Individual Customer Ranking at Bidv Quang Binh

If we consider the number of customers:

- Customers are most concentrated in BBB class (23.86%)

- Customers are least concentrated in class C (0.41%)

- Class D customers, customers with the highest risk, account for 5.38% of a total of 39 customers. These customers include customers previously handled by BIDV Quang Binh using the DPRR fund, customers with negative equity and business losses in the most recent fiscal year, customers with overdue debt of more than 360 days.

Table 2.14: Customer status by debt type

Class

Client		Outstanding Debt (million VND)
Quantity	Proportion	Absolute number	Proportion
AAA	53	7.31%	36,300	4.25%
AA	90	12.41%	122,360	14.34%
A	124	17.10%	124,265	14.56%
BBB	173	23.86%	236,521	27.72%
BB	106	14.62%	184,890	21.67%
B	80	11.03%	50,250	5.89%
CCC	29	4.00%	37,621	4.41%
CC	28	3.86%	25,654	3.01%
C	3	0.41%	9,379	1.10%
D	39	5.38%	25,960	3.04%
Total	725	100%	853,200	100.00%

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(Source: Internal audit performance report 2016 – BIDV

Quang Binh)

Total score:

Personal score = Score for personal criteria * 0.4 * Score for debt repayment criteria * 0.6

Based on the total score achieved multiplied by the weight to rank individual customers in ten descending levels from AAA to D, each rating level will have a corresponding risk assessment.

Table 2.15: Ranking of individual customers at BIDV Quang Binh

Client

Level assessment

Proportion

Quantity	Rating Points risk
8.11%	89	95-100	AAA
6.75%	74	90-94	AA	Low risk
26.98%	296	85-89	A
18.87%	207	80-84	BBB
18.14%	199	70-79	BB	Medium risk
9.85%	108	60-69	B
3.74%	41	50-59	CCC
4.56%	50	40-49	CC
2.73%	30	35-39	C	High risk
0.27%	3	<35	D

100% 1097 Total

(Source: Internal audit performance report 2016 – BIDV

Quang Binh)

The rating results for individual customers are an additional basis for customer assessment and lending decisions. Currently, BIDV is testing the results of individual customer scoring to apply policies in the credit granting process. At the same time, debt classification for individual customer loans is still applied according to Article 6 of Regulation 493/2005/QD-NHNN (debt classification according to loan age).

2.3.3 Decentralization of decision-making authority in credit activities

Based on the organization of the credit operation apparatus and the credit rating results for customers, according to specific instructions from the Head Office, Quang Binh Branch has implemented the decentralization of decision-making authority in credit operations. This is an important content of credit risk management. The decentralization of credit decision-making authority is assessed to be effective in credit risk management when

simultaneously meet the following criteria: unify the level of decision-making authority of all levels in credit activities at the Branch; separate and enhance the responsibility of individuals and departments in the credit granting process.

The levels with credit decision-making authority at BIDV Quang Binh currently include the Credit Council; Director; Deputy Director in charge of Risk Management; Deputy Director of Customer Relations; Head of Customer Relations Department, and Heads of Transaction Offices. For each loan before submitting to the competent authority for approval, depending on the amount, customer, term and form of guarantee, it will be decided whether to transfer to the Risk Management Department for risk assessment or not. The highest level of decision-making authority of the Branch will be reviewed and assigned annually by the Head Office, depending on the business performance and credit quality of the Branch in the previous year. The level of decision-making authority may be reduced if during the implementation period the Branch has a high increase in bad debt. Based on the highest approved level of authority, the Branch Director will assign specific decision-making authority to lower levels:

Authority

Scope of jurisdiction	Minimum level of authority multiple to one customer			Maximum loan term	Maximum warranty period
	( Unit: Billion VND)
	Group 1	Group 2	Group 3
HDTDCS	Total limit credit	80	40	10	60 month	60 month
(Credit risk approval)
	In which, gender project deadline	32	8	10
HDTDCS	For a credit (No credit limit control)	80	40	10
(Credit approval for credit facilities 100% secured by deposits/accounts/equities (except stocks) issued by BIDV) onion)

Manager

Total credit limit	56	28	7	12 month	60 month
						(Credit risk approval) use)
Manager	Total credit limit	16	8			3
(Credit approval for credit facilities without risk assessment) ro)
Manager	For a credit	56	28			7
(Credit approval for credit facilities 100% secured by deposits/accounts/equities (except stocks) issued by BIDV)
	Total credit limit	80	40			10
Deputy Director of Risk Management	Total credit limit	28	14	3.5	12 month	60 month
(Credit risk approval) use)
Deputy Director of Science and Technology	Total credit limit	16	8	3	12 month 12 month	60 month 60 month
(Credit approval for credit facilities without risk assessment) ro)
Deputy Director of Science and Technology	For a credit	56	28	7
(Credit approval for credit facilities 100% secured by deposits/accounts/equities (except stocks) issued by BIDV)
	Total credit limit	80	40	10
PGDTN	For one credit	Approve disbursement and issue guarantees one time up to the maximum level for contracts. credit agreement, guarantee agreement
(disbursement approval,	For the item

(issued each time)

medium and long term project credit

have been authorized at the Branch to sign, including contracts signed by authorized authorities at BIDV Head Office and assigned to the Branch for implementation.

disbursement, issuance of guarantees.

Director of PGD

Total credit limit

12 months

(Credit approval for credit facilities without risk assessment)

ro)

Director of PGD

For a credit

3.5

(Credit approval for credit facilities 100% secured by deposits/accounts/equities (except stocks) issued by BIDV)

Total credit limit

Director of PGD

For one

credit

According to the term of each credit contract

(Approval of each disbursement of credit under the credit approval authority of the Transaction Office)

For credit facilities secured 100% by deposits/accounts/valuable assets (except stocks) issued by BIDV

onion.

3.5

Director of PGD

For a credit, including a project credit

medium long term

(Approve each disbursement for credit contracts by the Director or Deputy Director)

Branch signing).

(Source: Excerpt from CV 1922/CV-QLRR on decentralization of authority at BIDV Quang Binh)

In Official Dispatch 1922/CV-QLRR, the Branch Director also identified the following customers who must undergo risk assessment:

Customers at the Branch whose total credit limit is greater than the Branch's non-risk assessment authority, specifically as follows:

+ For a Group 1 Customer: total credit limit over 16 billion VND;

+ For a Group 2 Customer: total credit limit over 8 billion VND;

+ For a Group 3 Customer: total credit limit over 3 billion VND.

Guarantees for customers borrowing capital from other credit institutions.

Credits beyond the jurisdiction of the Transaction Office

specified in Article 9 of these Regulations.

Other cases as prescribed by the General Director or Branch Director.

- Note:

+ Group 1 customers: are corporate customers with credit risk classifications of AAA, AA, A and are classified into group 1 debt (according to regulations on debt classification), except for customers who are private enterprises and partnerships, corporate customers with credit relationships of less than 6 months or have stopped credit relationships for 6 months or more at the Branch.

+ Group 2 customers are other business customers that are not Group 1 customers.

+ Group 3 customers are individuals, households, business households, cooperatives, cooperatives, administrative units with revenue and organizations that are not enterprises.

2.3.4. Customer policy

For individual and household customers, the Branch is currently providing credit according to BIDV's product lines such as: loans for home repair, business, car purchase, study abroad, etc. with interest rate policies according to regulations in each period of the Head Office, suitable to the characteristics of the Branch.

Credit policy

For customers with different classifications, BIDV applies the following

Different specific credit policies:

- BIDV will meet the maximum needs of AAA, AA, A customers on the basis of ensuring the necessary credit limits. For specific projects, BIDV will meet up to 85% of the capital needs of each project for this group of customers.

- BIDV meets the reasonable needs of BBB customers on the basis of ensuring the necessary credit limits. For specific projects, BIDV meets up to 80% of the capital needs of each project for this group of customers.

- BIDV maintains credit relations with BB customers at the necessary level to support customer operations to gradually reduce outstanding debt, lending up to 75% of project investment needs but not encouraging project investment loans.

- For customers B, CCC, BIDV only considers granting credit at the minimum level to support customers in generating revenue to repay debt with the goal of gradually reducing outstanding debt. No loans for project investment.

- Customers C and D were not granted new credit by BIDV but requested the branches to

The branch actively implements measures to thoroughly recover debts.

Collateral Policy

As well as credit policy, collateral policy is also applied.

different applications for different types of customers. Specifically as follows:

- Customers with AAA rating if the debt/equity ratio is below 2.5 are granted loans by BIDV without collateral. Conversely, if the customer has a debt/equity ratio above 2.5, the collateral ratio must reach at least 20% of the total outstanding debt.

- AA-rated customers are granted unsecured loans if their debt/equity ratio is below 2.5. Otherwise, customers will have to meet a secured loan ratio of 30%.

- A-rated customers are given loans when the collateral ratio meets the minimum

at least 50% of total outstanding debt.

- BBB rated customers are given loans when the collateral ratio meets

at least 70% of total outstanding debt.

- BB-rated customers are only granted loans when the collateral ratio meets 100% of the outstanding debt secured by assets.

- Customers ranked B, CCC, CC will only be considered for loans when 100% of outstanding loans are secured by assets and BIDV only accepts certain assets with high liquidity.

- For customers ranked C, D, BIDV requires customers to complete the application.

Legal and maximum additional collateral to handle debt collection when necessary.

About loan pricing policy

The pricing of loans to a customer is based on the customer's overall profitability based on the principle that the lending interest rate must increase with the customer's risk level. However, the current loan rating system does not allow BIDV to calculate the risk premium for each customer group and has not yet separated and allocated costs for different business segments, so the immediate loan pricing is carried out according to the following formula:

Lending floor rate = Base rate + Floor fee

In there:

+ Base interest rate : is the postpaid savings interest rate listed by BIDV in accordance with

customer loan term

+ The floor fee includes 03 components: (1) Capital cost of interest nature (required reserves, cash reserves and deposit insurance); (2) Business management costs for credit activities; (3) Cost of RRTD provision + Desired profit for credit.

Because BIDV's loan pricing policy has not been implemented, most loans are priced based on the subjective opinions of branches based on periodic announcements from BIDV Head Office on actual mobilization interest rates. This does not create competition when providing credit to customers.

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