LIST OF TABLES
Table 2.1: Likert rating scale 31
Table 3.1: Human resource structure in the period 2015-2017 of BIDV - Nam
Thai Nguyen 41
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Credit risk management at Vietnam International Commercial Joint Stock Bank - Hanoi Branch - 12 -
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Assessment of credit risk management according to Basel II Agreement at Vietnam Joint Stock Commercial Bank for Investment and Development - 1
Table 3.2. Business results of BIDV - Nam Thai Nguyen Branch
period 2015 - 2017 43
Table 3.3. Proportion of retail credit balance in total outstanding balance in the period 2015 - 2017 44
Table 3.4. Credit performance quality of branches in 2015 - 2017 47
Table 3.5. Classification of overdue debt risks of branches in 2015 - 2017 47
Table 3.6: Proportion of retail credit structure over time 50
Table 3.7. Proportion of retail credit structure by collateral 51
Table 3.8. Proportion of retail credit structure by usage activity 53
Table 3.9. Overdue debt of individual customers at BIDV - Nam Dinh Branch
Thai Nguyen period 2015 - 2017 54
Table 3.10. Classification of retail credit debt groups at BIDV - Nam Branch
Thai Nguyen period 2015 - 2017 55
Table 3.11. Overdue debt control plan of BIDV - Nam Thai Nguyen Branch from 2015 - 2017 58
Table 3.12. Loan appraisal results at BIDV - Nam Thai Nguyen Branch in the period 2015 - 2017 62
Table 3.13. Capital utilization coefficient index at BIDV - Nam Thai Nguyen Branch in the period 2015 - 2017 65
Table 3.14. SCI ranking scale according to internal cooperative alliance at BIDV 67
Table 3.15. Summary of survey forms from KHQ staff, RRQ staff and HR staff
QTTD Department at BIDV - Nam Thai Nguyen branch 79
LIST OF FIGURES
Figure 1.1. Diagram of credit risk components according to Gup (2007) 11
Figure 2.1: Research process 29
Figure 3.1: Organizational model diagram of BIDV Nam Thai Nguyen 40
Figure 3.2: Loan sales chart for the period 2015 - 2017 45
Figure 3.3: Chart of group 2 debt risk and retail credit bad debt of the branch
period 2015 - 2017 48
Figure 3.4: Loan structure over time, period 2015 - 2017 50
Figure 3.5: Loan structure by collateral in the period 2015 - 2017 52
Figure 3.6: Loan chart by usage activities in the period 2015 - 2017 53
Figure 4.1. Credit option contract diagram 94
Figure 4.2: Diagram of the contract for exchanging risky credits 94
Figure 4.3. Schematic illustration of credit swap 95
INTRODUCTION
1. Urgency of the topic
In recent years, the financial market in Vietnam has been developing at a strong pace, banks have continuously expanded their networks, increased their charter capital, and developed new products and services to meet the increasing demands of customers. For banks in Vietnam today, credit is still the main source of revenue in total income.
In the trend of modern commercial banking activities, retail banking activities play an increasingly important role and receive much attention and investment from banks. This is reflected in the fact that state-owned banks, joint stock commercial banks, and foreign banks have all changed their operating strategies, starting to penetrate and exploit the potential retail market in Vietnam since the early years of the 21st century. Although the proportion of retail debt in total debt and retail revenue in total revenue is still modest, this is a sustainable source of revenue and has the potential to bring long-term development to banks.
Vietnam Joint Stock Commercial Bank for Investment and Development (BIDV) is one of the four leading banks in Vietnam. After a long time as a bank serving investment and development (wholesale), retail banking activities have only been interested in developing in the last ten years or so. However, the Bank has also created a certain advantage in terms of a wide network across the provinces across the country. As of December 31, 2017, BIDV had 180 branches, over 798 network points, and over 815 transaction offices (according to the website bidv.com.vn - General introduction). BIDV currently ranks 3rd among commercial banks in terms of network points and is 1 of 3 banks (after Agribank and Vietinbank) with a wide network across 63 provinces/cities nationwide. Along with that, people's lives are increasingly improving, so there is potential for development and expansion of retail credit.
Regarding the Joint Stock Commercial Bank for Investment and Development of Vietnam - Nam Thai Nguyen Branch (hereinafter referred to as: BIDV - Nam Thai Nguyen Branch), although newly established and put into operation on the basis of separation from Thai Nguyen Branch since January 1, 2014, the operating area is in Pho Yen town, Song Cong city and Phu Binh district, the potential for retail credit development is very good. This is also the
one of the important bases for the separation to establish a separate branch operation. With a mixed model, retail banking activities have been given attention and development from the beginning. The growth rate is very positive, demonstrated by impressive growth figures over the years from 2015 - 2017, but is the perception of retail credit correct? With sales increasing sharply over the years, the bad debt and overdue debt indicators also go hand in hand, signaling the urgent need for tighter management in risk management activities. Retail credit is not simply about spreading risks through small loans, the process is relatively simple and easy to implement, but it is about knowing how to combine the assets securing the loan and accurately determining the source of debt repayment, collecting a lot of urgent information from support tools (CIC, credit score...), or investing in technology, digital transformation in operations and management. Good growth but poor risk control will significantly affect the financial situation and competitiveness of the bank, increase risk provisions and lead to a reduction in the income of each officer. Recognizing the importance of retail credit activities of the bank and the consequences that credit risks can cause for banks in general and BIDV - Nam Thai Nguyen Branch in particular, the author has chosen to research the topic: "Retail credit risk management at Vietnam Joint Stock Commercial Bank for Investment and Development - Nam Thai Nguyen Branch".
2. Research objectives
2.1. General objectives
The general objective of the thesis is based on the study of the current status of retail credit risk management at BIDV - Nam Thai Nguyen Branch, to propose some key solutions to improve and enhance the capacity of retail credit risk management, ensuring that retail credit operates within the acceptable risk range, contributing to the stable development of the branch, improving business efficiency in retail activities.
2.2. Specific objectives
- Systematize theoretical and practical basis on retail credit risk management of commercial banks.
- Analyze and evaluate retail credit activities, retail credit risks and retail credit risk management at BIDV - Nam Thai Nguyen Branch in the period 2015 - 2017.
- Propose some solutions to improve and enhance retail credit risk management capacity at BIDV - Nam Thai Nguyen Branch.
3. Research object and scope
3.1. Research subjects
The research object of the topic is credit risk management activities in retail business at BIDV - Nam Thai Nguyen Branch.
3.2. Scope of research
- Time scope: Secondary data used for analysis was collected during the period 2015-2017. Primary data was collected through direct interview survey in 2018.
- Spatial scope: BIDV - Nam Thai Nguyen Branch
- Scope of content: The thesis focuses on studying the current status of retail credit risk management at banks, the causes of retail credit risks and measures to manage retail credit risks.
4. Scientific and practical significance of the topic
The thesis is a scientific work with scientific and practical significance, a document that helps BIDV - Nam Thai Nguyen Branch to perfect the work of retail credit risk management with a scientific basis.
The thesis has researched quite comprehensively and argued closely, systematizing a number of theories on retail credit risk and retail credit risk management of commercial banks.
Solutions are built to contribute to improving credit quality at BIDV.
- Nam Thai Nguyen Branch, ensures benefits and limits risks in customer relations. Brings customer satisfaction that is superior to other banks.
The research results of the thesis contribute to the improvement of retail credit risk management at BIDV - Nam Thai Nguyen Branch and provide solutions to overcome shortcomings in retail credit risk management, contributing to limiting risks in retail credit activities for lending to individual customers at BIDV Bank - Nam Thai Nguyen Branch in particular and commercial banks in general.
5. Thesis layout
In addition to the introduction, conclusion, list of abbreviations, list of tables, graphs and list of references, the thesis structure includes 4 chapters:
Chapter 1: Theoretical and practical basis of retail credit risk management in the operations of commercial banks;
Chapter 2: Research methods;
Chapter 3: Current status of retail credit risk management at BIDV - Nam Thai Nguyen Branch;
Chapter 4: Solutions to improve retail credit risk management at BIDV - Nam Thai Nguyen Branch;
Chapter 1
THEORETICAL AND PRACTICAL BASIS OF RETAIL CREDIT RISK MANAGEMENT AT COMMERCIAL BANKS
1.1. Overview of research on credit risk management in commercial banks
Up to now, there have been many research projects on credit risk management conducted domestically and internationally. Typical projects directly related to the topic include the following:
1.1.1. Foreign studies
The authors Nyathi K., Ndlovu, Moyo, Nyathi T. asserted in their 2014 study “ Optimisation of the Linear Probability Model for Credit Risk Management ” that one of the objectives of banking is to provide loans. Credit risk management plays an important role in banks, as loans typically account for one-half to three-quarters of a bank’s total assets. Credit rating is a systematic method of assessing credit risk and helping to make lending decisions. Rating models are a systematic means of assessing the creditworthiness of a loan applicant. However, current rating models cause a loan application to be rejected unnecessarily because their credit rating is downgraded to a rejection level due to lack of information such as previous payment data. This could be a rejection of a good credit, potentially causing loss of future profits. The study aims to optimize a credit rating model to ensure that it uses only important rating criteria to determine credit scores. The optimized model will not only reduce the rate of unsafe borrowers but also identify borrowers that can bring income to the Bank.
In the research work “ Credit Risk Management in Commercial Banks ” by Konovalova, Kristovska, Kudinska in 2016 proposed a credit risk assessment model based on customer/retail customer factor analysis to ensure predictive control of the risk level of potential customers in the banking industry.
commercial banks with consumer lending activities. The objective of this study is to determine the level of risk posed by different groups of retail customers in order to minimize and prevent future credit risks and improve bank risk management. The main results of the study are the creation of an internal credit rating model of borrowers and the development of methods to improve credit risk management in commercial banks.
In 2017, the authors Wang Y., Wang W., Wang J. in their research paper “ Credit Risk Management Framework for Rural Commercial Banks in China ” pointed out that credit risk management is the identification, measurement, monitoring and control of risks arising from the possibility of non-payment. Existing credit risk management tools for large financial institutions do not meet the requirements of rural commercial banks because their main customers are small and medium-sized enterprises and farmers whose financial records and credit ratings are not available. Credit risk management in China also exposes specific risks related to rural commercial banking operations and especially agricultural-related loans and services. Through a qualitative analysis approach to identify the main factors contributing to customer failures of rural commercial banks, the authors attempt to develop a credit risk management framework for rural commercial banks in China. This framework is based on identifying business failures of rural commercial bank customers and factors contributing to the failure of small and medium enterprises and agricultural households, combining financial and non-financial variables. Using non-financial variables together with financial variables as predictors of corporate failure significantly increases the credit analysis quality and accuracy. In addition, this study identifies “relationship” as a potential risk and includes “relationship” risks in the framework. This study has made contributions to the literature on the governance of banks in general and rural commercial banks in particular.
1.1.2. Domestic research
Doctoral thesis in economics by author Nguyen Duc Tu (2012) " Credit risk management at Vietnam Joint Stock Commercial Bank for Industry and Trade ", National Economics University, Hanoi.