MINISTRY OF EDUCATION AND TRAINING
ACADEMY OF FINANCE
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MINISTRY OF FINANCE
TRAN THI VIET THACH
CREDIT RISK MANAGEMENT BY AGREEMENT
BASEL 2 CONVENTION AT VIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
DOCTORAL THESIS IN ECONOMICS
HANOI - 2016
MINISTRY OF EDUCATION AND TRAINING
ACADEMY OF FINANCE
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MINISTRY OF FINANCE
TRAN THI VIET THACH
CREDIT RISK MANAGEMENT BY AGREEMENT
BASEL 2 CONVENTION AT VIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Major : Finance - Banking
Code : 62.34.02.01
DOCTORAL THESIS IN ECONOMICS
Scientific supervisor: 1. Associate Professor, Dr. NGUYEN THI MUI
2. DR. NGUYEN DUC THANG
HANOI - 2016
COMMITMENT
I hereby certify that this thesis is my independent scientific research work. The data and results presented in the thesis are honest and have clear sources.
Thesis author
Tran Thi Viet Thach
INDEX
COVER PAGE STATEMENT OF GUARANTEE TABLE OF CONTENTS
LIST OF ABBREVIATIONS LIST OF DIAGRAMS, TABLES, CHARTS
INTRODUCTION 1
Chapter 1: BASIC ISSUES OF CREDIT RISK MANAGEMENT ACCORDING TO BASEL 2 AGREEMENT AT COMMERCIAL BANKS 15
1.1 SOME BASIC ISSUES ON CREDIT RISK OF COMMERCIAL BANKS 15
1.1.1 Concept of credit risk of commercial banks 15
1.1.2 Causes of credit risk 16
1.1.3 Negative impacts of credit risk 19
1.2 CREDIT RISK MANAGEMENT ACCORDING TO BASEL 2 AGREEMENT AT COMMERCIAL BANKS 22
1.2.1 The concept of risk management according to the Basel Committee 22's perspective
1.2.2 Credit risk management according to Basel II Agreement at commercial banks 23
1.2.2.1 Some features of the Basel Committee and the Basel Accord 2 23
1.2.2.2 Basel Committee 25 Credit Risk Management Principles
1.2.2.3 Credit risk management strategy and credit risk appetite according to Basel 2 28
1.2.2.4 Organization of credit risk management apparatus in Basel 2 30
1.2.2.5 Credit risk management policy according to Basel 2 32
1.2.2.6 Credit risk management process and procedures according to Basel 2 34
1.2.3 Benefits for commercial banks when implementing credit risk management according to Basel II Accord 51
1.2.4 Conditions for commercial banks to implement credit risk management according to Basel 2 52
1.3 EXPERIENCE IN IMPLEMENTING CREDIT RISK MANAGEMENT ACCORDING TO BASEL 2 AT SOME DOMESTIC AND FOREIGN COMMERCIAL BANKS 57
1.3.1 Experience in implementing credit risk management according to Basel 2 at some foreign commercial banks 57
1.3.2 Experience in implementing credit risk management according to Basel 2 at Vietnam Joint Stock Bank for Industry and Trade (Vietinbank) 65
1.3.3 Lessons learned from implementing credit risk management according to Basel 2 for the Bank for Agriculture and Rural Development of Vietnam 67
CHAPTER 1 CONCLUSION 69
Chapter 2: CURRENT STATUS OF CREDIT RISK MANAGEMENT AND LEVEL OF COMPLIANCE WITH BASEL 2 STANDARDS ON CREDIT RISK MANAGEMENT AT THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM 70
2.1 OVERVIEW OF CREDIT ACTIVITIES AND CREDIT RISKS AT THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM 70
2.1.1 Some features of Vietnam Bank for Agriculture and Rural Development 70
2.1.2 Credit activities at Agribank 74
2.1.3 Credit risk at Agribank 77
2.2 CURRENT STATUS OF CREDIT RISK MANAGEMENT AT THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM 82
2.2.1 Credit risk strategy and appetite at Agribank 83
2.2.2 Organization of credit risk management apparatus at Agribank 83
2.2.3 Credit risk management policy at Agribank 85
2.2.4 Credit risk management process and procedures at Agribank 87
2.3 ASSESSMENT OF THE CURRENT STATE OF CREDIT RISK MANAGEMENT AND THE LEVEL OF COMPLIANCE WITH BASEL 2 STANDARDS ON CREDIT RISK MANAGEMENT AT THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM 107
2.3.1 Assessment of the current status of credit risk management at the Bank for Agriculture and Rural Development of Vietnam 107
2.3.1.1 Results achieved 107
2.3.1.2 Limitations 109
2.3.1.3 Causes of limitations 111
CHAPTER 2 CONCLUSION 118
Chapter 3: SOLUTIONS TO IMPLEMENT CREDIT RISK MANAGEMENT ACCORDING TO BASEL 2 AGREEMENT AT THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM 119
3.1 ORIENTATION FOR IMPLEMENTING CREDIT RISK MANAGEMENT ACCORDING TO BASEL 2 AT THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM 119
3.1.1 Orientation of the State Bank in implementing Basel 2 at Vietnamese Commercial Banks by 2020 119
3.1.2 Opportunities and challenges when Agribank implements credit risk management according to Basel 2 121
3.1.2.1 Opportunity 121
3.1.2.2 Challenge 122
3.1.3 Credit risk management orientation according to Basel 2 Agreement at Agribank 125
3.2 CONDITIONS FOR THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM TO IMPLEMENT CREDIT RISK MANAGEMENT ACCORDING TO BASEL 2 127
3.3 SOLUTIONS TO IMPLEMENT CREDIT RISK MANAGEMENT ACCORDING TO BASEL 2 AT THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM 131
3.3.1 Phase 1: from 2016 to the end of 2018 131
3.3.1.1 Reorganize the credit risk management apparatus, ensuring functional independence between departments in the credit risk management apparatus structure according to Basel 2 131
3.3.1.2 Arrange and improve the quality of human resources in accordance with the organizational model of the RRTD management apparatus 137
3.3.1.3 Completing internal documents on credit risk management 141
3.3.1.4 Improving the efficiency of bad debt handling 142
3.3.1.5 Reorganize the network and reduce operating costs throughout the system 147
3.3.1.6 Maintain reasonable credit growth based on quality control of new loans 149
3.3.1.7 Improving the effectiveness of credit portfolio risk control 150
3.3.1.8 Completing the RRTD management infrastructure according to Basel 2 152
3.3.1.9 Increase equity capital to ensure capital safety ratio according to regulations of the State Bank 159
3.3.2 Phase 2: from 2019 to the end of 2020 161
3.3.2.1 Investing in technology to analyze and measure credit risk 161
3.3.2.2. Completing the data warehouse to meet the requirements of measuring RRTD according to the IRB 161 method approach
3.3.2.3 Determination of model, measurement method and measurement testing PD 163
3.3.2.4 Develop an internal capital adequacy assessment process (ICAAP) for credit risk 164
3.3.2.5 Implement information disclosure to meet Basel 2 requirements 166
3.3.2.6 Gradually improve the effectiveness of operational risk management and market risk management at Agribank 167
3.4 PROPOSAL 168
3.4.1 Recommendations to the Government and relevant Ministries 168
3.4.2 Recommendations to the State Bank 171
CHAPTER 3 CONCLUSION 176
CONCLUSION 177
SCIENTIFIC WORKS OF THE AUTHOR PUBLISHED RELATED TO THE THESIS TOPIC 1
REFERENCES 2
APPENDIX 8