Overview of Joint Stock Commercial Bank for Investment and Development of Vietnam

CONCLUSION OF CHAPTER 1

The content of chapter 1 has outlined the basic contents of credit risk, prevention and limitation of credit risk of commercial banks, including the contents of the nature of credit risk, classification, causes and impacts of credit risk on the operations of commercial banks. An important content in this chapter is the prevention and limitation of credit risk, clarifying the concept of prevention and limitation of credit risk, the need to prevent and limit credit risk, the content of prevention and limitation of credit risk includes: credit risk recognition, credit risk analysis and assessment, credit risk response and credit risk control. In addition, this chapter delves into the study of models of prevention and limitation of credit risk, lessons learned in the world and lessons learned for Vietnamese commercial banks on prevention and limitation of credit risk.

CHAPTER 2

CURRENT STATUS OF CREDIT RISK PREVENTION AND LIMITATION AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM

2.1 OVERVIEW OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT

2.1.1 History of formation and development

The history of establishment and development of Vietnam Joint Stock Commercial Bank for Investment and Development is a journey full of hardships and challenges but also very proud, associated with each historical period of protecting and building the country of the Vietnamese people. The journey of formation and development of BIDV through the following stages:

- Established on April 26, 1957 under the name of Vietnam Construction Bank. From 1981 to 1989: named Vietnam Construction and Investment Bank. From 1990 to April 27, 2012: named Vietnam Investment and Development Bank (BIDV). From April 27, 2012 to present: named Vietnam Joint Stock Commercial Bank for Investment and Development (BIDV).

Integrating with the flow of the nation, the Vietnam Joint Stock Commercial Bank for Investment and Development has contributed to the economic recovery after the war, implementing the first five-year plan (1957 - 1965); Carrying out two strategic tasks of building socialism, fighting against the destructive war of the American invaders in the North, supporting the South, fighting for national reunification (1965-1975); Building and developing the country's economy (1975-1989) and Implementing the innovation of banking activities to serve the country's industrialization and modernization (1990 - present). Wherever they are, in any circumstance, generations of BIDV staff have fulfilled their duties well - as the Party's shock troops on the financial and monetary front, serving the country's investment and development...

- BIDV successfully implemented equitization in accordance with the Government's direction.

government, ensuring the harmony of interests of the State, enterprises, investors and employees. From April 27, 2012, BIDV officially transformed into a joint stock commercial bank. In January 2014, BIDV shares were successfully listed on the stock exchange, marking the official milestone of becoming a public bank.

- Innovate and perfect the institution in accordance with the joint stock company model in accordance with the State's regulations, meeting the practical requirements of BIDV's operations, and at the same time aiming towards international practices. In May 2012, BIDV officially operated under the joint stock company model, in accordance with the provisions of the Enterprise Law and the Law on Credit Institutions.

- Actively expand the network and expand the scope of operations. During this period, implementing the direction of the State Bank in Circular No. 21/2013/TT-NHNN - rearranging the model of transaction offices, savings funds and transaction points with a 2-year roadmap of 2013-2015, BIDV on the one hand strictly complied with the network restructuring, on the other hand strengthened the expansion of the scope of operations through the establishment of new transaction points on the basis of fully meeting the regulations of the State Bank.

- By the end of 2014, BIDV had 127 branches, 584 transaction offices, 16 transaction offices/transaction offices, ranking third in the banking system in terms of traditional network points, and also strongly developing modern distribution channels such as ATMs and POS. By May 25, 2015, implementing the Commercial Banking Restructuring Project, BIDV had merged the entire system of the Mekong Delta Housing Development Joint Stock Commercial Bank (MHB) and had a strong development in its network of operations with 180 branches, 798 transaction offices, 1,822 ATMs, 15,962 POS transaction points in 63 provinces/cities nationwide.

- By the end of 2015, BIDV had established commercial presence in 06 countries and territories: Laos, Cambodia, Myanmar, Czech Republic, Russian Federation and Taiwan.

- By the end of 2018, BIDV's network of operations was continuously expanded with 190 domestic branches, 01 overseas branch (Myanmar) and 815 transaction offices to ensure increasingly better service.

more than customer needs. The individual customer base has grown strongly according to BIDV's retail strategy and orientation, growing 10% compared to 2015, reaching over 8.7 million customers, equivalent to about 9.5% of Vietnam's population.

2.1.2 Organizational structure

BIDV's organizational structure by 2018 is shown in the following diagram:

Chart 2.1: BIDV's organizational structure at Branches

Board of Directors

Customer management block

Risk Management Block

Block of work

Internal management block

Subordinate block

Source: [32]

- Board of Directors: Is the leading unit of a BIDV Branch, including the Branch Director and Deputy Directors: Directly manages daily activities at the Branch.

- The organizational structure of a BIDV Branch is divided into 05 blocks:

+ Customer management block: Handles tasks related to customer search, customer relations, and credit proposals.

+ Risk management department: Conduct risk assessment of credit-related proposals, asset valuation and perform other tasks assigned by the Branch Director.

+ Operational block: Directly handle tasks related to operations such as disbursement, money transfer, import and export of goods...

+ Internal management block: Handles tasks related to human resources and organization at the Branch, assists the director in human resources work and is under the direct management of the Branch director.

+ Affiliated block: Unit that performs other tasks related to the daily operations of the Branch such as cleaning, driving, etc.

Chart 2.2: BIDV's organizational structure at Head Office

General meeting of shareholders

Board of Control

Board of Directors

Technical and supervision board

Strategy & Organization Committee

Secretariat of the Board of Directors, Risk Management Committee

Human Resources Committee Research Center

IT Committee

Board of Directors

Credit Council

Alco Council

Other Committees/Activities

Wholesale Banking

Retail Banking

Capital and currency trading block

Risk Management Block

Operational block

Capital and currency trading block

Finance and accounting block

Support block

Source: [32]

- General Meeting of Shareholders: Is the highest decision-making body of BIDV, including all Shareholders with voting rights, operating through the annual General Meeting of Shareholders, extraordinary General Meeting of Shareholders and through collecting written opinions.

- Board of Supervisors: The Board of Supervisors is an agency elected by the General Meeting of Shareholders, representing the Shareholders to independently, objectively and honestly control and evaluate all business, management and operation activities of BIDV, the financial status of BIDV and is responsible to the General Meeting of Shareholders in performing assigned tasks.

- Board of Directors: Is the management body of BIDV, has full authority on behalf of BIDV to decide and exercise the rights and obligations of BIDV that are not under the authority of the General Meeting of Shareholders.

- Assisting the Board of Directors are the following units: Inspection and Supervision Board, Board of Directors Secretariat, Research Center, Strategy and Organization Committee, Risk Management Committee, Human Resources Committee, Information Technology Committee: each unit is in charge of a field of BIDV's operations.

- Executive Board: Is the unit that directly manages the daily activities of BIDV, including the General Director, Deputy General Directors, Chief Accountant and Head of BIDV's Division appointed by the Board of Directors.

- Under the direct direction of the Executive Board are the following divisions: Wholesale banking division, retail banking division, capital and currency trading division, risk management division, operations division, investment division, support division, finance and accounting division: directly handling BIDV's daily operations.

- Alco Council, Credit Council and other committees/councils: These are councils established to approve tasks beyond the authority of the blocks, proposed by the blocks.

2.1.3 Business situation and business results of Vietnam Joint Stock Commercial Bank for Investment and Development in the period 2014 - 2018

2.1.3.1 Capital mobilization

During the period 2014 - 2018, BIDV's capital mobilization results have continuously grown, meeting capital needs and ensuring liquidity. By the end of 2018, total capital mobilization from organizations and individuals reached VND 1,053,826 billion, up 11% compared to 2017, accounting for 12.3% of the total capital mobilization scale of the entire banking industry, well meeting capital needs; raising BIDV's total mobilized capital to VND 1,226,454 billion, up 9% compared to 2017.

Chart 2.3: BIDV's capital mobilization growth in the period 2014 - 2018

Unit: Billion VND

2014

2015

2016

2017

2018

1,053,826

934.111

797,689

685,791

440,472

Source: [28], [29], [30], [31], [32]

The structure of capital sources by economic sector has fluctuated significantly in recent years due to the rapid increase in capital sources from economic organizations. Specifically, in 2014, mobilization from the population accounted for 54% of the total mobilized capital, the main source of mobilized capital in this period was from economic organizations. By 2018, the proportion of capital mobilized from economic organizations had decreased to 42%, mobilizing

Capital mobilization from residents is 58%. This change is due to BIDV promoting retail banking activities, changing its image from a wholesale bank to a bank with diversified products and services.

In contrast to the fluctuations in the structure of mobilized capital by economic sector, the structure of mobilized capital by term and by currency did not have many major fluctuations. The structure of capital by term remained at an average of 81% for term deposits and 19% for non-term deposits, VND currency also accounted for an average of 90% of total mobilized capital, other foreign currencies accounted for an average of 10% in the last 5 years.

Table 1.1: BIDV's capital mobilization situation in the period 2014 - 2018

Unit: Billion VND

Year	2014	2015	2016	2017	2018
Total capital mobilized by the organization, population		440,472	658,701	797,689	934.111	1,053,826
Classification by KH (%)
1	TCKT	46	42	41	40	41
2	Population	54	58	59	60	59
By term (%)
1	KKH	17	18	17	19	20
2	Have KH	83	82	83	81	80
By currency (%)
1	VND	86	91	91	90	90
2	Foreign currency	14	9	9	10	10

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Source: [28], [29], [30], [31], [32]

2.1.3.2 Credit activities

Besides the importance of capital mobilization, the effective use of capital is a vital issue for the bank. Credit activities at BIDV are increasingly developing in both breadth and depth. In order to continue

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