Orientation and Solutions for Perfecting Credit Risk Management at Lien Viet Post Joint Stock Commercial Bank

Third, there are no effective measures to completely resolve potentially risky debts, and there are still some long-standing bad debts that have not been recovered. Some officials have not closely monitored customers' cash flows to urge customers to pay their debts. Handling assets for bad debts has encountered many difficulties, and although some assets have been handled in court, selling the assets is very difficult.

Fourth, the quality of the credit staff is not high, there is no professional credit risk management team, not enough specialized analysis and assessment skills and understanding of economic and social knowledge. The scale of branches is increasingly expanding but the number of staff has not been supplemented in time, leading to the phenomenon that one staff has to take on many positions, with a large workload. Therefore, loan assessment may lose accuracy.

2.3.2.2. Causes of limitations

* Cause from Lien Viet Post Joint Stock Commercial Bank:

Maybe you are interested!

Although credit risk management has been mentioned for a long time, how to implement it is still a big problem for Lien Viet Post Joint Stock Commercial Bank in general and LPB Ha Nam branch in particular. Currently, a complete credit risk management process has not been applied. LPB Ha Nam branch has not yet applied risk warning and prevention techniques. Customer risk measurement and credit rating models have been effectively applied by advanced countries, but to be applied, there must be modern facilities, systematized and computerized information management, and there must be a program to run calculation software based on accurately collected customer data.

* The cause comes from LPB Ha Nam branch, affiliated branches and transaction offices.

Firstly, the management and organization of the apparatus are not really suitable. The RRTD management apparatus does not have a specialized department, RRTD management is carried out in the Corporate Customer Department but risk handling is carried out in the General Department. Training on risk topics at LPB Ha Nam branch has not been conducted.

Regularly organized, officers in charge of credit risk work in a rut, so many risk handling files are not strict.

Second, the appraisal and approval of loans is lax. In credit activities, the appraisal of projects and production plans of customers is very important, deciding the majority of the risk of customers. When appraisal is mainly based on approved economic arguments, banks are not able to verify, so the appraisal quality is poor, the potential risk is large.

The appraisal quality is not high enough to meet the requirements of credit risk management. It can be said that the increase in bad debt and overdue debt ratio in recent times at LPB Ha Nam branch is related to many issues, especially the appraisal quality, the effectiveness of inspection and supervision activities is still weak, and the risk of credit risk is even higher. The appraisal stage is a very important stage, a prerequisite in the lending process for corporate customers. The necessary information as a basis for appraisal is all done by a credit officer. The ability to collect information, synthesize the collected information and the agility in approaching the development trends of hot industries in the economy to expand the credit scale will be very limited.

Third, the management and inspection of loan records is not strict. Most risk management officers do not have specialized expertise in credit risk management. In addition, the staff in charge of inspection and control still have many limitations. Inspection and control work is carried out in a formal manner, with poor efficiency.

* Reason from customer:

Risks brought by customers are often beyond the control of banks and most of the RRTD originate from customers for whom banks do not have a system to accurately evaluate customer information.

One of the basic reasons that can be mentioned is that customers do not use the loan for the right purpose as committed in the contract, leading to business failure or not having enough money to repay the debt. To create trust with the bank, many customers simulate fake business plans to borrow money in order to appropriate the bank's money or invest in illegal, ineffective activities. In addition

In addition, borrowers also commit fraud by appropriating assets created from loan capital (loans to buy houses in installments, buy real estate...) by taking advantage of loopholes.

* Causes from the business environment:

The fluctuating situation of the market economy in the region, some enterprises with capital stagnant in unpaid construction projects, some enterprises with inefficient production and business, and the complicated development of the Covid-19 epidemic have negatively affected the business activities of enterprises, especially import-export enterprises. This is also a cause of overdue debt.

In fact, in recent years, the climate situation has been complicated, with prolonged rain and floods in many places in the province, and the impact of pests and diseases is increasingly developing. These issues have also had a significant impact on production and business results in the area, and especially in areas where agricultural production is the main focus, natural factors play a very important role.

The incomplete legal environment, lack of synchronization, especially the low effectiveness of law enforcement, has reduced the effectiveness of measures to limit credit risks of branches. For example, slow enforcement of court decisions makes it impossible for branches to handle credit risks by recovering borrowers' assets.

CHAPTER 3: ORIENTATION AND SOLUTIONS TO IMPROVE CREDIT RISK MANAGEMENT AT LIEN VIET POST COMMERCIAL JOINT STOCK BANK - HA NAM BRANCH

3.1. Orientation of credit risk management targets of Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch to 2025

3.1.1. Business orientation of Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch

2020, the final year of the 5-year Socio-Economic Development Plan 2016-2020, is opening with many development expectations for the economy of Ha Nam province. In 2020 and the following years, Ha Nam province will continue to innovate investment orientation and growth model, focusing on agricultural industrialization; expand linkages, proactively and actively integrate internationally, exploit all potentials and advantages to improve the quality and competitiveness of the economy. Comprehensively develop the cultural and social fields, improve the quality of human resources, promote the application of science and technology, ensure the environment, social security, improve people's lives, especially rural residents. Strengthen and maintain national defense and security stability; create positive changes in social order and safety. Promote administrative reform, judicial reform, prevent corruption and waste, build Ha Nam province to develop quickly and sustainably. This is a favorable condition for small and medium enterprises to develop as well as expand the business activities of Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch.

However, in the context of the complicated and unpredictable Covid-19 pandemic, the application of necessary social distancing measures according to Directives No. 15/CT-TTg dated March 27, 2020, No. 16/CT-TTg dated March 30, 2020 of the Prime Minister during most of June has made the economic difficulties arising from the first quarter more evident, at a higher level. Accordingly, the business activities of Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch are also greatly affected, overdue debts and bad debts tend to increase, and profit margins decrease. 2020 and the following years

The economy in general and Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch in particular will face many difficulties. Therefore, the orientation of Lien Viet Post Joint Stock Commercial Bank is to continue to closely follow the common development goals of the country and the banking industry, actively seize opportunities, continue to promote growth, dominate the market, and play a leading role in implementing the policies of the Party, State and Government; Focus on comprehensively restructuring the bank towards modernization, improving financial potential, competitiveness, innovating and upgrading the organizational model, governance and management in accordance with international practices and standards, training to improve the quality of human resources, promoting investment and technological innovation, improving the quality of products and services, improving risk management capacity according to Basel II standards, focusing on handling and controlling bad debts... ensuring safe, effective and sustainable business growth, implementing well the social security policy to demonstrate the responsibility of Lien Viet Post Joint Stock Commercial Bank to the community.

On the branch side, in 2020 and the coming years, the branch will continue to improve its facilities, strengthen its staff, actively deploy and constantly improve its products and services to promptly meet the needs of customers.

The branch sets out specific goals, directions and tasks as follows:

- Regarding capital : Total mobilized capital grows at a rate of at least 15% compared to 2019, striving to reach 5,738 billion VND, of which: Minimum residential deposits reach: 967 billion VND, accounting for 21.18% of total capital.

- Regarding credit : Expand credit investment for all economic sectors, lending in both VND and foreign currencies, striving to increase outstanding loans at an annual rate of 15-18%, striving to achieve outstanding loans in 2020 of VND 5,020 billion. Focus on handling bad debts, risk-handling debts, striving for the lowest level (below 0.3%).

- Regarding S&P : Strengthen and strongly develop banking services such as: Bank guarantees, import-export payments, remittance payments, foreign money transfers, international credit cards, ATM cards, electronic banking services,... to meet the needs well.

of customers, service fees in 2020 reached at least 30 billion VND according to the central plan.

- Profit : The accounting profit strives to achieve the plan assigned by Lien Viet Post Joint Stock Commercial Bank in 2020: 210 billion VND.

To achieve the above goals, the branch focuses on synchronously and effectively implementing the following solutions:

1- Capital mobilization is identified as the top priority:

Timely grasp the direction of Lien Viet Post Joint Stock Commercial Bank to deploy and apply new, diverse and attractive products and forms of capital mobilization, research the market, build flexible and attractive interest rate policies, and actively promote products and services to all classes of people. Innovate and improve service quality, transaction procedures and transaction styles, implement customer policies well on the basis of improving service quality and services to attract customers, promote exploitation and growth of capital sources in the direction of diversifying capital sources (socio-economic organizations, residents, especially deploying non-cash payment services such as salary payment, electricity, water, telephone bills, etc. via ATM cards).

2- Credit growth ensures quality, safety and efficiency: Analyze, evaluate, exploit the market, each economic sector, each customer sector well to invest credit in the right direction to ensure safety. Implement good customer policies, maintain traditional customers and develop new customers to produce and do business effectively to invest credit capital in feasible plans and projects, increase medium and long-term investment in key economic programs to effectively implement the local development program. However, growth must be safe, not lower credit standards and conditions, and minimize possible risks.

3- Focus on improving service quality for all aspects of branch operations to better meet customer needs on the basis of investment in technology, facilities, and a team of professional and knowledgeable staff.

Law, society handle work quickly and accurately. The entire Corporate Customer Department, transaction departments, accounting department enhance the sense of responsibility, closely review all outstanding debts of the department, exploit market information, closely follow the business situation of each industry, of each customer, enhance the role of risk warning, early detection of risks to have appropriate and timely credit response measures.

3.1.2. Credit risk management objectives of Lien Viet Post Joint Stock Commercial Bank

– Ha Nam Branch

Lien Viet Post Joint Stock Commercial Bank has had specific orientations and instructions for lending activities, associated with the reality of LPB Ha Nam branch, the short-term goal is to handle bad debts, potentially risky debts, restructure the customer base, increase outstanding loans associated with ensuring quality improvement and risk management of lending activities.

To achieve this goal, LPB Ha Nam branch needs to have a specific action program, clearly defining each key goal, quantifying the goal with quantitative and qualitative indicators; associated with implementation measures, implementing departments, leadership, direction, control; implementation progress; periodically reporting, evaluating, proposing difficulties and obstacles to resolve, remove and have flexible and timely direction.

The purpose of building this Action Program is to specifically identify the work to be done, the goals to be achieved in terms of results and time, on that basis, allocate resources appropriately from assigning business plans, assigning members of the leadership team to direct, arrange and allocate human resources and resources reasonably for each department, ensuring that each component of the program must be implemented to achieve the highest results, the synthesis of the components is the completion of the set goals and more importantly, the completion of the assigned business plan. Specifically:

- Thoroughly grasp and implement the orientation, goals, focus and solutions to perform tasks and business plans according to the Resolution of the Board of Directors of Lien Viet Post Joint Stock Commercial Bank, promptly and effectively organize the implementation of the instructions of Lien Viet Post Joint Stock Commercial Bank on the implementation of the plan.

business plan; continue to focus on overcoming shortcomings and weaknesses in business operations to improve capacity, efficiency and quality of operations.

- The most important key task in directing, operating and implementing the business plan is to manage, recover bad debts, off-balance sheet debts, and handle debts at risk of being transferred to bad debt groups. This is a key and important content in implementing and completing the business plan for 2020 and the following years. At the same time, continue to strictly control bad debts, group 2 debts, improve the quality of appraisal, and manage risks of loans and borrowers. Continue to restructure the loan customer base, gradually reduce outstanding debts in areas with too high credit concentration. Be determined and thorough in recovering bad debts, interest arrears, overdue debts, and off-balance sheet debts.

- Focus on promoting loan growth associated with improving efficiency and increasing income from lending activities. Expanding the development of loan customers based on screening and restructuring a stable and sustainable customer base. Prioritizing the development of new customers with good financial status.

- Perfecting the motivation mechanism, linking the income of staff to work results to motivate and encourage staff to complete assigned work well, contributing to improving business performance as well as creating long-term attachment to Lien Viet Post Joint Stock Commercial Bank.

- Maintain and develop the image and position of LPB Ha Nam branch in the area, strive to maintain market share. Focus on development and improve the efficiency of network and distribution channels.

With the goal of stable and sustainable development, in the business strategy of LPB Ha Nam branch, risk management in lending activities to corporate customers needs to be focused more and must ensure the following requirements:

- Regularly review and re-evaluate customer risk levels to have a plan to screen, reduce credit limits and quickly reduce outstanding debt for weak and high-risk customers.

Orientation and Solutions for Perfecting Credit Risk Management at Lien Viet Post Joint Stock Commercial Bank - Ha Nam Branch

Comment