From the side of the implementing entities (credit institutions, organizations with banking activities) when drafting management documents, mechanisms and policies must approach international practices.
- Public opinion in general and market members also suggest that statements on monetary policy should only be made by the State Bank - the state management agency for currency and banking activities - and also a member of the Government. Avoid other agencies speaking on behalf of the State Bank, causing conflicting information and disturbing the market.
Consider the lag of monetary tightening:
- The message that the Government has given for 2012 is to stabilize the macro economy and control inflation (CPI increase not more than 10%). The monetary policy management target of the State Bank in 2012 is also determined: strive to achieve an economic growth rate of about 6.5%. Thus, it can be seen that the signal of tightening monetary policy has been clearly given from the beginning of the year.
- According to the message from the State Bank, in 2012, the Bank's capital will mainly be for agricultural and rural development. There is information that the State Bank also warns of risks in real estate lending and discourages credit growth in this area.
- However, there is an opinion that the policy lag is always from six to nine months. Therefore, implementing inflation control policy (which means tightening monetary policy) at any level must consider the effects on Vietnam's economic growth in the coming years.
Eliminate the “two-price” situation:
- The “two-price” situation in interest rates and exchange rates has made credit institutions and customers tired, and the currency market is not transparent. Commercial banks all want to bring interest rates and exchange rates to one price as soon as possible.
- There have been opinions that the interest rate solution should be proposed periodically (maybe monthly or quarterly), the members of the Banking Association discuss (negotiate) to agree on a ceiling interest rate for VND mobilization suitable for
capital supply and demand and inflation index, then VNBA requested the State Bank to support monitoring the implementation of consensus.
- Regarding exchange rates, the State Bank said it will flexibly manage exchange rates according to the market, with exchange rate policies linked to developments in VND interest rates and foreign currency interest rates. The implication is that in 2013 the State Bank may make adjustments (in terms of amplitude?) to narrow the exchange rate gap between the two official and unofficial markets.
Be decisive when using administrative measures:
- The 2010 State Bank Law has given the State Bank more authority in making administrative decisions. For example, Article 12 allows that in case of unusual developments in the money market, the State Bank shall prescribe the mechanism for regulating interest rates applied in the relations between credit institutions with each other and with customers, and other credit relations.
- It seems that commercial banks do not find this too difficult. Many commercial bank leaders believe that in the long term, market measures must be used to regulate the market, but in the short term, administrative measures are still necessary to stabilize the currency market. However, if administrative measures are used, they must be decisive, not half-hearted.
- Therefore, to survive and develop sustainably, VIB Vung Tau needs to innovate, improve competitiveness, find every measure to meet market demands as well as ensure the Bank's production and business efficiency is improved.
3.2 SOME SOLUTIONS TO IMPROVE CREDIT ACTIVITIES AT VIB VUNG TAU
3.2.1 Solutions to improve credit risk management capacity and specialize in bad debt handling activities
The risk management capacity of commercial banks is the ability of commercial banks to protect themselves in business activities, preventing risks that may occur and affect the business results of enterprises. Risk management capacity is assessed through risk prevention and handling activities, quantity, nature and level of damage caused by risks.
risks. Improving the credit risk management capacity of commercial banks contributes to improving risk management capacity to minimize the damage caused by credit risks. Below are proposed specific solutions for VIB:
First , on credit orientation and credit policy:
- VIB needs to regularly review and improve credit management policies, credit monitoring processes and build a bad debt management mechanism to make accurate and timely forecasts to serve credit risk management. At the same time, VIB is also considering and reviewing the debt asset structure of VIB to ensure the rationality of capital mobilization structure to reduce credit cost to the lowest level.
- Business processes need to be regularly reviewed and improved to avoid being too rigid and having loopholes. The Credit Policy and Regime Department and the Product Development and Management Departments must be ensured to operate effectively. These specialized departments regularly record feedback and evaluate, review issued regulations, processes, policies, and products to submit to competent authorities for adjustment, supplementation or replacement to ensure consistency, strictness, and suitability with VIB's management capacity and operating conditions in each period, preventing and minimizing the possibility of risks.
- Unifying awareness and consistency in implementing credit policies with a long-term vision is not only limited to senior management staff but needs to be deployed throughout the system on a regular basis.
- Strengthen cooperation policies with other banks and credit institutions to limit competition through co-financing lending policies, entrusted lending, syndicated lending, cooperation in credit and human resource information, etc. to limit competition, increase appraisal capacity, loan monitoring ability and be able to divide risks when incidents occur.
Second, about the network of operations and product development:
- VIB needs to plan and develop a network of business centers specializing in serving corporate customers in a reasonable manner and focusing resources;
In addition, it is necessary to invest in developing and expanding the retail banking network (mainly Transaction Offices, Savings Funds, Transaction Points) specializing in serving individual customers in areas with potential for economic development, such as tourist areas, urban areas, industrial parks, export processing zones, and densely populated areas. Developing and expanding the appropriate network not only contributes to improving the quality of customer service, expanding the customer base, increasing competitiveness and operational efficiency for VIB, but also contributes to implementing a decentralized credit policy, dividing risks to prevent and limit risks.
- VIB also needs to invest in developing a variety of banking products and services, combining many products and services with credit products to form product packages for a customer or group of customers, in order to both improve competitiveness and best meet the ability to reach and expand customers.
Third, build a management mechanism and specialize in bad debt handling activities:
- VIB needs to build a system to detect and give early warning of problem debts and processes to handle debts at risk of turning into overdue debts and bad debts to minimize losses when risks occur.
- VIB needs to have regulations on accepting collateral in lieu of debt repayment obligations (debt assignment) in cases where debt settlement is prolonged.
- Develop a mechanism to handle bad debts from risk reserves according to legal regulations for bad debts that have been outstanding for too long.
- Authorize business units to decide to apply resolute and legal measures to recover debts, such as deciding to handle mortgaged or pledged assets or initiate lawsuits.
- Carry out loan classification, based on debt classification according to regulations in Decision 493/2005/QD-NHNN and Decision 18/2007/QD-NHNN of the Governor of the State Bank, ensuring scientific basis based on criteria such as: cause of debt, debt recovery ability, loan collateral, customer objects.
goods, ... from which specific measures are proposed to prevent and handle bad debt.
- Strengthen post-loan inspection and control. Each department needs to appoint one person in charge of monitoring, synthesizing and proposing measures to recover overdue debts.
- Credit risk, in its most basic concept, is the possibility that a customer receiving a loan will not perform or not fully perform its obligations to the Bank, which is the possibility that the customer will not pay or not fully and on time both principal and interest to the Bank. From there, there are many criteria reflecting the credit risk of a Commercial Bank such as: the ratio of bad debt to total outstanding debt, the ratio of bad debt to equity... and directly affects the business results of the Bank. Improving the efficiency of using the risk reserve fund in bad debt handling activities is both to ensure that the Bank must set aside provisions in accordance with the regulations of the State Bank but also not to be rigid and rigid, affecting the business results of the Bank.
- Strengthen coordination with local agencies such as: Auction Center, Court, Enforcement in the process of handling bad debts by establishing a specialized department to handle bad debts. This specialized department needs to establish and maintain good relationships with local agencies (avoid establishing relationships when an incident occurs) so that in case of bad debts, it will receive timely support from these agencies and departments. Continue to focus on removing difficulties and obstacles in the procedures for auction, handling of assets such as land, real estate, enforcement, completing legal documents of assets before filing a lawsuit... In addition, it is necessary to have support from the headquarters to request the Provincial People's Committee to support the Branch in handling bad debts.
Fourth, improve the quality of the credit information system:
- In credit activities, information is an important factor that helps the Bank decide whether to invest or not. To assess credit granting, credit officers cannot rely solely on information provided by customers but must collect, assess, and process information related to plans and projects from many different sources. Organizing the storage and collection of information about customers, market information, etc.
Market, technology information, building a system to provide information on customer credit scoring and rating, etc. based on the use of information technology software will contribute to accurate assessment and appraisal, improve processing speed and quality of lending and investment decisions.
- VIB needs to strengthen information work to help prevent, stop and limit risks. Banking business activities are very sensitive to political, economic and social fluctuations. Economic information, especially risk prevention information, needs to be updated and thoroughly exploited in banking management. Only then can we minimize objective and subjective risks due to lack of information or failure to fully exploit information serving the bank's risk management work.
- VIB needs to continue upgrading its information management system and IT systems to support risk management, build an information system to provide early warning signs and loans at risk, and identify areas and industries with high potential risks.
- Information technology and operational systems need to be maintained and updated regularly. The basic functions of application software for risk management should at least include (i) Hierarchical data entry (loss data, risk indicators, risk assessment responses), (ii) Centralized assessment across all business areas, identification of regulatory and capital investment, aggregation and comparison of results across all operational risk components reporting to the Board of Directors
(iii) Centralization and/or decentralization of management.
Fifth, internal inspection and control work:
- VIB needs to strengthen internal control with the important goal of building a system to search for potential negative trends, instability and shortcomings in the Bank's operations to propose corrective measures.
- Develop appropriate plans and strictly implement professional inspection procedures to detect errors that may lead to risks and take timely corrective measures.
- From the results of the business inspection at the business units, it is necessary to summarize to draw experience and thoroughly implement throughout the system to contribute to improving the risk management capacity of the Bank.
- VIB needs to implement strict reward and punishment policies for individuals and units. There are forms of encouragement and rewards for units and individuals who do well and handle units and individuals who cause risks due to subjective factors that affect the business results and reputation of the Bank depending on the level of violation. Only with strict rewards and punishments can we promote and enhance the sense of self-awareness and responsibility in business activities of each professional employee and each unit, limit risks and improve business efficiency.
Sixth, credit risk management based on internal credit rating:
- Regularly review and improve the internal credit assessment and rating system to reflect the actual risk status and forecast the future risk portfolio.
- Develop plans and complete technical issues to bring credit risk management to Basel II standards through extracting customer-specific default criteria, adding overall measurement components to compare with internationally recognized rating systems such as S&P, Moody's. Regularly check the system and compare with external standard systems.
3.2.2 Improve capital efficiency
- The efficiency of capital use of VIB Vung Tau is still limited due to low credit balance, not commensurate with the scale of mobilized capital, most of the capital is deposited at the headquarters with low interest rates. The ratio between total outstanding loans and mobilized capital at VIB Vung Tau is on average 41%, which shows that the ratio of outstanding credit balance is much lower than the total mobilized capital. According to VIB's plan, the average ratio of the whole system in 2014 must reach 60% of total outstanding debt. To achieve the plan of outstanding debt growth in 2014, VIB Vung Tau needs to promote lending activities, actively seek customers with demand in the province. However, credit growth must be accompanied by management measures, limiting risks because overheated credit growth will lead to very large risks.
- The branch also needs to set mandatory credit balances for each customer officer. Currently, the branch has corporate and individual customer departments, so it is easy to manage and deploy products according to each customer group. Assigning appropriate targets will increase the motivation of customer officers, because credit balances directly affect their monthly income, so customer officers must always serve current customers well to maintain credit balances as well as actively seek new customers. From there, the branch can increase credit balances while increasing capital efficiency.
3.2.3 Diversify loan portfolio to minimize risk
The branch's credit products are not yet diverse and abundant, products such as: loans for agriculture and forestry, loans for studying abroad, factoring, overdraft, inventory financing, trade financing... have not really been focused on and developed. This factor has reduced the branch's competitiveness with other banks in the province, therefore, the branch needs to diversify its lending products to minimize risks. In addition, VIB Vung Tau continues to promote current key areas, some products proposed by customer management staff in 2013 are as follows:
Unit: Billion VND
2013 | Proposed in 2014 | |
Real Estate Loan Outstanding | 96 | 125 |
Outstanding consumer loans | 138 | 180 |
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- Currently, the real estate lending sector (including loans for real estate investment, apartment construction, infrastructure construction, etc.) in Ba Ria - Vung Tau province is increasingly developing. In 2013, there were 4 high-end apartment construction projects under construction, the demand for high-end apartments suitable for customers in Ho Chi Minh City and neighboring provinces who want to own an apartment to go to Vung Tau on weekends to relax and travel, so the demand for apartments and high-end apartments is growing strongly. Customer management staff proposed 125 billion VND in 2014 (an increase of about 30% of total outstanding debt), an increase of 29 billion VND compared to 2013. Department