Step one , Determine the goals of the loan portfolio. Vietcombank's loan portfolio management department, based on the bank's strategy and policy goals, sets out the goals to be achieved for the loan portfolio for the next period (usually annually ) ;
Step two , the loan portfolio management department evaluates factors affecting the construction of the loan portfolio structure such as external factors such as fiscal policy, monetary policy, economic cycle..., and internal factors such as credit policy, risk appetite, competitive advantages of the bank, and its available resources.
Step three , the country's current economic context and forecasts of macro fluctuations, along with Vietcombank's position in the coming time will be carefully analyzed .
Step
Maybe you are interested!
-
Solutions for Vietnamese Commercial Banks to Improve Loan Portfolio Risk Management -
Current Status of Loan Portfolio Risk Management at Vietnamese Commercial Banks -
Loan portfolio management at Vietnam Joint Stock Commercial Bank for Foreign Trade - 6 -
Use Tools to Adjust Loan Structure and Investment Structure Flexibly in Accordance with Practical Conditions. -
Vietnamese law on loan contracts in the field of banking credit - 28
four , based on the information collected at
first three steps,
The loan portfolio management department will determine the loan portfolio options that Vietcombank can implement.
Step 5 : Based on the established plan, the Loan Portfolio Management Department will discuss with Vietcombank's management to make the final choice, establishing a planned loan portfolio that is suitable for the criteria of profit, capital safety requirements and financial capacity of the bank .
b. Provide professional advice to the management board to implement the established loan portfolio.
The Loan Portfolio Management Department plays an important role in establishing the Board's credit philosophy and helping to ensure compliance with the Board's plans and policies. In addition to the credit policy department's focus on setting policies and standards for individual loans, the Loan Portfolio Management Department can provide additional and effective control over lending activities, providing additional expertise and management perspectives to the loan approval decision-making process. These expertise will be relevant to
concerned with the creation of the entire loan portfolio, analyzing the interactions between the structural components of the loan portfolio on various aspects.
Coordinate with the department
ALCO department can
was established to
monitoring and
directly manage assets and interest rate risk issues that are material to the organization. The size and complexity of the bank will determine the structure of this department and will determine the level of expertise required.
c. Determine standards and evaluate performance:
Employee performance plans and periodic performance reviews act as internal controls to ensure that direction, goals, and mandates are effectively implemented and results are achieved. Therefore, established performance standards must be consistent with grantee authority and the organization's lending policies and plans. Appropriate performance standards hold management and lending staff accountable and thus significantly increase the likelihood that plans and policies will be implemented.
will be effective and achieve results
desired. Below level
council
governance, the responsibility of senior management, such as directors
loan officer and manager, who supervises and controls loan officers.
d. Building risk parameters for banks
Board policies should clearly define risk parameters that are specific to the bank's lending environment. Risk parameters are limits on the level and type of risk and lending activities that may be undertaken.
body
acceptable and within reach
organization's risk tolerance
function. The
This parameter is usually expressed in terms of specific risks or in terms of the volume of loans in a specific risk category in relation to the bank's capital, risk reserves or both. Therefore, the establishment of risk parameters is part of the organizational control system, which originates from the planning process.
its planning. The risk parameters should be adjusted appropriately after
Carefully consider both internal and external factors affecting the organization.
e. Monthly review of loan portfolio
The monthly assessment of the loan portfolio is the core task of the Loan Portfolio Management Department. The loan portfolio can be classified according to a number of specific aspects (by economic sector, by term, by loan quality, by customer type, by currency, by geographical area, by bank branch, etc.) Based on the division of the loan portfolio structure, the Loan Portfolio Management Department can prepare a report to monitor the outstanding debt situation. In addition, Vietcombank can use the DEA model to evaluate the effectiveness of the loan portfolio classified by economic sector to have a basis for adjusting and forecasting the loan portfolio in the next period. Thanks to that, the Department can quickly detect loans that are not in line with the proposed objectives or existing or potential loan portfolio risks in the portfolio to quickly have solutions to adjust, overcome, and prevent losses.
3.2.4. Detailed loan portfolio classification, in accordance with government guidelines
Selecting and managing individual loan transactions remains a
important part of bank credit risk management, but loan portfolio risk management also includes considering the entire sub-sector of the loan portfolio, groups of loans with similar risk characteristics due to the same industry. Effective loan portfolio management requires an understanding of all the risk characteristics of the economic sectors in which the bank disburses. Vietcombank needs to conduct economic sector classification on the investment portfolio closer to government regulations (21 sectors) instead of only 8 specific sectors and 1 group of other sectors as at present. Based on the detailed economic sector classification,
The diversification of the loan portfolio will be reflected, providing a basis for managers to make decisions. The bank should identify the risk characteristics of each segment.
After proper sectoral classification, banks can use indicators to assess the diversification of their loan portfolio by economic sector, which is the basis for decision making. Orientation for economic sectoral classification activities in Vietcombank's loan portfolio is as follows:
Banks need to be fully aware of the importance of building a loan portfolio and allocating loans appropriately. In order to complete the bank's loan portfolio building activities, the first thing to do is that banks need to be aware of the importance of building an effective loan portfolio, building and evaluating the level of diversification of the portfolio and the risks of the portfolio.
Banks need to use a unified industry classification system, have a plan to develop a method for calculating industry correlation indexes, and comply with reporting regimes according to current State regulations. Along with that, banks need to be transparent in their operations, strictly comply with all regulations of the management agency. From there, there are conditions
moving towards building the image of a good bank with transparent information,
unified and clear, meeting maximum requirements on risk management and business strategy.
3.2.5. Building a standardized loan portfolio risk measurement tool according to international practices
Currently, Vietcombank is applying risk management according to Basel II, so the bank needs to consider using tools to measure loan portfolio risk in accordance with international standards. Applying tools and models based on modern technology helps managers quantify the level of risk,
Early detection of risk signs, accurate identification of the main causes of risks to have timely and effective solutions and more
analysis tool, forecast
measurable and reportable
future risks by each
Industry, field, customers and products are extremely important, requiring Vietcombank to focus on investing in applied research.
In modern loan portfolio risk measurement tools, according to
NCS VAR is most suitable for Vietcombank to determine unexpected losses of the loan portfolio as well as the entire bank. The main reason
The main advantage of VAR is that it can approach the measurement of reputation risk.
Loan portfolios are evaluated from many different perspectives such as loan portfolios by credit quality, loan portfolios by economic sectors, loan portfolios by customer types, etc. This evaluation based on many different criteria is very suitable for banks to issue monthly periodic reports as mentioned in section 3.2.3.
Among the VAR model groups mentioned in chapter 1, NCS believes that the CreditPortfolioView model is the most suitable for Vietcombank. This model
allows assessment of non-repayment potential and changes in loan quality
loans based on fluctuations in the macroeconomic situation. Vietcombank's loan portfolio can be divided into specific industry groups suitable for
regulations of the State Bank and based on this division, the bank applies the model
model to evaluate the loan portfolio. With the participation of macroeconomic variables that directly affect the business activities of a group of industries in the loan portfolio, this model helps Vietcombank measure the risk of the loan portfolio in the most general way with the combination of information chains that the bank has built. Thanks to that, the bank will save the cost of building a data system to calculate the parameters of the model.
The model simultaneously provides the most objective economic picture.
performance evaluation
loan portfolio by
3.2.6. Flexible implementation of loan portfolio adjustment tools
On the basis of
periodic loan portfolio report
or abnormal
Regarding the excess lending by proportion of customer groups, industries, and customer objects, Vietcombank needs to research, develop and implement solutions to adjust the loan portfolio in line with the bank's strategy.
Firstly, the Bank conducts syndicated lending. Normally, for large loans exceeding the threshold prescribed by the State Bank (exceeding 15% of the bank's equity), or exceeding the maximum ratio for each customer according to the industry and geographical area specified in the loan portfolio, Vietcombank can call for co-financing from other banks to maintain the relationship with customers and still ensure the goals of the loan portfolio. In addition, loans to customers who have a long-term business relationship with the bank, the large loan value can affect the bank's liquidity, then syndication can be used to adjust the loan portfolio. Syndication is considered a tool to adjust the loan portfolio only when the loan has been fully disbursed by Vietcombank, then for financial security reasons, the bank will call on a number of other banks to participate in the loan.
Second, Selling Loans. In some cases where the current borrowers of the loan portfolio exceed the ceiling regulations on loan ratio by customer type, the bank can shift loans by selling loans to adjust the ratio of loans in the
loan portfolio. When selling loans, Vietcombank has eliminated
The loan is completely removed from the bank's loan portfolio, with no provision made for this amount.
Rank
Three, securitization of loans.
Banks can
use carefully
This technique to handle its bad debts but requires strong development of the stock market and debt trading. With the transfer of loans according to the original loan portfolio plan, the company
The securitization of loans has helped banks adjust their loan portfolios very effectively. The cash flow from securitization helps banks make capital investments in accordance with the objectives of the original loan portfolio.
Rank
private, history
use tools
derivative
Bank of use
tools
Credit derivatives such as credit swaps, credit options, etc.
to adjust the loan portfolio structure in line with the government's objectives.
credit books. Derivatives provide managers with a
new way to form a portfolio suitable for the selected target. At the micro level, derivatives can be used to reduce the concentration risk of the portfolio or diversify the portfolio by combining the acceptance of risks from the business lines and operating areas provided that the business lines and operating areas are below the allowable weight of the portfolio. At the macro level, derivatives are used to create a securitization complex to balance the risk and profit of a large number of loans at the same time. However, this is a new tool in Vietnam, so Vietcombank needs to:
Cooperate with foreign banks to learn from their experience and advice. Invite experts from countries with developed economies to guide and train staff, helping them become more familiar with this profession. In addition, be proactive in recruiting, giving priority to candidates with specialized training in derivatives.
Provide specific documents and regulations on the application of derivatives in practice under the advice of major banks in the world.
gender and in accordance with the law as well as Nam.
Vietnamese environment and customs
Build a specialized department to carry out derivative transactions.
credit generation. Ministry
this part will
help the bank in transferring
Translate your loan portfolio.
Technological innovation, acceleration
application of science and technology
magic
move towards the application of derivatives.
Fifth, the form of loan guarantee. Loan guarantee standards
approved by
The Board of Directors is not possible.
lack of management
reputation
item. The underwriting standards describe the minimum creditworthiness
for personal loans and the risk-return rate approved by the Board of Directors
receive. If the organization
title
creditworthiness through standards, capital
better insulated from unsafe and unsubstantiated lending conditions.
Underwriting standards clearly define, in measurable terms, the desired credit criteria for granting acceptable loans. Acceptable loans can be classified in three main areas: (1) creditworthiness, (2) documentation and completeness of records, and (3) policy and legal compliance. Proper evaluation of these three areas before loans are placed will reduce loan losses and will be more efficient than
the techniques
best lending ability used
use after loan problem
more complex. Therefore, underwriting standards should include: Assessment of the purpose of the loan and the associated repayment program (primary and secondary);
Evaluate key lending credit factors such as nature, capacity, capital, conditions and collateral;
Assess the legality of the loan;
Determine the economic benefits (risk-return) for the bank;
Ensure that loans are originated within the bank's area of expertise.
Once these components are assessed, the organization
possible function
weigh
scoring of components according to their perceived importance. Regardless of the process chosen, an institution must identify and report loans that do not meet or comply with accepted lending standards.