For Government and Relevant Ministries

Each appraiser saves a lot of time and effort, greatly affecting the

big to the success of a bank.

Currently, the technological level of banks and the appraisal technology of credit institutions in the region and the world have been very developed. Therefore, to improve the quality of project appraisal to match current requirements, modern technology and technical equipment must be focused on and innovated further.

It is necessary to implement electronic management right from the customer information management stage, this will significantly save time in information flow between the appraisal department and the customer department.

The reality of the appraisal work shows that besides the traditional software EXCEL, it can be seen that this software temporarily meets the needs, but there is a need for separate support software for each stage. Using specialized software will overcome the above difficulties. Such as management software, forecasting models according to different methods, multidimensional sensitivity analysis software... These software can be purchased from software companies or hired software companies to write their own programs suitable for the conditions applied at the bank.

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Banks need to regularly open IT training courses for staff to help them exploit the full potential of hardware and software.

Third, Improve the capacity of organization, management, and regular inspection and control of project appraisal work.

The organization and operation of the bank's operations need to be monitored, evaluated, and conducted regularly and continuously. Project appraisal is an important step to help improve the credit quality of the bank. Therefore, the appraisal work must be arranged and organized with strict direction, with regulations and procedures implemented comprehensively and synchronously with the procedures of other operations to form a comprehensive strategic solution in the management and operation of the bank's operations. To do this well, the Bank needs to implement the following measures:

Regularly review the business processes currently applied at the Bank. Arrange the appraisal department to be relatively independent from the credit department. This will ensure the quality of appraisal work in a comprehensive and strict manner in many aspects. The current situation is that a credit officer still has to undertake the entire appraisal process and then submit it to the superior, so errors are inevitable due to the professional level and ability of each officer. To overcome this, there needs to be close coordination between each person in the department and between departments, from which the task can be carried out conveniently, quickly and safely.

Banks need to closely follow reality, based on the current situation of businesses that have credit relationships with the Bank, in order to build a separate appraisal process suitable for each loan customer.

Based on the appraisal results, strengthen the inspection and supervision of the disbursement process, debt collection, management and use of loan collateral, and assets formed from loan capital to take timely measures. Such management organization will help the Bank inspect the project's operations after it comes into operation, find out difficulties and obstacles in the project implementation process, thereby drawing practical experience to improve the quality of appraisal work in lending, ensuring that loans are used for the right purposes and effectively.

Banks must regularly summarize practices and strengthen inspection and control.

Internal control to draw lessons to better serve the appraisal work.

Fourth, Promote the bank's advisory role with investors

In the context of international economic integration, Vietnamese enterprises face many difficulties in production and business activities. On the one hand, they must innovate technological equipment to produce high-quality products, on the other hand, they must research the consumer market to compete with competitors. Therefore, the bank's advisory role for investors is extremely important. During the loan appraisal process, banks can detect unexpected risks that the project faces, thereby providing financial solutions to overcome those difficulties. Banks can perform their advisory role for investors.

Investing in aspects such as: helping investors build a project, choosing product production, calculating debt repayment sources for the project; helping investors calculate economic efficiency based on revenue and profit, and at the same time detecting risks that investors encounter, thereby providing solutions to ensure the project operates effectively.

Fifth, Implement well the loan guarantee regulations.

When analyzing loan security conditions, appraisers must consider the safest source of bank debt repayment, the most basic of which is the project's revenue. Therefore, the prerequisite when approving a loan is the feasibility and effectiveness of the project. However, in case the customer's debt repayment plan cannot be implemented, the collateral is the economic and legal basis for the bank to be able to make loan investments. Currently, the loan security measures applied are: unsecured loans; loans secured by customer assets: Guarantee by third party assets; security by assets formed from loan capital. Depending on the financial capacity and effectiveness of the project, the bank applies the above types of loan security. Regarding the issue of collateral, it is necessary to pay attention to the following contents:

The collateral must fully meet the legal and economic conditions according to current regulations, ensuring that there are no disputes over the collateral. When implementing this content, the bank must require the customer to confirm in writing that the property is currently not in dispute and take responsibility for its commitment.

When appraising collateral, credit appraisers need to carefully review the documents and information provided by the customer. In addition, they need to conduct a physical survey of each asset to accurately determine the ownership of the asset and the value of the collateral to prevent and avoid fraud and falsification of documents.

To avoid risks, the value of collateral assets must be periodically re-evaluated at least every 6 months and immediately after major fluctuations in asset value on the market.

Based on the re-evaluation of collateral, the appraiser requests the customer to add collateral or reduce the corresponding outstanding debt accordingly and establish an additional security contract according to regulations.

Sixth, Select appropriate customers and loan projects to improve

banking performance

Customers are the ones who decide the existence and development of the bank. When lending to customers, the bank must ensure that the credit principle is to only select customers with stable, healthy and reputable financial status. However, in reality, to properly implement this principle, lending and expanding credit relations encounter many difficulties because not all customers who have credit relations with the bank have good business activities. This requires VCB to build a reasonable customer policy, both maintaining its reputation with customers and ensuring capital safety in business.

Customers can be classified into three groups:

 Customers with good business situation, healthy financial potential, regular credit relationship with the bank and good performance in repaying principal and interest regularly. With this type of customer, the bank should strengthen the relationship and create favorable conditions for borrowing capital.

 Customers with unhealthy financial and business situations, always having overdue debts and bad debts. Banks should terminate and absolutely not have credit relationships with this type of customer.

 The customer previously had a good relationship with the bank, with a healthy financial situation. But is currently facing difficulties and risks in production and business. With this type of customer, when deciding to lend, the bank must be cautious, and must have strict legal constraints during the investment project implementation process to avoid possible risks.

In short, the selection of customers and investment projects to ensure the success of the project

To achieve high project appraisal results, VCB needs to take the following measures:

 Maintain relationships with traditional customers, create and exploit new customers with high reliability and reputation to have safe and effective projects.

 Focus on feasible and highly effective projects to minimize risks

for bank

Strictly evaluate and classify customers, from which there are lending policies for each type of customer. Create favorable conditions and have preferential policies for customers who have long-term relationships and reputation with the bank. For first-time borrowers, it is necessary to carefully consider and evaluate the loan project, strictly implement the regulations on loan guarantees.

3.3. SOME RECOMMENDATIONS

3.3.1. For the State Bank

The State Bank needs to issue a joint circular to guide the procedures for handling mortgaged assets and loans of credit institutions. It is recommended that the State compensate or write off debts for banks with overdue debts due to objective reasons, and identify and provide sufficient capital for commercial banks.

Make early decisions on establishing risk compensation funds for organizations

Credit actively addresses problem loans.

The State Bank needs to further improve the quality of credit centers to help banks grasp information about economic organizations accurately and promptly. Enhance the role of coordination and proactiveness in collecting information from sources, thereby supporting the provision of information for more effective appraisal activities . The State Bank should regulate credit limits in accordance with the capacity of each commercial bank.

The State Bank and state-owned commercial banks need to create more favorable conditions for the operation of the interbank market, increasing the ability to meet liquidity and credit requirements for banks.

The State Bank needs to do a better job of bank inspection to minimize possible mistakes in banks.

3.3.2. For the Government and relevant Ministries

The Government and ministries need to have the right policies, have a long-term vision, and avoid changing many legal documents and policies. Ministries and sectors need to build a system of economic and technical indicators and norms for the sectors under their management.

For state-owned enterprises, before making an investment decision, the total investment capital of the project must be approved by the competent authority. It is recommended that competent authorities calculate the total investment capital objectively and accurately when approving it.

In addition, the State needs to direct enterprises to strictly implement the accounting, statistics and reporting regimes in accordance with regulations, and to establish specialized companies for mortgage asset valuation to avoid errors in the valuation of mortgage assets in order to best serve the appraisal work, thereby limiting risks to banking operations.

3.3.2.1. Macroeconomic stability needs to be maintained.

According to the Government's assessment in the opening session of the 7th National Assembly on May 20, 2014, the macro economy in the first months of 2014 tended to be more stable than previous years, the major balances of the economy were basically guaranteed. Interest rates continued to decrease; Exchange rates were maintained stable.

However, according to the Government's assessment, the economic and social situation still faces many difficulties. Challenges contain many risks. The macro economy is not yet truly stable. Credit growth is low, bad debt handling is slow, and the mechanism and policy for managing collateral assets still have many obstacles and shortcomings. On the other hand, many mechanisms and policies to remove difficulties for businesses are slow to come into effect, such as housing credit support packages for low-income people, interest rate support for shrimp, pangasius, coffee tree replanting, etc.; the real estate market recovers slowly; the investment environment still has many shortcomings; equitization of state-owned enterprises and divestment of non-core investments still have many obstacles and shortcomings.

Above is the macro panorama of the country. If the macroeconomic weaknesses are not soon overcome, it will greatly affect the credit work in general and the investment credit of the Joint Stock Commercial Bank for Foreign Trade in particular. Each

Once the investment credit work encounters many obstacles, it is inevitable that the implementation of the appraisal work for investment project loans will also encounter many difficulties due to the unstable macro economy, the input factors of the project will inevitably have many large fluctuations. Therefore, to improve the quality of appraisal with the solutions proposed by the thesis, we cannot pay attention to the issue of maintaining and stabilizing the macro economy. This is the responsibility of the entire political system, first of all the responsibility of the Government. The important solution to ensure macroeconomic stability is to focus on the flexible use of monetary policy and fiscal policy along with other policies, promptly following the developments of the domestic and foreign economic situation.

Strengthen training and retraining of appraisal staff.

loan from the banking system

This is a decisive condition for implementing solutions to enhance the appraisal of loans for investment projects at VCB. Ultimately, the quality of appraisal depends mainly on the human factor. The staff doing the appraisal of loans for investment projects with extensive knowledge of economic and financial activities, construction investment activities, investment credit activities, and having clear professional ethics will be a decisive factor for the quality of appraisal of loans for investment projects.

In fact, through the results of the appraisal work for loans to investment projects at VCB in the past, it shows that, besides a number of officers assigned to do appraisal work who are qualified, experienced, and sharp in the process of analyzing and evaluating investment projects, there is a large number of officers doing appraisal work who have not received basic training in appraisal procedures and mainly rely on experience accumulated through credit activities. With this situation, it has more or less limited the appraisal work for loans to investment projects at VCB in the past.

To be able to implement the solutions proposed by the thesis for the work

appraisal of loans for investment projects at Vietnam Joint Stock Commercial Bank for Foreign Trade,

requires training and retraining of the bank's appraisal team. This is both the responsibility of the State Bank and VCB.

The State Bank needs to organize training programs, workshops, and experience exchanges across the industry to enhance cooperation among commercial banks, while improving the professional qualifications of the appraisal staff. The State Bank can utilize the network of universities, colleges, and research institutes to compile teaching materials, provide systematic training on appraisal operations, and organize training courses for appraisal staff not only for the state-owned commercial bank system but also for the commercial bank system. Along with opening long-term training courses, it is necessary to periodically organize short-term training courses to disseminate the experiences of those who have worked in appraisal for many years to the new team assigned to do appraisal work.

For VCB, it is responsible for reviewing the appraisal team, classifying their qualifications to have a training and development plan. At the same time, along with training and development, it is necessary to research and develop a material regime and a responsibility regime for appraisal workers.

3.3.2.2. Information technology development

Credit officers conduct appraisals based on the information collected. Thus, appraisal results depend on the quality of information, and complete and accurate information is a necessary condition for good appraisal results. Two issues of concern today are the source of information and the quality of information. Information can be collected from many sources:

- Information from the borrowers themselves. Any customer applying for a loan must be responsible for providing information as required by the bank. That is the loan project, financial reports and other necessary documents. This source of information is very important but it is difficult to determine its reliability, because customers who want to borrow capital always present the good aspects of the project and are often subjective and one-sided. The general mentality is not to want to disclose the actual financial situation of their unit. In this case,

Credit officers often have to use professional experience and rely on long-term business relationships and creditworthiness to assess the quality of information.

- Information collected from competent authorities. Because before submitting the project for loan, these projects have gone through the appraisal step of competent authorities to sign and approve the project. This is also a basis for credit officers to be more confident about the feasibility of the project.

- Information from credit information centers and risk prevention centers are also reliable sources, however, these sources of information are not updated and diverse.

In addition, there are other sources of information such as customers of the borrower, from other banks with which they have had previous relationships. After collecting information, an important issue for credit officers is how to process that information to both save time and achieve high results. To do this, it is necessary to analyze, evaluate, and store necessary information regularly and scientifically. The important tool to perform this task is the computer system. Therefore, investing in computer systems and implementing network connections from the Head Office to the units within the bank is extremely necessary. This is also an important condition to implement the solutions proposed by the thesis.

3.3.3. Recommendations to the Investor

The investor must be responsible for strictly complying with the construction and project establishment in accordance with the provisions of Circular No. 09/BKH/VPTĐ of the Ministry of Planning and Investment dated September 21, 1996 on project construction and appraisal. The investor must provide information that ensures honesty, and is responsible for the information provided as a basis for appraisal.

Investors should voluntarily cooperate with bank credit officers, providing honest information so that appraisal officers have a complete source of information, helping them analyze and evaluate the financial capacity of the project more accurately. In addition, investors of enterprises also need to improve the level of investment project appraisal based on thorough research on

market, technology, total investment capital, funding sources, financial indicators... so that credit officers can conduct appraisal work conveniently and easily.

Enterprises increase their own capital accumulation, constantly improve their professional qualifications and management skills, and apply advanced technology suitable to the domestic production environment and level.

Businesses must have flexible operating methods to adapt.

quickly to changes in economic and legal environment

CONCLUSION OF CHAPTER 3

In chapter 3, the researcher presented the orientation for medium and long-term credit development, orientation for improving appraisal of investment project loans, solutions to improve appraisal of investment project loans at VCB, conditions for implementing solutions and some recommendations. Specifically, the thesis proposed 9 solutions, 2 conditions for implementing solutions and 3 recommendations (to the State Bank, to the Government and related Ministries/sectors, to investors).

The most important content of chapter 3 is the solution section, in which the thesis especially focuses on 2 important solutions:

- Develop and deploy project appraisal models and financial indicators for industries.

- Perfecting the method of determining financial discount rate in loan appraisal for investment projects.

The purpose of the solution to build and deploy a project appraisal model and a system of financial indicators for industries is: Standardize the steps to create a spreadsheet for financial project appraisal for the entire system, ensuring that the parameters for appraisal have the same basis and calculation method. Build a database as a system of financial indicators for industries from the appraisal results of all projects funded by VCB loans to serve the appraisal information of new projects. This system of indicators has a unified basis and calculation method, so it can be used for reference, comparison and evaluation of new projects.

One of the most important components to calculate these indicators is the Financial Discount Rate or discount rate used to calculate NPV and IRR. One of the most commonly used methods today is to use the weighted average cost of capital (WACC) as the discount rate. However, the calculation of WACC at commercial banks in general and at VCB is currently quite simple, difficult to apply to projects with complex capital structures. That is why NCS offers a solution to perfect the method of determining WACC in loan appraisal for investment projects.

CONCLUDE

For any commercial bank, safety and profitability are the top goals in business operations. That is also the motto for the bank's credit activities. This can only be achieved when the bank seriously and effectively implements lending in general and lending for investment projects in particular. It can be said that appraisal of investment project loans is an effective tool to help banks minimize risks and improve the quality of credit activities. Therefore, perfecting investment project lending activities at commercial banks is an inevitable requirement for banks in the context of competition and deep international economic integration as today.

In recent times, credit activities of commercial banks have had many advantages, namely: the investment environment has been improved, legal barriers in banking activities have been gradually removed, the economy is showing signs of recovery from the impact of the economic crisis. However, there are still many risks of instability in the banking system, such as bad debt, over-standard lending and some loosening...

Entering the period of 2014-2020, VCB's policy is to increase credit lending activities in the context of the domestic and foreign economic situation, although showing signs of recovery, is not yet stable. Many unfavorable factors for VCB's lending activities pose many potential credit risks, and the risk of insecurity for loan capital is inevitable. In such a context, VCB's policy is that credit growth must go hand in hand with improving appraisal work. Improving appraisal work for loans for investment projects means increasing appraisal solutions to contribute to the good implementation of appraisal work for loans for investment projects.

On the basis of clarifying the basic contents of investment project theory and investment project loan appraisal of commercial banks, the viewpoints, principles and factors affecting the investment project loan appraisal of commercial banks are systematically summarized in the thesis.

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