit, guarantees, foreign currency trading, international payments, insurance, consulting, supporting businesses and other services (ATM automatic withdrawal, payment via POS system, Credit card, Internet Banking, Mobile Banking ...).
2.1.2. Organizational structure of Agribank Quang Binh [3]
As of December 31, 2016, the total number of employees of the Branch is 385 officers and employees (of which over 87% have university and post-graduate degrees), a large network including:
- The provincial headquarters has 8 functional departments:
+ General Planning Department
+ Corporate Customer Service Department
+ Customer Service Department for Production Households and Individuals
+ Accounting - Treasury Department
+ Computer Room
+ Human Resources Administration Department
+ Internal Control and Inspection Department
+ Service and Marketing Department
- There are 10 type 3 branches evenly distributed in cities, towns and districts of Quang Binh province with 13 affiliated transaction offices. The names of type 3 branches are:
+ Agribank Ly Thuong Kiet Quang Binh branch (Dong Hoi city area)
+ Agribank Quang Trung Quang Binh branch (Dong Hoi city area)
+ Agribank Tran Hung Dao Quang Binh branch (Dong Hoi city area)
+ Agribank Ly Thai To Quang Binh branch (Dong Hoi city area)
+ Agribank branch in Bo Trach district, Quang Binh
+ Agribank branch in Quang Trach district, Quang Binh
+ Agribank branch in Minh Hoa district, Quang Binh
+ Agribank branch in Quang Ninh district, Quang Binh
+ Agribank branch in Le Thuy district, Quang Binh
Administration
Human Resources | |
HR Department | |
Maybe you are interested!
-
Credit risk management in lending to small and medium enterprises at Vietnam Joint Stock Commercial Bank for Industry and Trade - Dong Hai Duong Branch - 14 -
Credit risk management in lending to small and medium enterprises at Vietnam Joint Stock Commercial Bank for Industry and Trade - Dong Hai Duong Branch - 2 -
Some Solutions to Enhance Credit Risk Management in Lending to Small and Medium Enterprises at Vietnam Joint Stock Commercial Bank for Industry and Trade - Dong Hai Branch -
Developing lending to small and medium enterprises at Vietnam Joint Stock Commercial Bank for Industry and Trade - Bac Ninh Branch - 12 -
Bad debt management at Vietnam Joint Stock Commercial Bank for Industry and Trade - Thang Long Branch - 14
Department of Science
Business
Department of Science, Technology and Production
Computer Room
Service and Marketing Department
General Planning Department
Treasury Accounting Department
Internal Control Department
Manager
Vice president
Vice president
Transaction offices
Branch type 3
Transaction offices
Online Relationship:
Functional relationship:
Diagram 2.1: Management structure of Agribank Quang Binh
(Source: Agribank Quang Binh province branch)
37
2.1.3. Business performance of Agribank Quang Binh since year
2014 to 2016 [3]
During the period of 2014 - 2016, Agribank Quang Binh has achieved many outstanding achievements in business activities, always being the leading flag not only in banking activities in Quang Binh province but also being highly appreciated compared to branches in the entire Agribank system nationwide. The branch is ranked as a Class I branch, continuously for 5 years being a unit ranked as AAA emulation unit. In Quang Binh province, the reputation and brand of Agribank are increasingly enhanced, not only in the field of lending to serve the development of agriculture and rural areas but also including lending activities to businesses, especially SME customers. The branch's activities are demonstrated through the following aspects:
2.1.3.1. Capital mobilization activities
In the current period, to attract deposits, interest rates are an important factor but not necessarily decisive for depositors, especially when the State Bank controls the ceiling on deposit interest rates. The choice of depositors depends a lot on other factors such as: trust, bank reputation and the utilities that the bank provides. A bank with strong financial capacity, reputable brand, effective business will create trust, have a wide network and high interaction between products will create more added value for customers. Agribank Quang Binh almost meets all of those conditions.
Capital mobilization is a core business area, determining the scale of operations, competitiveness and ensuring system safety during the bank's operations. Therefore, in recent years, Agribank Quang Binh has always actively promoted capital mobilization with many flexible policies and attractive interest rates. Based on the products that have been guided by Agribank for implementation, the Branch has studied and carefully researched customer groups to offer product packages suitable for each specific customer group, practically meeting customer needs. In addition, the Board of Directors and all staff of the Branch have persistently implemented the working style and manner according to Agribank's culture, actively exploiting and approaching