The domestic economy is greatly affected by international macroeconomic variables. Variables such as trade wars, currency wars, global economic downturn, the Covid 19 pandemic, etc. have created negative impacts on Vietnam's macro economy. These factors have also created a wave of investment shifts around the world, and Vietnam is a potential destination. Faced with these difficulties and opportunities, the Government needs to continue to flexibly manage the content of macroeconomic policies in the direction of:
- Comprehensively reform administrative procedures in all public services, especially in the investment sector, to take advantage of the wave of investment capital shifting around the world.
- Use flexible fiscal policy to strongly promote public investment and stimulate consumption to create conditions for GDP growth when the world economy is entering a serious recession due to the Covid 19 pandemic.
- Make full use of the FTAs that Vietnam participates in to boost exports, especially in industries where Vietnam has advantages such as textiles, computer components, agricultural products, etc. as a basis and driving force to promote other components of GDP.
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Second, the Ministry of Finance needs to direct the State Securities Commission to soon have solutions to develop the stock market, bringing the Vietnamese stock market to be upgraded to an emerging market by MSCI. The early upgrade will solve two problems for banks:
- When the stock market is upgraded, it will create attraction for many foreign investment organizations, creating a basis for domestic banks to easily issue shares to increase capital in the process of meeting Basel II Agreement.
- To be upgraded to Emerging Market, the stock market will have to diversify its products, including derivatives. This is a very good condition for commercial banks to be able to hedge RRLS in the bank book and exchange rate risks.
Third, the Ministry of National Defense needs to continue to direct the review and supplement of specific regulations and guidelines on MB's operations to ensure that MB's operations are effective and efficient. Continue to have a roadmap to increase capital from the National Defense budget for MB to ensure compliance with Basel II standards. The Ministry of National Defense needs to direct all aspects of MB, including ALM activities, so that all MB activities must be organized carefully with high discipline and organization.
3.3.2. Recommendations to the State Bank
Firstly, the State Bank needs to complete the legal framework and specify the regulations on ALM content at commercial banks such as regulations on RRLS and RRTK management. The State Bank has very few specific regulations and instructions on ALM activities, especially when implementing Basel II. If detailed regulations on Asset - Liability management are issued, commercial banks will increasingly recognize the role of ALM, which will be the basis for each commercial bank to develop ALM policies to ensure a balance between operational goals and risk appetite. The State Bank's regulations need to be specific and detailed in terms of implementation procedures, ALM limits, and reporting forms that need to be implemented based on detailed classification of commercial banks.
In addition, the State Bank needs to develop regulations on a market for trading derivative products exclusively for commercial banks, especially derivative products related to market factors such as interest rates and exchange rates. This is an important basis for commercial banks to proactively use derivative contracts to hedge risks as well as speculate to seek expected profits.
Second, the State Bank needs to flexibly manage interest rates and exchange rates, closely linked to the Government's macroeconomic goals:
- Stabilizing the exchange rate to ensure both support for exports and to avoid being listed by some countries as “currency manipulators” which could lead to tariff barriers on exports. At the same time, stabilizing the exchange rate also helps to create confidence for foreign investors.
- Due to the impact of the global economic recession caused by the trade war and the Covid 19 pandemic, the world economy is operating in a very low interest rate environment. Therefore, in addition to maintaining interest rates closely following interest rate changes in countries around the world, the State Bank needs to take into account inflation fluctuations and the interests of commercial banks, ensuring that the interest rate policy both supports the economy and ensures profits for commercial banks.
Third, improve the quality of operations at the banking inspection and supervision agency. Banking operations always have many potential risks, so they need to be closely monitored by the State Bank. Therefore, effective banking inspection and supervision by the State Bank will help commercial banks control their risks well. Banking inspection and supervision agencies need to:
- Continue to improve the organizational structure, ensure close coordination with other legal agencies such as tax inspectors and government inspectors to unify the time and content of inspections for commercial banks to avoid overlapping inspections causing waste and difficulties for commercial banks.
- Effectively promote the early warning ability of the State Bank of Vietnam to have measures to help commercial banks prevent the risk of violating legal regulations in the banking sector.
- Promote the application of modern information technology, use tools as well as implement inspection and supervision methods appropriate to each
commercial banks, ensuring effective macro and micro safety supervision while saving costs for both the State Bank and commercial banks.
Fourth, improve the overall data management process of the entire Vietnamese banking industry, ensuring that all commercial banks can access information that is fair, public and transparent. Especially information related to risks related to market factors and macro factors, the State Bank needs to study, combine and share information with the State Bank of other countries in the region to have abundant data sources.
CONCLUSION OF CHAPTER 3
Based on the existing limitations and the causes of the limitations, Chapter 3 of the thesis has provided orientations for MB's development, orientations for ALM activities and proposed some specific solutions to improve Asset - Liability management at MB. The solutions include:
- Perfecting the organizational structure of Asset - Debt management.
- Develop a comprehensive ALM policy.
- Group of solutions to complete RRLS management.
- Group of solutions to complete RRTK management.
- Strengthen capital management according to Basel II Accord.
- Improve data management quality, design risk management software related to ALM.
- Improve the quality of ALM human resources.
Finally, the author proposes recommendations to the Government, relevant ministries, branches and the State Bank to ensure that MB properly implements ALM contents.
GENERAL CONCLUSION
During the implementation of the topic, the thesis achieved the following results:
- Firstly , systematize the basic theoretical issues of ALM activities including: RRLS on the bank book, RRTK and balance sheet structure.
- Second, survey the current status of ALM activities at MB, quantify the factors affecting ALM activities at MB, clearly indicate the achieved results, existing limitations and causes.
- Third, the thesis points out solutions for MB and some recommendations for the Government, relevant ministries, branches and the State Bank so that MB can complete ALM activities.
Although there have been many efforts, due to the complexity of ALM content, limited time and qualifications, it is difficult to avoid shortcomings in the research process. The author looks forward to receiving contributions from teachers, scientists and readers to complete the thesis at a better level.
LIST OF PUBLISHED RESEARCH WORKS BY THE AUTHOR
1. Nguyen Duc Thinh, Challenges in Employing BASEL II at Military Commercial Joint Stock Bank , Research Journal of Finance and Accounting, Vol.9, No.24, 2018.
2. Nguyen Duc Thinh, Liquidity risk management at Military Commercial Joint Stock Bank , Finance - accounting for promoting sustainable development in private sector (FASPS 2020), December 10 th , 2020 Hanoi City, Vietnam.
3. Nguyen Duc Thinh, Interest rate risk management at Military Commercial Joint Stock Bank , Economics and Forecast Magazine, No. 31, November 2019.
4. Nguyen Duc Thinh, Risk Management at Military Commercial Joint Stock Bank in Vietnam , Research Journal of Finance and Accounting, Vol.10, No.12, 2019.
LIST OF REFERENCES
A. Vietnamese reference documents
1. Listing prospectus of the Bank – Military Commercial Joint Stock Bank 2013.
2. Annual reports of Military Commercial Joint Stock Bank for the years 2015, 2016, 2017, 2018, 2019.
3. Annual reports of VCB, CTG, VPB for the years 2015, 2016, 2017, 2018, 2019.
4. Nguyen Kim Anh (2010), Commercial Banking Operations, Hanoi University of Business and Technology Publishing House, Hanoi.
5. Nguyen Thi Van Anh (2014), Limiting risks for the banking system through applying Basel II - looking from international experience , Financial and Monetary Market Journal No. 20, October 2014.
6. Le Cong (2017), Applying Basel II in risk management of Vietnamese commercial banks , Article in the Conference Proceedings: “Applying Basel II in risk management of Vietnamese commercial banks: Opportunities - challenges and implementation roadmap.
7. Hoang Huy Ha (2012), Application of business safety standards and risk management according to international practices in the banking system in Vietnam: Current situation and solutions , Industry-level scientific research topic.
8. Phan Thi Thu Ha (2009), Commercial banking management , Transport Publishing House, Hanoi.
9. Do Thu Hang, Tran Thi Thu Huong and Nguyen Thi Diem Huong (2018), Current status of interest rate risk management in banking books according to Basel II and recommendations for Vietnamese commercial banks, Journal of Banking Science & Training No. 197 - October 2018.