originating from the bank or the customer, leading to the customer not being able to repay the debt, causing the possibility of losing capital. At the same time, regular inspection will help the bank monitor and manage customers, thereby having appropriate management measures for each subject to ensure high quality lending activities and control risks. To do a good job of inspection and examination, LPB Ha Nam branch needs to implement the following solutions:
- Check through periodic/ad hoc reports based on data extracted from the system to have an overall view of the lending activities at LPB Ha Nam branch, analyze the causes of risks concentrated in customer groups and industries to have appropriate management measures, restructure the loan portfolio, control risks and help the Board of Directors be proactive in operations.
- Strengthening the implementation of direct inspection, self-inspection, cross-inspection through the activities of periodic or ad hoc inspection teams to promptly detect signs of risks that may occur during the lending process such as: loan documents, legal documents of customers, legality of credit contracts, loan guarantee contracts; current status of customers' collateral... to promptly detect and prevent customers from using loans for purposes other than those agreed in the credit contract, unsecured property records leading to risky cases, and failure to repay debts. In addition, it is necessary to establish a specialized department to inspect lending activities, focusing on inspecting large-value loans to identify risks as soon as they arise.
3.3. Some recommendations and proposals
3.3.1. Recommendations to the Government
Completing documents on mortgaged assets, it is necessary to create more convenience and speed in liquidating mortgaged assets.
Currently, there are no measures or sanctions to deal with the case where the collateral holder is uncooperative, sluggish, or delays in handing over the collateral. Therefore, it is necessary to build strong enough sanctions to decisively and quickly handle the outstanding bad debts.
The enforcement of judgments is still slow. In reality, there are many judgments and decisions of the Court that have come into effect and there have been requests for enforcement from banks, but the Procuracy has not checked them all to urge them, so the bank has to make documents many times, prolonging the enforcement time.
It is necessary to have measures to closely monitor the compliance with financial regimes and accounting standards of enterprises and business units. At the same time, propose sanctions and measures to strictly handle cases where enterprises provide false information, deliberately modify financial reports in a favorable direction, causing inaccurate information. It is necessary to enhance the role of independent auditing companies.
Rectify the licensing of operations and business for new enterprises. At the same time, do not loosen the inspection and supervision after the enterprise has been granted the establishment license.
Building a national information system: In Vietnam today, information is scattered across state management agencies without regulations on coordination of information provision between agencies, making it very difficult and time-consuming to look up information. In particular, finding information from state agencies such as tax, police, etc. is very difficult. Therefore, the implementation of building a national information system is extremely necessary, helping banks to easily exploit customer information.
To ensure a stable macroeconomic environment, changes in government policies need to be clearly announced and given sufficient time for transition.
3.3.2. Recommendations to the State Bank of Vietnam
Strengthen inspection, supervision and control of bad debt, credit quality, debt classification and risk provisioning, and improve effectiveness in bad debt control.
Perfecting the legal framework, facilitating the handling of bad debts, especially the purchase and sale of debts and secured assets, enhancing the responsibility of borrowers, ensuring the rights of creditors, building incentive mechanisms, creating conditions for domestic and foreign investors to participate in the purchase and sale of bad debts and secured assets.
Continue to develop and improve mechanisms and policies on credit institutions' derivative instruments. Further deploy risk prevention operations.
in the currency market such as options, swaps, futures...
Improving the quality of credit information center operations Credit information provided by the credit information center (CIC) in recent years has not met both quantity and quality requirements, limiting the credit analysis capabilities of Vietnamese commercial banks today.
Therefore, the State Bank needs to:
Closely coordinate with trade agencies and information centers of state management agencies on enterprises to collect more information about enterprises operating in Vietnam.
Require member banks to properly perform their roles and responsibilities when participating in providing and exploiting information from CIC. Take measures to handle credit institutions that do not strictly comply with information regulations, provide false information or cause information interference.
Quickly strengthen staff, apply new technology, modernize and automate all business processing stages to ensure quick and timely information provision.
3.3.3. Recommendations to Lien Viet Post Joint Stock Commercial Bank
The Vietnam Bank for Agriculture and Rural Development must always direct and provide specific and timely guidance on the policies and guidelines of the Government and the State Bank in supporting business loans.
Develop reasonable targets for branches, suitable to the scale and risk conditions of each branch.
Support branches in recruiting and training staff.
Further improve the internal credit rating system for corporate customers. Upgrade the information technology system to become more modern.
Strengthen internal inspection and control activities to promptly detect shortcomings, violations, and weaknesses in the lending process at branches to take remedial measures to avoid unwanted consequences for the bank.
CONCLUDE
Credit risk is a very complex type of risk, which occurs frequently and causes the most serious consequences for commercial banks. The prevention and management of credit risk is very difficult. Credit risk management is one of the important tasks in the management and operation of commercial banks, especially in the current difficult economic situation of Vietnam.
On the basis of clearly defining the objectives, objects and research methods, the thesis has accomplished the following tasks:
Firstly, systematizing the basic issues of credit risk management of commercial banks: From the concept, the thesis has clarified the content of credit risk management, identified subjective and objective factors related to credit risk management of commercial banks.
Second, the thesis analyzed the current status of credit risk management of Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch and evaluated the successes such as: The provisioning for credit risk handling was fully and seriously implemented according to the regulations of the State Bank, contributing to improving the quality of the branch's debt; regularly and continuously re-evaluating collateral; implementing well the lending policy and credit procedures;... In addition to the achievements, credit risk management of Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch also has some limitations such as: The handling of bad debts and overdue debts of the branch is not really effective; the system of supporting credit risk measurement and analysis that the bank is applying is not complete and lacks synchronization; debts with potential risks have not had really effective measures to thoroughly resolve them, there are still some long-term bad debts that have not been recovered.
Third, analyze, propose some solutions and recommendations to improve credit risk management at Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch such as: Improve customer classification; Improve the quality of loan application appraisal; Strengthen post-loan and disbursement control; Improve and improve the quality of credit risk management.
quality of bad debt handling work; Strengthening technology, improving the quality of resources in risk management of lending activities.
With limited vision and understanding, in addition to the constant changes of the business environment and the diversity and richness of commercial bank operations, the issues raised in this article still have many shortcomings. Therefore, I hope to receive comments from the Bank as well as teachers to make the thesis more complete.
Thank you very much!
LIST OF REFERENCES
1. Mai Van Ban (2012), Commercial Banking Textbook, Academy of Finance Publishing House.
2. Pham Ngoc Canh (2019), Credit risk management in lending activities of Vietnam Joint Stock Commercial Bank for Investment and Development - Son La Branch , Master's thesis, University of Commerce.
3. Government (2015), Decree No. 55/2015/ND-CP dated June 9, 2015 on credit policy for agricultural and rural development.
4. Government (2015), Decree No. 78/2015/ND-CP dated September 14, 2015 on business registration.
5. Frederic S.Mishkin (2001), Money - Banking and Financial Markets,
Science and Technology Publishing House, Hanoi.
6. Ngo Thi Thuy Giang (2018), Credit risk management in corporate lending at Vietnam Prosperity Joint Stock Commercial Bank - Quang Tri branch , Master's thesis, University of Economics - Hue University.
7. Le Thi Man (2014), Commercial banking operations , Social Labor Publishing House.
8. State Bank of Vietnam (2005), Decision No. 493/2005/QD-NHNN dated April 22, 2005 on promulgating regulations on debt classification, provisioning and use of reserves to handle credit risks in banking activities of credit institutions.
9. State Bank of Vietnam (2013), Circular No. 02/2013/TT-NHNN dated January 21, 2013 regulating the classification of assets, provision levels, methods of setting up risk provisions and the use of provisions to handle risks in the operations of credit institutions and foreign bank branches .
10. State Bank of Vietnam (2013), Directive No. 04/CT-NHNN dated September 17, 2013 on debt classification for debt with restructured repayment terms and bad debt settlement.
11. State Bank of Vietnam (2015), Circular No. 10/2015/TT-NHNN dated July 22, 2015 guiding the implementation of Decree 55/2015/ND-CP on credit policy.
used for agricultural and rural development issued by the Governor of the State Bank.
12. State Bank of Vietnam (2017), Circular No. 21/2017/TT-NHNN dated December 29, 2017 regulating the method of disbursing loan capital of credit institutions and foreign bank branches to customers issued by the Governor of the State Bank of Vietnam.
13. Lien Viet Post Joint Stock Commercial Bank (2017) , Cultural handbook of Lien Viet Post Joint Stock Commercial Bank.
14. Peter S. Rose (2004), Commercial Bank Management, Finance Publishing House, Hanoi.
15. National Assembly (2010), Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010.
16. National Assembly (2017), Law No. 17/2017/QH14 dated November 20, 2017 amending and supplementing a number of articles of the Law on Credit Institutions .
17. Nguyen Van Tien (2010), Risk management in banking business , Statistical Publishing House.
18. Ngo Ngoc Toan (2019), Credit risk management in lending to corporate customers at Vietnam Technological and Commercial Joint Stock Bank - Ha Nam Branch , Master's thesis, University of Commerce.
19. Nguyen Quoc Toan (2017), Credit risk management in corporate lending at Vietnam Joint Stock Commercial Bank for Foreign Trade , Master's thesis, University of Economics - Vietnam National University, Hanoi.
20. Trinh Hoang Vu (2019), Credit risk management in lending to individual customers at Vietnam Bank for Agriculture and Rural Development - Tu Ky Branch, Hai Duong , Master's thesis, University of Commerce.
APPENDIX
Appendix 2.1: Classification and evaluation table of corporate customers at 14.
Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch
Type
Characteristic | Risk Level | |
AAA: Superior. The best credit score for customers with good credit quality. best | - Strong financial situation. - High capacity in management. - Highly efficient operations. - Very resilient to the impacts of the business environment. - High credit ethics | Lowest |
AA: Excellent | - Good fertility. - Efficient and stable operation. - Good management. - Long-term development prospects. - Good credit ethics. | Low but longer term higher than AAA customers. |
A: Good quality | - Financial situation is stable but has certain limitations. - Works efficiently but not as stable as AA type customers. - Good management | Short |
BBB: Fair | - Effective and promising operations in the short term. - Financial situation is stable in the short term due to some financial and management capacity limitations and can be strongly affected by economic and financial conditions. in the business environment. | Medium |
BB: Medium pretty good | - Average financial potential, yes potential risks | Average, ability principal and interest repayment |
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