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Diversifying Banking Activities


bad debt score; (4) Improve the efficiency of cost structure management and optimize income; (5) Solutions to respond to and regulate the macro economy.

5.2. Policy recommendations

5.2.1. Bank size

According to research results, bank size has a positive relationship with bank business efficiency. Bank size is shown through total assets and equity, which is also the financial capacity of the bank.

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When banks increase capital, they will have the conditions to attract capital, develop human resources, expand networks, invest in technology, and access management experiences according to international standards. In addition, when banks have great financial potential, they will be able to overcome instability when there are changes in the market.

To improve financial capacity, banks can consider some solutions such as: restructuring charter capital, equity capital in accordance with legal regulations and the business situation of the bank, thoroughly resolving bad debts. Consider the process of merging with weak banks to enhance capacity, ensuring business efficiency.

Diversifying Banking Activities

When expanding the scale of the bank, it is necessary to pay attention to the issue of human resources in terms of quantity as well as qualifications to avoid the phenomenon of expanding the network too much, increasing the number of branches and transaction offices but the quality and human resources are not enough to meet the requirements, which will lead to many negative consequences for business activities. Mobilized capital must be focused on, and risks must be effectively managed to avoid the risk of expanding more and more, causing greater risks and losing control of bank leaders.

There is a policy of maintaining an appropriate capital structure for effective operation. A large scale of equity ensures the health and safety of the bank, enhances the bank's position in the market, and supports the bank's ability to withstand economic shocks. Usually, to increase capitalization, banks will issue additional shares to domestic and foreign markets, or through bank mergers.


5.2.2. Asset quality

If banks want to increase business efficiency, they need to focus on minimizing credit risks by building a reasonable and effective credit process, ensuring strict compliance and unifying a standard process. Banks need to issue measures aimed at managing credit risks at each level and consider evaluating loans with high potential risks. The human factor is an important factor, so credit officers must be well-trained, competent, qualified and skilled to improve asset quality.

In addition, it is necessary to ensure that regulations related to the issuance of procedures of the State Bank must be properly implemented, and regulations on the responsibilities of each person and department related to the appraisal, lending and post-credit supervision of the bank must be issued. Improve the quality of loan control and management activities strictly, complete documents and procedures for credit control and supervision. Strengthen the independent role of internal audit in monitoring compliance. It is necessary to regularly check and monitor violations and non-conformities in each work and credit activity of the bank to improve and improve quality. Investing in technology to support the storage and retrieval of customer data and credit information accurately, completely, and easily retrieved and stored will make business operations more effective.

Commercial banks need to manage business activities scientifically classified by customer groups and service types, aiming to develop a multi-functional bank, replacing traditional banking management methods. Continue training, learn from experience, improve operational risk management skills, effectively exploit assets and liabilities. Build and improve the effectiveness of internal control activities, make information transparent to improve financial health, increase investor and customer confidence.

Banks need to have fundamental solutions to proactively increase provisions for bad debts, accept reduced profits or losses to prevent risks arising in the worst case scenario.

Bank management boards need to further develop and improve policies.


Great enlightenment policy for employees, especially for experienced staff, senior and middle managers on training activities, salary and reasonable bonuses.

Commercial banks need to securitize bad debts. The securitization method is to convert a part of the principal debt into medium-term bonds for businesses in difficulty and financial distress. Convert overdue debts and bad debts of businesses into shares and increase ownership shares, becoming strategic investors after restructuring business operations if the business has the ability to survive and grow well. Commercial banks need to actively enhance community spirit, coordinate actively, smoothly, and effectively supervise businesses to effectively handle bad debts, avoiding uncontrolled defaults. In addition, bank leaders actively direct debt management companies, securities companies, or fund management companies to actively participate in the management and risk handling of business debts.

Banks need to propose to the State Bank to increase the foreign ownership ratio in the banking sector to 40%. At the same time, it is also allowed to increase the ownership ratio of foreign strategic investors to 25% or 30% of charter capital.

Commercial banks are studying effective options for acquiring, merging and restructuring weak banks.

5.2.3. Capital mobilization activities

Currently, the main source of capital for commercial banks is mainly mobilized capital. The research results show that the business performance of banks is still low. The income of the current banking system is still mainly from interest income from loans mobilized from customers. The estimation results show that the deposit-to-asset ratio (DTA) has a negative impact on the profitability of commercial banks, and some listed joint stock commercial banks are falling into a state of decreasing efficiency according to scale. From the above arguments, the study proposes specific solutions such as:

First, build customer policies in capital mobilization activities.

*For business customers:


- Create favorable and easy conditions for businesses to open accounts, conduct cash transactions flexibly, satisfy all needs of organizations and businesses in payment activities for purchasing materials and goods for production and business activities.

- For deposits in payment deposit accounts and current deposit accounts, banks need to have appropriate incentive policies for businesses such as: reducing transfer fees, bank check opening fees, letter of credit opening fees for import and export purposes.... However, commercial banks will not pay interest on this activity, the interest revenue will be offset against the expenses for businesses but still create a more satisfied mentality for those businesses.

*For customers who are agencies and administrative units:

For agencies and administrative units such as the State Treasury, Social Insurance... are agencies that manage a large amount of money. In the coming time, the Bank needs to have good relationships, be ready to meet all cash requirements, and make payments to customers, which will attract a large amount of capital from this customer group.

*Customers from all walks of life:

To attract this particularly important source of capital, banks need to develop a plan to diversify flexible deposit products with different terms, with interest rates that ensure the interests of the bank and the depositor are consistent. It is necessary to diversify and create attractive promotions such as gifts, interest bonuses depending on the level of deposit, and prizes...

Commercial banks need to develop a plan to arrange working hours to make transactions more suitable for customers. If possible and under conditions, they can work on holidays and outside of office hours to attract a large number of customers who are busy during office hours to deposit and withdraw money. The Bank's activities are closer to people's lives, not only attracting capital for the bank, but also increasing the image and reputation of the bank itself among the people.


Second, information transparency and customer trust stability

Recently, some banks have encountered many difficulties in meeting payment requirements when customers have needs. The cause of these incidents is partly due to the fact that most customers do not trust the financial resources of the bank, leading to mass withdrawals due to customers' concerns about risks. Commercial banks, through mass media, promptly, accurately and widely announce information to their customers in order to increase their trust, satisfaction and level of customer engagement with the credit institution.

Third, commercial bank deposit management

To reduce the burden of liquidity, banks often do not allow early withdrawal of term deposits, except in special cases when customers have a prior agreement with the bank. Banks have been racing with interest rates to attract customers to deposit money, the race seems to never end. Therefore, to mobilize capital effectively, it is necessary to have flexible policies, synchronous between marketing activities, interest rates, diversifying service portfolio and other promotion policies related to the relationship between banks and customers. Implement systematic research on each target group or each customer about motivation, habits and business activities, consumption habits to satisfy customer needs to the maximum. Optimal balance between deposit mobilization activities and credit lending activities, there must be mutual harmony between them.

5.2.4. Cost to revenue ratio

Deploy in depth and focus modern software with electronic banking functions (payment cards, online payments). Commercial banks need to research and develop many value-added products for customers, effectively apply new generation software invested in by many international banks. In addition, it is necessary to proactively train and develop human resources so that they can master new technologies and improve system operation efficiency and work performance.

Commercial banks should cooperate and build reputable and experienced strategic partners to support the development and exploitation of each other's technology infrastructure to reduce investment costs, management costs and improve the efficiency of using existing infrastructure.


especially improving the efficiency of electronic banking services towards modern banking in the shortest time.

Continue to promote the process of technological modernization, at the same time, it is necessary to have an effective technology exploitation policy through the development of products and product groups based on high technology to enhance the competitiveness of products and services, create diversity in product choices and increase cross-selling for customers. At the same time, the development of diversified products and services will also contribute to dispersing and limiting risks in the operation process.

Focus on product and service quality management, diversify modern banking services to best serve the consumption trends and changing needs of customers. Research and deploy the application of new modern technologies such as contactless cards, multi-function cards, QR codes, Tokenization.

Improve the effectiveness of supervision, ensure security, safety and reliability of banks for electronic payment systems and card payments; supervise electronic payment systems according to international supervision principles, ensure payment systems operate safely and effectively.

Continue to build, develop and perfect payment infrastructure and technology towards using modern, friendly, safe and effective technologies.

5.2.5. Diversifying banking activities

Research shows that diversification of activities increases the efficiency of banks' operations, the level of contribution is not equal to interest income but it is also an important part of income because of low risk. When banks focus on promoting diversification of activities such as payment services: card services, capital, high-tech products interacting with banks via the Internet, smartphones. Some proposed solutions here are as follows:

Enhance the role of developing non-credit services, most importantly the senior leaders of the bank. Build a separate set of regulations, separate products for non-credit services, analyze and evaluate the effectiveness of each type of service, product from many perspectives such as revenue, cost, risk.


Set out a vision for developing non-credit services in the medium and long term: Based on actual needs, research and analyze current needs and future trends to plan business strategies, thereby specifying solutions for each stage based on the characteristics and strengths of each branch in each specific location.

Existing products and services need to be diversified with new, modern features applying technology to easily and quickly perform services such as cards, payments, money transfers, foreign exchange, deposits, and credit.

Accelerate and upgrade information technology systems and infrastructure to ensure customer transactions are fast, safe, and uninterrupted, creating a foundation for developing other high-quality, technologically advanced products and services.

5.2.6. Economic growth

The problem of the government and the State Bank of Vietnam now is to focus on restructuring weak banks and improving the operational efficiency of VAMC. Strengthening supervision and inspection of credit institutions, correcting violations of the law, market manipulation, and strictly handling violations to ensure the safety of the banking system.

The Government needs to implement solutions to stabilize the macro economy, create an environment and driving force for economic development, promote economic restructuring associated with growth model innovation, improve productivity and quality of human resources, and promote scientific and technological factors to promote economic growth.

Develop supporting industries, high-tech industries, industries serving agricultural development... Promote the development of small-scale handicraft industries in craft villages towards high quality, promote the development of each industry, key products, each market, each export partner, review and control the import of domestically produced goods. Remove difficulties in administrative procedures for businesses.

5.2.7. Inflation

There needs to be a mechanism to control interest rates at a reasonable level in a proactive and positive manner to curb inflation, curb credit growth, and increase the value of the VND compared to other currencies.


foreign exchange by closely combining monetary and fiscal policies.

Boost exports, control imports, increase foreign exchange reserves, promote the development of capital markets and stock markets, strengthen state budget management, cut down on incorrect, unregulated, and unnecessary spending. Effectively manage exchange rates and the currency market. Create conditions for businesses to easily access the capital market, strengthen state budget revenue and expenditure management, prevent revenue loss, and have a market price mechanism for essential goods and public services.

In addition, the Government needs to have a policy on foreign currency loans from commercial banks to import high-tech goods or things that cannot be produced domestically, closely monitor foreign currency loans abroad by economic entities, and implement measures to attract remittances and deposits from abroad.

Adjusting prices of basic goods and public services requires a reasonable roadmap regarding the timing of price increases and the level of price increases to stabilize market prices.

5.3. Limitations of the topic

- About the research model


This study is limited in the selection of independent variables affecting credit risk based on the synthesis of previous empirical studies in the world. Many variables were not selected such as exchange rates, corporate taxes, credit risks, interest rates, etc. due to insufficient data collection or data that is not public. Therefore, the independent variables in the study do not reflect all factors affecting business performance at Vietnamese commercial banks.

- About the research sample


The research sample includes 27 Vietnamese commercial banks. The research results may not accurately reflect the factors affecting the business performance of the entire Vietnamese commercial banking system. This limitation is because the author can only collect complete data from the Financial Reports of 27 commercial banks in 7 years, some banks are restructuring so the data is incomplete.

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