ICAAP Internal Capital Adequacy Assessment Framework of Vietnam Joint Stock Commercial Bank for Industry and Trade

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ICAAP Internal Capital Adequacy Assessment Framework of Vietnam Joint Stock Commercial Bank for Industry and Trade - 25
ICAAP Internal Capital Adequacy Assessment Framework of Vietnam Joint Stock Commercial Bank for Industry and Trade - 2
Solution to Complete Internal Capital Adequacy Assessment Framework According to Basel II at Vietnam Joint Stock Commercial Bank for Industry and Trade
Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015 zt2i3t4l5ee zt2a3gsnon-credit services, joint stock commercial bank zt2a3ge zc2o3n4t5e6n7ts At that time, the Branch had to set aside a provision for credit risks, which reduced the Branch's income. Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015 Unit: Billion VND 140 120 100 80 60 40 20 0 63.3 80.34 89.29 110.08 131.99 2011 2012 2013 2014 2015 Profit before tax (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) However, through chart 2.2, it can be seen that BIDV Tien Giang's profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project "Restructuring the system of credit institutions in the period 2011-2015" approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: "Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services". 2.2. Current status of non-credit service development at BIDV Tien Giang. 2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times. Along with the development of the Head Office, BIDV Tien Giang's products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,... 2.2.1.1. Payment services: In accordance with the Prime Minister's Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers' cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc. Chart 2.3. Net income from payment services in the period 2011-2015 Unit: Million VND 6000 5000 4000 3000 2000 1000 0 3922 4065 4720 5084 5324 2011 2012 2013 2014 2015 Net income from payment services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment. 2.2.1.2. Treasury services: BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giang's treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17]. Chart 2.4. Net income from treasury services in the period 2011-2015 Unit: Million VND 350 300 250 200 150 100 50 0 105 122 309 289 279 2011 2012 2013 2014 2015 Net income from treasury services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services. 2.2.1.3. Guarantee and trade finance services: BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance. Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015 Unit: Million VND 14000 12000 10000 8000 6000 4000 2000 0 5193 5695 2742 3420 8889 3992 11604 12206 5143 5312 2011 2012 2013 2014 2015 Net income from guarantee services Net income from Trade Finance (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Through chart 2.5, we can see that BIDV Tien Giang's income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giang's corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area. are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future. 2.2.1.4. Card and POS services: As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services. In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system. Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments. Chart 2.6. Net income from card services in the period 2011-2015 Unit: Million VND 3500 3000 2500 2000 1500 1000 500 0 687 1023 1547 2267 3104 2011 2012 2013 2014 2015 Net income from card services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Through chart 2.6, it can be seen that BIDV Tien Giang's card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25]. Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area. Unit: Machine STT Bank name Number of ATMs Cumulative number of ATM cards POS machine 1 BIDV Tien Giang 23 97,095 22 2 BIDV My Tho 7 21,325 0 3 Agribank Tien Giang 29 115,743 77 4 Vietinbank Tien Giang 16 100,052 54 5 Dong A Tien Giang 26 97,536 11 6 Sacombank Tien Giang 24 88,513 27 7 Vietcombank Tien Giang 15 61,607 96 8 Vietinbank - Tay Tien Giang Branch 6 46,042 38 (Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21]) Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6). div.maincontent .content_head3 { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: bold; text-decoration: none; font-size: 14pt; } div.maincontent .p { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; margin:0pt; } div.maincontent p { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; margin:0pt; } div.maincontent .s1 { color: black; font-family:"Courier New", monospace; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; } div.maincontent .s2 { color: black; font-family:"Times New Roman", serif; font-style: italic; font-weight: normal; 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Increasing capital mobilization from individual customers of commercial banks - Case study of Vietnam Joint Stock Commercial Bank for Investment and Development, Phu Tho Branch - 1

3. Interview questions

Question 1: Please evaluate the capital sources and access to capital that VietinBank is using:

……………………………………………………………………………………………………………………………………………………………………………………

Question 2: Suggest you the use of capital according to risk principles at VietinBank

Question 3: Please evaluate the limitations in the current method of calculating capital adequacy ratio that VietinBank is using:

Question 4: Please evaluate the following control work at VietinBank:

Question 5: In your opinion, what support does the State Bank need to provide to commercial banks in building/implementing ICAAP?

Question 6: In your opinion, what is the difference between the implementation of ICAAP at VietinBank and the requirements of Basel II?

Question 7: What are your recommendations to improve the efficiency of capital safety management at VietinBank to meet the requirements of Basel II?

Question 8: Your recommendations to the management agency to improve the capital safety management mechanism according to Basel II standards:

Thank you for your cooperation./.

Appendix 3:

SURVEYEE INFORMATION

STT

Full name	Position
1	Nguyen Thi Huong	Deputy Director of Block
2	Nguyen Huy Quang	Deputy Director of Block
3	Pham Bao Khue	Head of Department
4	Chu Thi Thanh Tu	Head of Department
5	Tran Thi Thanh Mai	Deputy Head of Department
6	Duong Thanh Ha	Deputy Head of Department
7	Nguyen Huu Son	Deputy Head of Department
8	Tran Hung Son	Deputy Head of Department
9	Nguyen Thuy Linh	Deputy Head of Department
10	Ta Hai Yen	Deputy Head of Department
11	Vu Thu Thuy	Deputy Head of Department
12	Nguyen Bich Lien	Deputy Head of Department
13	Nguyen Huyen Trang	Deputy Head of Department
14	Nguyen Manh Khoi	Deputy Head of Department
15	Nguyen Hoai Nam	Deputy Head of Department
16	Le Mai Thai	Deputy Head of Department
17	Ta Hoang Ha	Deputy Head of Department
18	Ngo Thi Phuong Thao	Team Leader
19	Nguyen Kim Thoa	Team Leader
20	Nguyen Van Sam	Team Leader
21	Nguyen Hong Diep	Senior Specialist
22	Hoang Phuong Ngan	Senior Specialist
23	Vu Van Vong	Senior Specialist
24	Hoang Quang Minh	Senior Specialist
25	Nguyen Thi Le Mai	Senior Specialist
26	Chu Thi Ngoc Tu	Senior Specialist
27	Kim Thuy Tien	Senior Specialist
28	At Viet Nga Market	Senior Specialist
29	Le Chi Trung	Senior Specialist
30	Tran Thi Thuy Linh	Chief Specialist
31	Nguyen Thi Cam Anh	Chief Specialist
32	Nguyen Thai Hanh Lien	Chief Specialist
33	Do Thi Phuong Thao	Chief Specialist
34	Nguyen The Anh	Chief Specialist
35	Tran Viet Anh	Chief Specialist

Pham Duy Anh	Chief Specialist
37	Khuc Van Quynh	Chief Specialist
38	Du Duc Tung	Chief Specialist
39	Hoang Nguyen Duc	Chief Specialist
40	Dao Manh Ha	Specialist
41	Trinh Khanh Ly	Specialist
42	Vu Manh Tien	Specialist
43	Nguyen Duc Long	Specialist
44	Tran Thi Thuy Dung	Specialist
45	Nguyen Phan Anh	Specialist
46	Vu Thanh Huong	Specialist
47	Duong Huong Giang	Specialist
48	Bui Kim Quy	Specialist
49	Pham Duy Lap	Specialist
50	Truong Thi Thanh Binh	Specialist

Appendix 4:

INTERVIEWEE INFORMATION

STT

Full name	Position
1	Nguyen Thi Huong	Deputy Director of Block
2	Nguyen Huy Quang	Deputy Director of Block
3	Pham Bao Khue	Head of Department
4	Chu Thi Thanh Tu	Head of Department
5	Tran Thi Thanh Mai	Deputy Head of Department
6	Duong Thanh Ha	Deputy Head of Department
7	Nguyen Huu Son	Deputy Head of Department
8	Tran Hung Son	Deputy Head of Department
9	Nguyen Thuy Linh	Deputy Head of Department
10	Ta Hai Yen	Deputy Head of Department

ICAAP Internal Capital Adequacy Assessment Framework of Vietnam Joint Stock Commercial Bank for Industry and Trade - 26

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