Quickly and effectively reduce interest rates, in line with macroeconomic developments, gradually forming an interest rate curve, effectively supporting the goal of stabilizing exchange rates and the foreign exchange market.
Solutions to establish monetary market discipline are strictly implemented on the basis of monetary policy management closely linked with inspection and supervision work, ensuring strict implementation of the State Bank's policies, thereby helping the monetary policy transmission mechanism operate better.
4.2.1.2 Ensuring consistency and flexibility of credit policy
Following the direction of the National Assembly and the Government, the key tasks in Directive 01/CT-NHNN in 2014 on organizing the implementation of monetary policy and ensuring safe and effective banking operations, and closely monitoring macroeconomic and monetary developments, in the coming time, the State Bank will continue to operate monetary policy proactively and flexibly, closely coordinating with fiscal policy to control inflation, stabilize the macro economy and support economic growth at a reasonable level. To continue future successes, credit policies need to be flexible to create conditions for credit institutions to expand credit in a safe and effective manner, providing sufficient capital for the economy. Based on close monitoring of credit growth of each credit institution and the entire system, the State Bank of Vietnam considers adjusting growth targets for a number of credit institutions, directing credit institutions to continue implementing solutions to remove difficulties in credit relations and interest rates with customers, promptly issuing and implementing credit policies for a number of industries and sectors to effectively expand credit.
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Focus on implementing credit solutions to strive to achieve the set credit targets, contributing to removing difficulties, promoting production and business development, continuing to implement programs linking bank credit with economic sector policies, shifting credit structure towards concentrating lending capital for priority sectors according to the Government's policy. Specifically: The State Bank needs to synchronously implement credit programs and policies for sectors and fields such as timely capital support for the Agricultural Restructuring Project; lending programs for linkage models in the agricultural production and consumption chain; credit policies for offshore fishing; loans for livestock and aquaculture; credit for shrimp and pangasius farmers; credit for business, export, and temporary storage of rice; reducing post-harvest losses in the agricultural and rural sectors, and coffee replanting policies; Promote the implementation of housing support loan programs according to Resolution No. 02/NQ-CP dated January 7, 2013 and Resolution No.
61/NQ-CP dated August 21, 2014 of the Government; encouraging enterprises to participate in agricultural production and rural development; Circular No. 25/2018/TT-NHNN dated October 24, 2018 on amending and supplementing a number of articles of Circular No. 10/2015/TT-NHNN dated July 22, 2015 of the Governor of the State Bank of Vietnam guiding the implementation of a number of contents of Decree No. 55/2015/ND-CP dated June 9, 2015 of the Government on credit policies for agricultural and rural development...
Continue to further promote the restructuring of the credit institution system and bad debt settlement to improve the operations of credit institutions and ensure system safety.
4.2.2 Solution groups of commercial banks
4.2.2.1 Meet the requirements of completeness, transparency of information systems and technology modernization
Firstly, commercial banks should invest in upgrading modern banking technology such as: Internet Banking, Mobile Banking and ongoing projects such as Kondor, ERP and applying a synchronous transaction management system from Front Office, Middle Office and Back Office. Continue to upgrade, systematize, and improve processes in operations to maintain and further improve the quality of services as well as diversify products such as: CMR, ECM, Visa, Anti Money Laundering... This modern technology has brought customers satisfaction and trust in good quality banking services, fast transaction time, safety and security.
From a management perspective, thanks to new technology, management in banks will be tighter, more effective, and risk will be better minimized.
- Should focus on training and advanced training for bank staff on information technology. Because this is the decisive factor in the efficiency of exploiting the features of technology of commercial banks. At the same time, build a manual for using system software and applications in products for customers to staff throughout the system.
Second, it is necessary to innovate the reporting information system, exploiting existing data on the system of commercial banks. Build a reporting information system, management tools to declare and extract reporting data in a timely manner to serve credit management and control credit limits by industry and sector. In order to make the right lending decisions, handle debt collection in a timely manner, and reduce losses in credit risks. Credit officers must regularly grasp accurately,
timely and complete information about borrowers. This is a very complicated task but plays an important role in improving credit quality. The solution that needs to be focused on is:
Improve the system of indicators and methods of customer assessment through an internal rating system according to standards and practices suitable for customer interests, and at the same time build and develop a credit information system to warn and support credit review work to improve the quality of credit activities.
Implement well the regulations of the State Bank on credit information work from both perspectives:
+ Provide the CIC department of the State Bank with complete credit information about customers with credit relationships, including information about new customer profiles establishing credit relationships, information during the bank credit granting process, information about customers' production and business activities periodically or suddenly.
+ Effectively and regularly exploit information sources from the State Bank's CIC to serve credit work for customers having relationships with the bank, especially carefully reviewing information about new customers establishing credit relationships.
- Credit officers are the ones who regularly approach customers. Therefore, these officers need to grasp information about customers from the stage of researching the customer's business market to customer research, mainly to investigating and appraising loan projects, grasping information in the process of using loan capital, product consumption, and debt repayment sources. It is possible to conduct direct interviews with customers, investigate at the customer's place of production and business activities through cross-information (from customers of customers), management agencies (departments, tax agencies) and mass media, even the customer's competitors.
In short, it is necessary to consider the application of information technology and information processing as a key factor, supporting all business development activities. Building a synchronous, modern, secure, unified, integrated, and highly stable information technology system.
4.2.2.2 Improve discipline in credit process compliance
A/ Improve appraisal quality and implement strict credit procedures
Credit risks originate from the results of careless and inaccurate credit analysis and appraisal by appraisal officers and non-compliance with lending regulations, leading to wrong lending decisions. Therefore, to limit credit risks with the highest efficiency and least loss, appraisal officers are required to:
Customer analysis and assessment work is good, accurately reflecting the nature of the customer's financial situation and operations, and complying with lending regulations.
To address these requirements, banks need to analyze and accurately assess the overall risk of customers by determining credit limits periodically every 6 months or 1 year. This work helps banks have an overall view of the financial situation, business quality and evaluate the development prospects of customers, thereby identifying customer risks, setting a reasonable credit limit, within the customer's debt limit for the system of commercial banks.
To effectively implement this requirement, it is necessary to focus on quantitative analysis, quantifying the level of risk of customers through evaluating data, and at the same time combining with qualitative analysis (analysis of the macro, micro environment, internal environment of the enterprise, history of credit relations with the bank...) to recognize potential risks and the ability to control and limit risks for the bank. This system needs to be regularly adjusted to suit the reality and economic conditions of Vietnam, and should not be rigidly based on calculations of countries with dissimilar conditions. Through the use of quantitative models, the level of risk will be reasonably quantified, reflecting more clearly the level of risk of expected loans and developing measures to prevent and limit risks before granting credit to customers.
It is necessary to closely coordinate credit conditions in credit contracts such as interest rates, equity participation ratio, collaterals... to ensure that the benefits received must be commensurate with the level of risk. Customers with lower credit ratings need to increase the equity participation ratio, and select collaterals with high liquidity... The stricter the legal conditions in credit contracts are, the more they ensure the rights of commercial banks when risks occur, while at the same time increasing the responsibility of customers in using loans and limiting risks.
On the other hand, based on the existing lending process, all credit officers are required to strictly follow the procedures when processing credit applications for customers. However, in reality, in order to process applications quickly and create favorable conditions for customers, some credit officers have performed a cursory assessment, processing the loan first and then completing the credit application later. This leads to the fact that credit officers will not see the potential risks of the loan and are at risk of making mistakes that will affect the customer.
to credit quality. And in the process of completing the credit file, if the CBTD discovers inappropriate or unqualified places to grant credit, the possibility of recovering the loan amount is very difficult, the risk of causing loss of capital for the bank is very high. Therefore, it is required that CBTD when resolving loans must strictly implement the current lending process of Vietnamese commercial banks to minimize possible credit risks.
B/ Improve the quality of credit inspection and supervision
In fact, the cause of credit risks is not all due to ineffective loan plans or customers using loans for the wrong purposes, but also due to CBTD not performing strict and regular loan monitoring and supervision, leading to the bank not being able to control cash flow after customers finish their business plans, as well as not promptly detecting whether customers can use this source of money to invest in other ineffective or non-transparent purposes... Therefore, to prevent credit risks from occurring, it is recommended that CBTD must perform strict and regular loan monitoring and supervision. Specifically:
• When disbursing, CBTD must consider the suitability between the loan target and the actual use, disbursement requirements and the structure of expenses in the customer's capital needs; ensure that the disbursement must have full and valid supporting documents. Limit disbursement in cash except for special business cases such as paying employee salaries, paying for goods to people or paying for small businesses... Encourage customers to receive loan debt by transfer to make it easier to control the purpose of using the loan.
• There must be a periodic plan to check the actual performance of each borrower (depending on the internal rating results, the customer's reputation in the credit relationship...).
• Conducting checks on customers' loan usage must be based on actual data and valid original documents.
• The minutes of the loan use inspection must fully show information about the financial situation, production and business situation, inventory, customer debts, current status and value of collateral at the time of inspection... In order to accurately assess the effectiveness of the loan use. At the same time, promptly detect possible risks, thereby taking timely preventive and handling measures, avoiding the situation of performing inspection of loan use purposes in a perfunctory and perfunctory manner.
• It is necessary to promptly analyze and evaluate signs of RRTD such as when borrowers are often late in paying interest and principal, changes in the business environment, market conditions that negatively affect business plans... to have proactive and timely handling measures when RRTD is at risk of occurring.
• It is necessary to consult CIC regularly to promptly grasp the credit relationship situation of customers, thereby having timely preventive and handling measures when credit risks arise.
4.2.2.3 Improving the effectiveness of the internal control system of commercial banks
The issuance of Decision No. 36/2006/QD-NHNN and Decision No. 37/2006/QD-NHNN in 2006 and then the issuance of Circular No. 44/2011/TT-NHNN in 2011 replacing the above two Decisions has revealed clear progress with the separation and clear distinction between the internal control function and the internal audit function of credit institutions, demonstrating the trend of integration with international practices on the internal control system. However, in the coming time, in order for the internal control and internal audit system to truly promote its effectiveness in the operations of credit institutions, the State Bank and other functional management agencies need to continue to amend, supplement, and issue more detailed guidance documents on the contents related to the internal control and internal audit systems in a risk-oriented manner to meet the needs of credit institutions. On that basis, commercial banks have more favorable conditions in implementing internal control work to improve credit management efficiency.
To improve the effectiveness of the internal control system, Vietnamese commercial banks need to focus on the following issues:
Creating a control environment that focuses on business ethics
Since the control environment is the foundation of the internal control system, the bank's Board of Directors needs to really appreciate the role of the internal control system by establishing a full monitoring mechanism for all bank operations, creating a comprehensive control culture in the organization, in which, paying special attention to promoting the issue of business ethics when the frequency of occurrence and the level of damage of business ethics violations in the banking sector are increasing in Vietnam.
Adjust risk assessment and response processes in a timely manner
To ensure the internal control system operates effectively, commercial banks need to set control objectives, not neglecting to fully assess risks for short-term benefits such as high profitability of some loans or investments.
Continuously review operations. Banking is a special business sector, extremely sensitive to fluctuations in the economic environment and facing many types of risks such as financial risks, operational risks, business market risks and other unusual risks with increasingly complex nature and levels. This requires Vietnamese commercial banks to adjust their risk assessment processes when there are changes in the business environment to promptly respond to new risks arising in the bank's business operations.
Strengthening supervision and improving the effectiveness of internal audit
Commercial banks need to focus on building a regular and continuous monitoring process combined with periodic monitoring conducted by internal audit to provide independent and objective assessments of the internal control system. Internal auditors need to be trained in specific and specialized banking operations, and participate in testing and checking the completeness of control procedures at all stages of the bank's operational process. All findings and recommendations of internal audit need to be urged and closely monitored by the Board of Directors to thoroughly handle the cases, avoiding the serious and unfortunate consequences that have occurred in a number of Vietnamese commercial banks in the recent period. Specifically:
For the effectiveness of the internal control system : issue policies and procedures to help operational directives be implemented; Regularly review documents and policies to update, edit, and supplement in a timely manner to be appropriate and comply with legal regulations and business practices.
For each on-site inspection: The Head of the KSNB team and team leaders are responsible for supervising the inspection members, ensuring the inspection follows the correct procedure.
Strengthening periodic and ad hoc internal control work. The purpose is to promptly detect and prevent negative manifestations and possible risks to ensure the entire system operates safely, effectively, and in compliance with State and bank regulations. Through this, inspection officers can also learn from each other's experiences to improve their professional skills and expertise.
Developing a development strategy for the internal control department. Commercial banks today have a relatively consensus view that the internal control department will operate most effectively when it operates within a clear strategic framework. To develop an appropriate strategic framework, the internal control department is required to determine the expectations of the Board of Directors and the Executive Board about the value that internal control will bring.
bring to the bank. On that basis, describe the tasks of internal control through charter, regulations, control regulations and finally build an official strategy for the internal control department. The strategic framework that commercial banks outline often focuses on a number of key factors, expressed through:
Determine human resource needs for the Internal Audit department for the present and for the next few years.
Building criteria for evaluating the performance of internal control: Traditional indicators to evaluate the performance of these activities such as the number of minutes, published conclusions, the number of violations detected, or the number of recommendations in each inspection... are still qualitative. Therefore, the results are still limited in directly measuring risk management, or enhancing compliance... Therefore, commercial banks have now actively built a series of criteria to evaluate the level of implementation in a scorecard that banks call KPIs.
Completing internal control processes and methods. Currently, internal control at many credit institutions, the development of complete inspection programs is still in the process of completion. At some commercial banks, internal control inspections are mainly focused on compliance, completeness of documents and documents, but not on assessing risks and appropriateness of the unit's control procedures. Therefore, completing internal control processes and methods that commercial banks have been implementing is to clearly define the position, authority, and responsibility of control officers and improve the quality of inspections.
4.2.2.4 Perfecting the customer scoring process combined with the credit risk management model according to Basel 2
i/ Current context of credit risk management of Vietnamese commercial banks
As we all know, banking is one of the areas that faces the most risks such as: credit risk, exchange rate, interest rate, liquidity, operational risk... All types of risks are closely related and interact with each other and can cause losses to the bank. Therefore, no bank can survive and develop for a long time without building an effective risk management system.
The implementation of Basel II in the context of the Vietnamese banking system having just gone through a difficult period and is in the process of restructuring, will help banks operate more safely and healthily due to enhanced risk management levels, proactive application of risk management solutions and internal credit ratings.