Some Basic Solutions To Improve Credit Quality At Commercial Banks

the right direction in the credit granting process as well as in other banking activities

This is especially important for small-scale banks with little capital and limited information... a wrong strategy will not give the bank a chance to fix it immediately, it will have a long-term impact on the bank's operations in the future.

- Credit policy of commercial banks

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Credit policy plays a key role in regulating activities such as: Capital mobilization and lending, interest rates, credit products, credit risk management techniques and customer attraction... to achieve strategic goals set out in business.

Credit policy in each stage as an orientation must be followed to ensure the management requirements of the State Bank and suitability will create conditions for banks to optimize the use of their resources safely, maximizing the quality of credits.

- Credit information

In the current period, any industry or business field, information always occupies an important position. This is an indispensable part in the process of social activities. Credit information contributes a significant part to the success of any commercial bank.

Thanks to credit information, banks can make necessary decisions regarding loans, minimizing possible credit risks.

- Commercial Bank Organization

Is an important factor belonging to the bank that affects the quality of loans and even other activities of the bank.

A bank with a scientifically arranged and structured organizational structure, making the most of each individual's strengths, creating close connections between departments... will be the basis for performing well the task of best meeting the needs.

customer needs, seize business opportunities, closely manage and secure your capital.

- Quality of human resources of commercial banks

People are the decisive factor for the success or failure of any business. For banks, people are an irreplaceable factor, no matter how modern and perfect other factors are, people are always the main factor, the core factor that determines the effectiveness of all activities.

Reality shows that a Bank with a team of quick-witted, creative staff, with team spirit, working for the benefit of the Bank, will be able to develop and stand firm in the market.

- Internal control inspection work

As one of the main activities of a bank, it is carried out regularly and continuously to maintain the bank's operations in a safe and effective manner.

1.4.2. Objective factors

- Business management capacity of the borrower

The borrower's business management capacity refers to whether the borrower has enough financial capacity to repay the loans or not, because this is a necessary condition to bring high efficiency in business operations.

Borrowers with good business management capacity will ensure the ability to repay loans to the bank in the future and vice versa.

- Morality of the borrower

The borrower's poor ability to predict business problems, poor management, intention to deceive bank staff, procrastination... are the causes of credit risks. To achieve their goals, they are willing to find any means to deal with the bank such as providing false information, bribing... In the case of borrowers who are profitable in business but still procrastinate in the hope of being able to default on their debts, or using the loan as long as possible.

For businesses operating or investing in sensitive areas with frequent fluctuations such as real estate, securities... then revenue

The income achieved is often high but the risk level is high, so it has a strong impact on the credit quality of the bank.

- Macroeconomic environment

A fluctuation in the domestic and foreign economy affects the operations and income of borrowing businesses. If it is a positive impact, it will make the business operations more favorable, create a larger source of income and the business will fully and promptly pay off bank loans. However, a negative impact on the business's production and business process will reduce the business's income, thereby affecting the ability to pay off loans to the bank.

However, a negative impact on the business production process reduces the business's income, thereby affecting the ability to pay credit to the bank.

Nowadays, our country's economy is in the process of deep and wide integration into the world economy, so the impact of world economic fluctuations on our country's economy is continuous and very strong. Banking activities are monetary business activities - a very sensitive field that will be affected first, in which credit-related activities of banks are most affected.

- State law and policy

The operation of banks in general and credit activities of banks in particular cannot be outside the protection and regulation of the legal system. It can be said that legal documents are public to prevent and limit risks in the credit operation process. Completing the credit mechanism and regulations of the industry in accordance with the Banking Law and in accordance with reality is a prerequisite to improve credit quality.

Currently, our country has the State Bank Law, the Law on Credit Institutions and a system of sub-law documents of the State Bank and Joint Stock Commercial Banks. Basically, it has created a legal corridor for banking activities.

In each different period, the legal policies of the state always change depending on the goals pursued by the state to suit the general situation of that period. The policies of the state, especially those of the central bank, are related to the operations of commercial banks such as interest rate policies, compulsory reserve policies, foreign exchange policies, etc., which play an important role in the operations of the economy in general and of commercial banks or enterprises in particular. Each policy has a direct or indirect impact on the credit provision operations of banks to their customers.

1.5. Some basic solutions to improve credit quality at commercial banks

1.5.1. Perfecting credit policy

It can be said that credit policy is the first factor that determines the direction and business strategy of the Bank. To build a perfect credit policy, the Bank needs to pay attention to the following issues:

 Diversify lending forms: In addition to direct lending to customers, increase syndicated lending for large projects that the Bank alone cannot handle. Expand real estate lending, installment lending, etc.

 Diversify capital mobilization areas: Through attracting deposits from economic organizations of the population to create sources. From there, the Bank has the basis to conduct lending. In particular, term deposits are an important source of capital for the Bank to have strong potential in lending. The Bank needs to have new solutions in capital mobilization through channels to improve existing forms of capital mobilization, apply new forms of mobilization with simple procedures, easy transferability with flexible interest payment methods.

1.5.2. Expanding the credit scale of the Bank

Expanding the lending market: Attracting customers through preferential lending policies on repayment terms... applying many new services such as payment services, trust services, customer consulting...

Adjusting the loan structure to suit the economic structure: Focusing on investing in economic sectors with high growth rates. In our country, a country that is undergoing industrialization and modernization with a trend of increasing the proportion of service industry and reducing the proportion of agriculture in the economic structure, when lending, priority should also be given to industry and services.

Strengthening foreign affairs: Cooperating with banks and international credit institutions to expand the interbank lending market. Reducing overdue debt: Strengthening the exploitation of debt-forfeited assets including mortgaged assets, pledges, and guarantees means limiting the occurrence of new overdue debts, and better managing and using debt-forfeited assets.

1.5.3. Other solutions

Improving the credit team's qualifications: People are the key factor of every victory. The qualifications of the Bank's staff are improved, they have professional qualifications, are knowledgeable in many different fields related to credit activities, are equipped with knowledge about the development of the market economy, and marketing knowledge to meet the needs and satisfy all the desires of customers.

Strengthening innovation in banking technology: Equipping and upgrading information technology machinery and equipment as a lever for development is a condition for a bank to integrate into the international banking and financial community. Modernizing technology to improve service quality, meet management needs and strengthen and compete for a large customer market share in the national banking system.

Improve the effectiveness of internal control and audit activities: In Vietnam, the inspection and control work has been weak in recent years, so this is one of the important action programs to ensure that the Bank's operations follow the legal corridor, implement safety measures and do business effectively. At the same time, increase the focus on directing the audit work to objectively view the financial status of borrowing enterprises as well as the unit.

Improve the quality of project appraisal: both financial and technical aspects of the project.

Diversify investment portfolio: Do ​​not limit yourself to a few businesses, industries, or business sectors, but invest in all sectors with a reasonable structure to spread the risk of a business situation worsening in one industry or some businesses.

Chapter 1 Conclusion

A commercial bank is a credit institution that operates in the monetary and credit sector with two main and most important tasks: receiving deposits and lending. Thanks to the credit activities of commercial banks, capital sources in society are concentrated and invested effectively, creating additional capital for the national economy, regulating the reproduction process at both the macro and micro levels.

Improving credit quality from the perspective of banks as lenders is essential for the development of banks and for socio-economic development. Credit quality of commercial banks is shown through 2 groups of indicators: Qualitative indicators and quantitative indicators. There are many quantitative indicators used to evaluate credit quality, including some of the following basic indicators: Overdue debt ratio, bad debt ratio, capital utilization efficiency, annual credit capital turnover, and credit activity profit ratio.

The credit quality of commercial banks is affected by many different factors, including both positive and negative factors. The basic factors affecting the credit quality of commercial banks include: factors from customers, factors from the bank itself, factors of the macro-economic environment and legal policies of the state.

CHAPTER 2: ANALYSIS OF CREDIT SITUATION AND ASSESSMENT OF CREDIT QUALITY AT NATIONAL CITIZEN COMMERCIAL JOINT STOCK BANK - HAI AN BRANCH - HAI PHONG

2.1. SOME OVERVIEW OF NATIONAL CITIZEN COMMERCIAL JOINT STOCK BANK – HAI AN BRANCH – HAI PHONG

2.1.1. History of establishment and development of National Citizen Commercial Joint Stock Bank - Hai An Branch - Hai Phong

- Transaction name: National Citizen Commercial Joint Stock Bank - Hai An Branch - Hai Phong

- Abbreviation: NCB – Hai An Branch – Hai Phong

- Phone number: (0313)559096

- Address: 52 Ngo Gia Tu, Cat Bi Ward, Hai An District, Hai Phong City National Citizen Commercial Joint Stock Bank - NCB was established in 1995, starting

source from Song Kien Rural Commercial Joint Stock Bank. On May 18, 2006, NCB officially converted its operating model from Rural Joint Stock Commercial Bank to Urban Joint Stock Commercial Bank.

By 2014, Navibank was officially renamed National Citizen Commercial Joint Stock Bank - (Abbreviation: NCB) and restructured the system, aiming to standardize and perfect financial services.

Hai An BRANCH belongs to Hai Phong branch with address 52 Ngo Gia Tu, Hai An, Hai Phong, is a BRANCH directly under the operation center, legal representative, has seal, balance sheet, internal economic accounting

Since its establishment, with the dynamic and creative leadership of the Board of Directors and the continuous efforts of all officers and employees, the scope of operations has been continuously expanded with a network of 1 Branch and 4 affiliated Transaction Offices to facilitate customers' transactions in the area.

With the bank's motto: Compact structure, efficient operation.