Current status of information risk management at Asia Commercial Joint Stock Bank

It is relatively effective to decentralize and separate operations between departments to ensure sustainable operations and healthy finances.

In the 2003 prospectus, ACB's risk management activities were not assigned to independent departments but were only included in the operational activities of departments such as: Credit Department, Credit Council, Asset and Liability Management Board, Treasury Management Board, Risk Management Department and Internal Audit Department. After nearly 20 years of establishment and development, credit risk management at ACB has developed and become the main activity in independent departments such as: Policy and Credit Management Department; Market Risk Management Department; Operational Risk Management Department; Risk Analysis Department, Portfolio Management, Infrastructure Tools and Project Management Department. Each department is given independent authority in risk control activities of ACB's operations, forecasting and preventing possible risks, creating a healthy ACB environment.

The Credit Policy and Management Department is responsible for credit granting activities in all forms: lending, guarantee, factoring, discounting, etc.; forecasting potential credit risks and proposing preventive measures, ensuring that ACB's credit granting activities are provided correctly, sufficiently and accurately to capital-needing factors. Minimizing moral hazard is a factor that increases credit risk.

The Market Risk Management Department is the brain unit in receiving and analyzing information from the State Bank as well as other organizations that have an impact on the operations of credit institutions in general and ACB in particular. From the analysis, it provides orientations and operating policies to ensure that ACB's operations take place within the legal framework, in accordance with the regulations of related organizations.

The Operational Risk Management Department controls all daily transactions arising in banking operations, ensuring that operations are performed accurately and in compliance with ACB regulations and current laws.

Information risk management is a newly mentioned concept but is one of the risk factors that greatly affect banking operations. As analyzed

In chapter 1, the consequences of information risks if not handled effectively were analyzed. ACB's operations have undergone many fluctuations when information risks occurred. The effectiveness of ACB's information risk handling activities has been somewhat effective in bringing the entire bank's operations back to the old orbit in a relatively short time.

However, in ACB's current management activities, information risk management has not received due attention. This is easily seen through the risk management system in ACB's organizational chart (ACB's Prospectus 2012), there is no department assigned to manage information risks as well as a team of specialists in charge of monitoring information spread internally as well as information transmitted externally. All information risk handling activities are formed when information has been spread, and have more or less caused noise and increased uncertainty. This partly makes it impossible for ACB to analyze, anticipate potential information risks, come up with faster handling measures and avoid unnecessary losses.

2.2.2 Asia Commercial Joint Stock Bank and information risks in 2003 In 1993, ACB officially came into operation and increasingly affirmed its brand and reputation in the domestic and foreign financial markets. According to the plan of the Board of Directors, the 10th anniversary of ACB's establishment in 2003 was a memorable milestone. However, all plans for the 10th anniversary had to be put on hold when information risks occurred in the last months of 2003.

- On October 14, 2003, a piece of information was spread among the community that the General Director of ACB at that time, Mr. Pham Van Thiet, had fled to the US with a huge amount of assets. The information was not verified but it was a bomb that exploded and caused everything in the market to fluctuate. The source of the information spread quickly, people flocked to ACB not to find out the accuracy of the information but to withdraw money from this banking system. The entire operation of ACB was disrupted, customers were in a panic, scared, and rushed to withdraw money. Until the end of October 15, 2003, the long line of people still lined up at ACB headquarters, continuing to create pressure on withdrawing money. The people's simultaneous withdrawal of money took place continuously for 3 days, resulting in more than 1,000 billion VND being gone.

from ACB even though ACB is a large and reputable bank (Table 2.3). Not only that, investors find every way to dump and sell off stocks, causing all sources of information to continue to be disrupted, causing more difficulties for ACB's operations.

Table 2.3 ACB's mobilization from the population from October 14, 2003 to October 17, 2003 (Unit: million VND)

Time

October 14, 2003

October 15, 2003

October 16, 2003

October 17, 2003

Mobilization from

population

7,297,900

6,711,937

6,365,975

6,110,268

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Source: ACB

- Faced with such a tense situation, ACB leaders quickly took actions to handle information risks.

+ First, ACB General Director Pham Van Thiet and Chairman of the Board of Directors Tran Mong Hung had to appear at the bank's headquarters to deny the rumors and affirm that ACB's operations were still operating normally, and that all customer deposits were insured by ACB according to the regulations of the State Bank. ACB representatives also awarded a prize of 200 million VND to anyone who provided information to the authorities to find the person spreading false information.

+ The current Governor of the State Bank, Mr. Le Duc Thuy, immediately flew from Hanoi to Ho Chi Minh City to handle the situation. Contacting ACB customers, he confirmed that this was false information and pledged to support ACB if all customers still insisted on withdrawing their money. Mr. Le Duc Thuy stood together with key leaders of ACB to pledge that the State Bank would not let any people deposit money in the banking system suffer loss or damage, especially ACB is one of the best banks among banks. Following his speech at the ACB headquarters the day before, October 15, Governor Le Duc Thuy issued a document clarifying his above commitment. The Governor's document stated: The Governor of the State Bank pledges to fully meet all needs for Vietnamese Dong (VND), foreign currency and gold so that Asia Commercial Joint Stock Bank can fulfill the following conditions:

1. Ensure the safety of deposits in VND, foreign currency or gold and all other benefits of customers depositing money and transacting with the bank as committed by Asia Commercial Bank.

2. Pay in full and on time all withdrawal requests in VND, foreign currency or gold of the depositor when requested.

The above document was signed by the Governor in Ho Chi Minh City, so it had to have the confirmation signature of the director of the State Bank branch in Ho Chi Minh City below to be issued in time.

+ The State Bank of Vietnam, Ho Chi Minh City branch, had to hold a press conference to announce that the above rumors were false, and officially sent a dispatch advising ACB customers to stay calm, not fall into the plot to sabotage economic security, and to rest assured about ACB's business operations.

+ On the same day, Vice Chairman of Ho Chi Minh City People's Committee Nguyen Thanh Tai signed and issued a notice stating: Recently, there has been a false rumor that the General Director of ACB has absconded. This rumor has created panic and fear for a number of customers who have transactions with ACB. This is a false rumor that is destructive to monetary and economic security, affecting the political security of the city. This rumor not only affects the reputation of ACB but also affects the banking systems in Ho Chi Minh City. Currently, Mr. Pham Van Thiet is the General Director running ACB. This is one of the banks with strong financial strength, highly effective business in the joint stock banking system in particular and the entire banking system in general. ACB always complies with the regulations of the State, is a leading bank in applying modern technology, and is highly appreciated by the State Bank of Vietnam as well as international organizations for its reputation and security. The Ho Chi Minh City People's Committee requested the police to coordinate with relevant units to investigate and track down the perpetrators who intentionally spread false information and strictly handle them according to the provisions of the law. The press agencies should widely inform ACB customers to stay calm, not fall into sabotage plots, and feel secure about the stability.

and safety of ACB. If ACB customers receive rumors and inciting words, they should immediately report to the competent authority.

+ ACB itself also promptly sent information to the press and media agencies to send ACB's message and continuously broadcast the commitments of ACB's leaders and leaders of related departments. The commitments were broadcast at all ACB transaction points to ensure providing the most correct, accurate and complete information to customers.

+ On the other hand, on the State Bank's side, after supporting ACB with a loan of 500 billion VND on the evening of October 14, on the morning of October 15, the State Bank continued to support ACB with an additional 1,400 billion VND, but the bank only received about 800 billion VND due to the significant decrease in the number of customers coming to withdraw money. Other banks also actively supported ACB. On October 14, Vietcombank in Ho Chi Minh City lent ACB 7 million USD, Sacombank lent 2 million USD. Dong A Bank, Eximbank, BIDV in Ho Chi Minh City all supported ACB wholeheartedly both materially and spiritually. The amount of money ACB paid to customers, as of 3:00 p.m. on October 15, was recorded to be about 520 billion VND. Thus, in total, ACB paid depositors about VND1,200 billion on October 14 and 15, including foreign currency and gold.

+ In addition, the support of financial institutions has created conditions for ACB to fully cope with customers' withdrawal needs during the information crisis. The International Finance Corporation (IFC), one of ACB's major shareholders, has immediately taken measures to support the bank in terms of operations. According to Mr. Lam Bao Quang, IFC's investment specialist, IFC has used its reputation to guarantee ACB in case the bank's short-term liquidity is temporarily lacking. With IFC's guarantee, Vietnamese banks and foreign bank branches in Vietnam have increased the credit limit for ACB. At the same time, an IFC investment specialist in Hong Kong flew to Ho Chi Minh City on October 15, 2003 to further support the bank and find solutions to overcome possible consequences. HSBC, one of the leading foreign bank branches in Vietnam, has increased

loan limit for ACB. An HSBC official said that the most important thing for ACB now is to restore customer confidence.

+ By the afternoon of October 17, ACB announced that it had completely resolved the false rumors about the bank, and the ACB system had returned to normal operation. Mr. Pham Van Thiet, General Director of ACB, acknowledged and apologized to customers for the shortcomings in handling information risks.

The information risk incident that occurred at ACB in 2003 provided the first concepts and foundations for information risk management activities at ACB as well as at other banks. In a short time, ACB has somewhat quelled rumors, overcome the consequences of information distortion leading to major risks in banking management activities. And through this incident, ACB has gained more experience in handling information risks that occurred in 2012.

2.3.3 Asia Commercial Joint Stock Bank and information risks in 2012 ACB has gone through nearly 20 years of formation and development, with the successes achieved proving the prestige and potential of ACB worthy of being one of the leading banks in Vietnam. But once again, the information risk event that occurred in August 2012 forced ACB to change its short-term operating strategy as well as pursue new goals.

- On the morning of August 21, 2012, the news that Mr. Nguyen Duc Kien (commonly known as Mr. Kien) was arrested shocked the financial market in Vietnam as well as the world. Mr. Kien is known as the founder of ACB bank and this event started a series of bad news about ACB's operations. Information about the relationship between Mr. Kien and ACB quickly spread in a negative direction. The stock market was immediately shaken by the fact that ACB bank shares hit the floor (ACB shares fell from 25,900 VND/share to nearly 15,000 VND/share), dragging a series of other bank shares to the floor. The stock market on both exchanges fell almost to the full range, showing the great impact of this event on the financial system. The gold market reacted to the news of Mr. Kien's arrest by soaring to over 43 million VND/tael even though the world price only fluctuated slightly.

Figure 2.3: ACB stock price from August 1, 2012 to September 27, 2012

Source: Cafef.vn Table 2.4 VN Index from August 16, 2013 to August 31, 2013

Day

Batch

Index

Change

Number of matched orders

Mass

Value (thousands)

copper)

discount

old man

16-Aug-12

430.83

0.06

16,695

26,763,034

488,189,000

131

17-Aug-12

433.45

2.62

20,223

37,819,893

713,127,000

154

20-Aug-12

437.28

3.83

20,387

41,498,652

757,915,000

139

100

21-Aug-12

416.84

-20.44

33.5

70,056,259

1,235,248,000

257

22-Aug-12

410.23

-6.61

36,088

74,161,947

1,052,477,000

190

23-Aug-12

392.82

-17.41

19,414

38,827,201

679,539,000

256

24-Aug-12

399.72

6.90

46,798

94,636,397

1,206,453,000

168

27-Aug-12

386.19

-13.53

21.76

42,325,880

645,221,000

209

28-Aug-12

385.78

-0.41

22,688

41,225,681

539,576,000

101

141

29-Aug-12

393.06

7.28

21.55

41,597,563

582,422,000

206

30-Aug-12

397.25

4.19

21,529

39,043,722

602,102,000

132

31-Aug-12

396.02

-1.23

18.03

33,353,341

505,389,000

119

111

Source: Ho Chi Minh City Stock Exchange

- Before the news of Bau Kien's arrest spread quickly, ACB took the first steps to deal with information risks. The liquidity assurance board of

The bank was established, the main spokesperson of ACB was appointed, the entire board of directors of ACB met to agree on specific scenarios to control the situation. Accordingly, ACB proposed 5 scenarios, including: Normal, slightly crowded, chaotic, emergency and crisis, and gave 5 solutions to solve .

- ACB's Board of Directors has requested all units to temporarily suspend loan disbursement and wait for further notice from the Executive Board. Units need to closely monitor liquidity and immediately report any unusual signs of business to the Permanent Deputy General Director. In addition, ACB's leaders also require Heads and Deputy Heads of units not to leave their posts and not to accept any requests for information from outside individuals or organizations without going through ACB's spokesperson.

- While the information about Mr. Nguyen Duc Kien is being processed, the information that Mr. Ly Xuan Hai, the current General Director of ACB, has also been arrested and detained is spreading on several official and unofficial websites. The new source of information is even more disadvantageous for ACB as the person arrested is the one who has been leading the operations and associated with ACB for 15 years.

- On the afternoon of August 21, 2012, ACB held its first press conference to confirm Mr. Kien's role in current banking operations. Mr. Tran Thanh Toai, Deputy General Director and spokesperson of the bank, said that Mr. Kien's arrest was "Mr. Kien's personal matter", and at the same time, "Mr. Kien's temporary detention was a decision of the authorities, so it did not affect the bank's normal operations". Mr. Toai said that ACB had dissolved the Founding Council about 4 months ago because the State Bank had issued regulations to abolish organizations established by banks that were not included in the Law on Credit Institutions. As for Mr. Nguyen Duc Kien's current position as Chairman of the Board of Directors and General Director of Asia Financial Group Joint Stock Company, according to Mr. Toai, "has nothing to do with ACB". ACB's spokesperson also announced that Mr. Kien is no longer a major shareholder because he holds less than 5% of shares, nor is he a member of the Board of Directors or a member of ACB's executive board. Therefore, Mr. Kien is not obliged to disclose information about the number of ACB shares that he and his family members currently hold.

Current status of information risk management at Asia Commercial Joint Stock Bank - 7

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