Improving the management efficiency of Vietnam Joint Stock Commercial Bank for Foreign Trade in the context of international economic integration

+ Organize a centralized accounting system, process online transactions throughout the system, and on that basis develop convenient products;

+ More complete, timely, and accurate accounting and statistical information has helped manage assets, liabilities, and credit risks more effectively.

f) For Contribution to the Economy

+ Vietcombank is always one of the 4 banks with the largest market share in the system, typically the credit market share reached about 9.2% and the capital mobilization market share accounted for 10.3% in 2020.

Maybe you are interested!

+ From 2015-2016, Vietcombank's total contribution to the State budget reached nearly 40,000 billion VND. For 6 consecutive years, Vietcombank has been the largest budget-paying bank in the country, affirming its business efficiency and great contributions as well as Vietcombank's influential role in the economy.

3.2.3.2. Main limitations and causes

According to the general assessment, Vietcombank faces many difficulties and challenges when approaching international standards, principles and practices on banking management. Indeed, Vietcombank's management work still has the following limitations:

a) Regarding the governance model, organization and management still reveal some weaknesses.

It can be assessed that the operating procedures at some commercial banks in general and at Vietcombank in particular do not fully meet the requirements of international governance practices. Vietcombank has currently implemented a vertical organizational structure, divided into specialized business blocks. However, the organizational structure and functions between departments, especially between the Head Office and branches, are still inconsistent and overlapping.

+ Firstly, in reality, the roles of the Board of Directors and the Executive Board are not really clearly separated. Therefore, the Board of Directors may fall into the situation of: either not being able to concentrate the main information flows about the bank's operations to build and check strategic goals and risk prevention decisions; or being too deeply involved in the daily activities of management.

+ Second, the bank's management and organization model is not yet complete and needs to be improved according to good international practices. There is still a situation where functional departments from the head office and branches are assigned according to their functions and divided according to administrative boundaries, without paying attention to assigning tasks according to customer groups and service types as per international practices. This is the biggest limitation in the management structure and development of new products for Vietcombank. This limits the ability to serve and meet customer needs.

+ Third, there is a lack of departments that link activities and decisions between departments and professional divisions, creating conditions for the Board of Directors and the Executive Board to comprehensively oversee operations and focus human and financial resources on strategic directions. In addition, the database on business environment analysis and forecasting, resource assessment and medium and long-term vision determination, which are basic management tools of modern banks, is still lacking, so in general, Vietcombank is still quite confused in planning long-term development strategies.

+ Fourth, the number of independent members of the Board of Directors is only one person. In the organization and operation of the Board of Directors, the new law only stipulates a minimum of 01 independent member of the Board of Directors in the structure of the Board of Directors of commercial banks. This number is modest when compared with the laws of other countries. In addition, Vietcombank also does not have a mechanism to check the independence of independent members of the Board of Directors after they are appointed.

+ The board of directors interferes too much in operations.

Although the law clearly stipulates the functions and tasks of the Board of Directors and the Executive Board (BOD), in reality, overlap, encroachment, and even dominance still occur, causing the decision-making system to be complex and opaque, and the separation between ownership and control of bank operations. The composition and structure of the Board of Directors are still inadequate, the relationship between the Board of Directors and the Executive Board is not very smooth, the role of the Board of Directors' committees/councils is unclear, and the responsibilities of the Board of Directors' members are unclear. The level of participation of the Board of Directors in operations, from passive participation to the final level of operations, still shows the level of intervention. The Board of Directors often

Interfering in management through direct or indirect requests from the Board of Directors. The boundary between directing, formulating and promulgating policies and guidelines and implementation is unclear, leading to a situation of "both beating the drum and blowing the whistle".

+ Influence of major shareholders

Founding shareholders and major shareholders often feel responsible for the survival of their bank, so they often give themselves absolute control, not only in matters related to strategy and direction but also in important decisions under the authority of the Board of Directors.

b) Internal management has not received due attention

Internal management of banks is a very urgent issue today, it is the premise to help banks operate well and proactively grasp fluctuations in the market. Internal management includes many related areas from human resource management, financial management to customer management, risk management, brand management, market management... In general, all activities within the internal scope related to the services that banks provide to customers. In countries, the role of internal management of banks is highly appreciated because banking is a sensitive business and often faces many risks, especially the issue of ensuring solvency and quality of services provided.

The Board of Directors and the Executive Board at Vietcombank generally recognize the important position and role of the internal management system. Vietcombank has developed processes and procedures to establish an effective control environment, issued operating regulations, and designed departments within the bank to clearly separate functions and tasks to ensure independent and effective operations and minimize conflicts of interest. At the same time, Vietcombank's internal management system has identified and assessed risks, including detecting and assessing all internal and external factors that have a negative impact on the achievement of the bank's goals. Any changes in policies, legal regulations, market developments, business goals, new products and services are promptly updated and captured.

However, in reality, the organization and operation of Vietcombank's internal management system still has many shortcomings such as:

+ The internal management system is not fully proactive in identifying and preventing risks, but often focuses on detecting and minimizing risks.

+ Risk management, identification, assessment and response functions in banking operations are still limited.

+ The implementation and application of legal and administrative regulations still face many difficulties.

+ At Vietcombank, there are still violations related to a number of officers and employees at the bank: the phenomenon of collusion, connection, and falsification of documents and papers for personal gain still exists and greatly affects the interests of customers as well as the reputation of the bank.

+ The framework of corporate culture standards and business ethics for managers and executives in banks has not been specifically defined. Although current laws stipulate standards and conditions for managers and executives in commercial banks to have "professional ethics", current legal regulations in general and at Vietcombank in particular have not specifically defined what "professional ethics" is.

With the above limitations, the main reasons are believed to be:

+ The bank's management information system is not good. Vietcombank has invested in management products for the bank, however, the habit of using information and thoroughly using the product's features to make management decisions is not high.

+ The management accounting system is not complete, cannot evaluate the effectiveness of each product and each business unit, so it cannot calculate the risks and profits of the bank;

+ Risk management solutions have been proposed, however, the application is still not completely thorough, therefore, it has not brought practical results for risk management.

c) Staff capacity and qualifications do not meet modern technology requirements.

Although Vietcombank has made great efforts to build a team of high-quality, industry-leading human resources, this is a common reality not only for Vietcombank but also for the entire banking industry. Most of the experiences and knowledge about management in general, and credit risk management in particular, are still rudimentary. Most of the management methods such as statistics, quantification, tools such as modeling, forecasting... using econometric parameters (VAR, alpha, beta, convexity, linearity...) have not been applied at any commercial bank. Commercial banks, including Vietcombank, are currently facing the challenge of brain drain and a serious shortage of highly qualified human resources. The high proportion of university-educated staff (from 40% to 70%) does not mean that their work capacity is sufficient to meet the requirements, because the training at university levels is still weak, and moreover, the bank itself does not have a policy of retraining and advanced training. While information technology is becoming increasingly important and is the driving force for the operation and development of banks, the number of qualified information technology staff ready to do so does not allow banks to develop, and even decreases due to the shift to IT and software companies with higher incomes. Meanwhile, there is a lack of incentive, motivation, attraction, and nurturing mechanisms for human resources. The author hereby summarizes some of the limitations of human resources at Vietcombank as follows:

+ Firstly, Vietcombank has not completed the process of building a strategy on human resource management, and human resource management activities are still far from best practices. The planning has not yet provided a master plan for the positions that need to build a successor team, and has not yet determined the scale and number of subjects that need to be planned appropriately at each position, unit and system to ensure the effectiveness and overall goals of the planning work, leading to many times during the operation process lacking management personnel and lacking people in charge of department operations.

+ The work of assigning targets and evaluating staff has not been implemented systematically. To comprehensively evaluate staff, most commercial banks are in the process of editing and perfecting a standard toolkit for employee evaluation, and Vietcombank is no exception.

+ Vertical connection between headquarters and branches has not met the expectations of the Board of Directors, two-way communication in the evaluation process still has limitations, difficulties in obtaining evaluation data, the human resource management information system is still lacking, there is no connection between human resource management and training.

+ Annually, bank staff also conduct staff evaluations, especially leadership evaluations. However, this is sometimes a formality, because the evaluation method is not really effective, and the evaluation results are basically for the purpose of keeping staff records.

+ All evaluation results through work, through tests, through evaluation from colleagues, superiors... are not yet synthesized, stored systematically and scientifically so that they can be exploited easily and immediately to comprehensively evaluate staff, as a basis for building plans to continue training and developing staff.

+ Personnel work is not really linked to staff evaluation work. In many cases, staff are appointed beyond their level and placed in positions that do not match their capacity.

The limitations in Vietcombank's human resources operations are mainly determined by the following reasons: facing the requirements for labor qualifications in the era of modern banking business and digital technology transformation, this is still considered the main reason leading to the reduction in the effectiveness of bank management activities. The qualifications and experience of the management team and senior managers still lack modern knowledge of banking management. Therefore, the requirement is to attract and train human resources to operate the Digital Banking Center. The new digital technology has actually reduced a part of Vietcombank's human resources, the labor force is less but requires higher expertise, both knowledgeable about banking finance and knowledgeable about technology. And Vietcombank's human resources problem is still in a state of having personnel who are knowledgeable about banking finance but not knowledgeable about technology and vice versa.

d) The technology equipped at Vietcombank has been innovated but has not yet fully met the management activities according to international practices.

In the previous stage of the banking industry, most commercial banks operated and managed their activities on decentralized, non-centralized systems. Data was not stored and processed to meet business management requirements. Even the most technologically advanced banks, including Vietcombank, still used independent systems to manage different operations.

Although Vietcombank has invested in a core banking system consisting of key components such as: Deposits, loans, ledgers, trade finance, treasury, cards, etc., the time to promote modern banking technology is still slow, the level of use is still low, and it still depends heavily on foreign partners providing solutions. Moreover, compared to the modern banking management model, the requirements for modern technology at Vietcombank have not actually met all the requirements, some software purchased from foreign suppliers have not yet conducted current risk assessments, and have not been maintained and upgraded by consultants and suppliers.

The main reasons identified for technological limitations are as follows:

Technology applied in digital banking often develops rapidly and is easily replaced by new technologies. And with high technology costs, it is necessary to regularly improve, maintain, upgrade systems, and replace technology to meet competition, which puts great pressure on banks, especially medium and small-sized banks. This is a challenge for Vietcombank's investment in technology for its digital transformation process and is also considered the main reason why Vietcombank's digital technology has not kept up with international practices.

In addition, the application of high technology also depends a lot on the qualifications of the staff and employees at the bank. The quality of human resources is not only about the level of banking expertise but also the knowledge and skills in operating and mastering advanced and modern technology. Therefore, banks face many difficulties in training and educating staff to master new technology. In addition, the pressure to retain high-quality human resources for a long time with the increasing wave of high-quality financial and banking human resources shifting.

e) Inspection, monitoring and control activities are not really effective.

+ According to regulations, the Board of Supervisors (BOS) is an independent unit with the function of supervising compliance with the provisions of law and the charter of the credit institution, responsible to the General Meeting of Shareholders, owners and capital contributors. However, the General Meeting of Shareholders only meets once a year, so the regular activities of the BOS are unstable without direction. At Vietcombank, solutions for general governance and risk management in particular have been proposed, but their application has not been thorough.

+ The main task of the Supervisory Board is to conduct internal audits, control and evaluate the bank's compliance with legal regulations. However, members of the bank's Supervisory Board are not allowed to participate in the bank's operations, so in reality, the control activities are only formalities, not properly assessing the nature of the monitoring activities when conducting the control. Sometimes, instead of representing the General Meeting of Shareholders, the Supervisory Board becomes an ally of the Board of Directors and the Executive Board.

+ The members of the Supervisory Board are often influenced by the Board of Directors, Chairman of the Board of Directors, and General Director of the bank, so the decisions made by the Supervisory Board do not reflect objectivity.

+ Risk management solutions have been proposed, but their application is not yet thorough.

+ One of the principles of commercial bank management is that the bank must be managed in a transparent manner, with the important decision-making role of the board of supervisors. However, during its operations at Vietcombank, the board of supervisors has not fully reported and disclosed information, and been transparent to the public and investors.

The limitations in inspection, supervision and control activities are mainly due to: In reality, Vietcombank has not implemented this regulation well and thoroughly, leading to violations that cause losses of bank assets. The cause of this shortcoming is mainly due to the lack of a control mechanism from the State Bank to ensure that commercial banks fully comply with legal regulations on internal control and internal audit activities, thereby minimizing operational risks for banks.

Improving the management efficiency of Vietnam Joint Stock Commercial Bank for Foreign Trade in the context of international economic integration - 15

Comment