Quản trị rủi ro trong kinh doanh của ngân hàng thương mại Việt Nam theo hiệp ước Basel

In commercial banks: the monitoring system is applicated to the model: The control department belongs to Board of Director, internal inspection department belongs to Operation Board, internal audit department at branches equivalent as a department. With the supervision system as above, commercial banks have increased the effectiveness of risk management in business. However, until now, commercial banks have not issued any documents guiding the process of intrenal monitoring imlementation because the State Bank of Vietnam has not any documents stated functions, tasks, execution orders of inspection and supervision at commercial banks.

Inspection and supervision of commercial banking system in Vietnam is limited at present and has many problems need to be addressed, especially compared to the principles of Basel. This is really a big challenge for Vietnam commercial banking system in the future.

2.2.3. The situation of statistical information report problem according to market principles in the Vietnamese commercial banks

Statistical information system of each Vietnamese commercial banks has to meet the needs of statistical report for State Bank of Vietnam, the General Department/Department of statistics to help these state management agencies perform their funtions under law provisions. At the same time, it also meets the demand of statistical information for business management activities of banks.

To meet the incerasing demand of information for the state bank’s adiministration, gradually step by step in accordance with international practice, the state bank has issued documents regulated on reporting, lead to state bank’s statistic activity has made fundamental changes to meet the information requirement in the context of international integration. In addition, the state bank also issued regulations on financial reporting regime for credit institutions, which regulated on the information collection about safety operation, independent audtiting and fiancial and operation information disclosure of credit institutions.

The banks also must build, issued statistic report indicators for internal business management. For the group of foreign banks in Vietnam, statistical

information and accounting information are complete, allows a better management of financial risks. Meanwhile, for Vietnamese commercial banks, the information quality is different. Some banks perform ralatively well the statistical information. Some banks do this work not well.

Bottom line: statistical reporting activities at the commercial banks in Vietnam now has some restrictions on the legal framework, the completeness and accuracy of data provided. transparency and information disclosure. The main cause of the limitations is due to: the central bank has not established a system of regulations on the openness and transparency of information; The ICT usage by banks still face many difficulties and inconsistencies; The banks not really serious about serving quality statistical reports, and statistical staff is lacking in both quantity and quality.

2.3. Overall assessment of risks management activities in business of Vietnamese commercial banks under the Basel Accord

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2.3.1. The results obtained

First, banks have to pay more attention to maintaining minimum capital adequacy ratio.

Second, banking supervision activities are also emphasized.

Third, the information disclosure under market principles has been made regularly and has been more transparency.

2.3.2. Some weaknesses and causes

- Organizational structure, functions and duties related to the risk management, inspection and information disclosure are not reasonable leading to overlap and not clearly demarcated responsibilities.

- The regulations, business policies and risk management are weak, limited and not synchronous.

- The staff are lack of experience.

- The technology is obsolete and outdated Causes:

According to survey results in 21 Vietnamese commercial banks, 95.24% of banks are aware of the importance of risk management in banking business,

100% of banks make a lot of attention to the Basel Accord and 90.48% of banks assess that Basel Accord has an important role in strengthening financial security for Vietnam banking system. However, the factors cause the most difficulties for the application of Basel in risk management of Vietnamese commercial banks are human resources, information technology infrastructure and law frame.

In addition, although commercial banks confirmed the role of risk management is very important, but they did not focus on investing in risk management capabilties as pronounced. Specifically: 85.71% of banks refered expanding assets in banks’activities strategy; 71.43% of banks focused on the second objective is to increase equity in order to achieve higher asset growth speed. Investing in concentrated information technology system, building data management ability are the most important activities but rank lowest strategic priorities.

Besides, there are also some reasons as follow:

- The commercial banks’capital scale is small while the range of activities is large.

- The banks have not focused on the formulation of policies, procedures and regulations.

- Recruitment and training do not meet job requirements.

- Some other objective reasons.

CHAPTER 3

THE SOLUTIONS TO ENHANCE RISK MANAGEMENT IN THE BUSINESS OF VIETNAMESE COMMERCIAL BANKS UNDER THE BASEL ACCORD

3.1. Evaluating the applicability of Basel’s treaty to the Vietnamese Commercial Banks

3.1.1. The needs to strengthen risk management for businesses of the Vietnamese commercial banks under the Basel’s treaty

The joining of Vietnam to the World Trade Organization (WTO) on 11/2006 marked the period of deeper integration of the Vietnamese Economy to

the World Economy. With a commitment to open the financial market in the WTO’s negotiating process, foreign banks shall be active and treated equally with the domestic banks. This causes a competitive pressure on the Vietnamese commercial banking system. Like other countries’ banking system, the safeness, efficiency and sustainability are the goal that Vietnamese banks are aiming at. Therefore, the application of international standards in risk management is necessary in order to improve the stability of the financial system and ensuring the Vietnamese banking system to active healthily.

3.1.2. The oriented development strategies and integration of the Vietnamese banking sector.

By 2020, the Vietnamese banking system continues to create breakthroughs results, building a banking system that is stable and sustainable with the world average scale, ensuring the stability and safety of the financial market. The motto of commercial banks is “Safety – Efficiency – Sustainability

– International integration”.

In addition, banks also build a orientation to enhance risk management under the Basel’s treaty. Specifically:

- Enhancing the institution’s capability, restructuring organization models and actives in accordance to the international practice.

- Strengthening of financials capability.

- Enhancing the ability of information technology applications in transaction, processing and administration.

3.1.3. Opportunities and challenges in applying the Basel’s treaty to the risk management of the Vietnamese commercial bank

The international economic integration create incentives and opportunities for Vietnamese banks to evolved into a banking system that is dynamic, safe, effective and consistent with international practice.

This also create a driving force to reform and evolve for the Vietnamese banking system, especially improving management, improving the legal

environment in the banking sector, closing the gap between the Vietnamese currency market and the international practice, to meet the international integration and commitment with international organization. The more intelligible law will help facilitate better assessment for borrower, lenders including banks will charge lower risk fee. In addition, there is also a more active participation of foreign banks in Vietnam. This is one of the main reason promoting Vietnamese commercial banks to improve its professionalization in banking, banking management, asset management , risk management, improving credit quality, enhancing the efficiency of capital used and the development of new banking services.

In addition, Vietnamese commercial banks will face many challenges from economic integration and for the banking sectors like institutional challenges, structural, financial capacity, and human resources. The international economic integration increases capital transactions and the risk of banking system, while management and information system to monitor banks is still in its infancy, is not consistent with the international practice.

Economic integration also leads to transformation of high quality human resources: foreign banks are willing to legally recruit skilled manpower with an attractive incentive that Vietnamese banks will not be able to offer.

3.2. Solutions to improve risk management for Vietnamese commercial banks under Basel’s treaty.

3.2.1. Solution for the Government and central bank

Although the International Monetary Fund (IMF) and the World Bank (WB) were widely announced their desire to support countries to prepare for decision whether, when and how to implement Basel II. However, both institutions emphasis that at the national level, Basel I remains a viable option in the near future, while Basel II should be based on a solid foundation of standards accounting and management, practices of pricing, classification and provisioning possible risks, the legal framework and resources adequate supervision. When the factors are yet to convergence, countries want to apply Basel II to improve its financial infrastructure as part of Basel II implementation

roadmap. In this orientation, the work that the Government and the central bank can do in the early stages in the formation of a risk monitoring framework include:

Finance infrastructure upgrades

Improving the quality of credit information center Training and development of a new surveillance culture

The Central Bank is the licensing agency for all banking activities and observance of policies and laws on monetary and banking activities in the territory of Vietnam.

3.2.2. Solutions for banks to meet minimum capital rules

- Continue to issue shares to increase its own capital

- Merger of commercial banks to increase the size of own capital

- Enhance business efficiency, equity supplement free

- Consistently apply international standards in credit risk management, market risk and operational risk

3.2.3. Solutions to meet the Basel standards on the process review and supervision of banking activities

3.2.3.1. For State Bank:

- Renewing the organizational model of inspection agencies, banking supervision

- Renewing the form and content inspection activities, banking supervision

- To improve the infrastructure to support the inspection and supervision of banks

- Renew licenses and operate a system of safety regulations of banking activities

- Strengthening international cooperation in banking supervision activities and cooperation between banking supervision with the financial supervisory authorities in the country, the law-enforcement agencies in the country

3.2.3.2. For commercial banks:

- Develop banking management model as the best international practices

- Change the supervisory process

- Construction and application of effective reward and punishment mechanism

3.2.4. Solutions to meet the market principles, information disclosure

3.2.4.1. For State Bank:

- Solutions to improve the efficiency of statistical information

- Applying the public policy and transparency of information

- Applying a fine mechanism/ discipline cases reported incorrect information in accordance with regulations

3.2.4.2. For Commercial Bank:

- Organize statistical report implement at commercial banks

- Develop centralization data base

3.2.5. Solutions for banks to support the successful application of systems of risk management standards under the Basel Accord

- Training staff

- Defining the functions, tasks and role of risk management at all levels in Vietnamese commercial banks

- Technological information innovation in banks

- To study and implement selective principles of Risk Management issued by the Basel Committee

3.3. Recommendations conditions to implement solutions to enhance risk management in business of commercial banks under the Basel Accord

The thesis proposes a number of recommendations to the central bank and commercial banks to implement the solution enhance risk management in the business of commercial banks under the Basel Accord.

On the part of commercial banks: Banks should achieve the level of certain risk management, invest more in infrastructures, particularly the appropriate information technology to meet international standards, to apply the good practices on corporate governance and the rule to set and operate systems of internal control and risk management (credit, market, liquidity and operational). The bank must establish a professional system of internal risk management consistent with best practice and meet the minimum requirements of the banking supervisory authorities to detect, measure, manage and monitor appropriate types of risks in banking activities. The banks need to recruit and train human resources in sufficient quantity and quality to operate the risk management system, particularly for market, credit and operational risk management systems as risk modeling.

On the part of the State banks: State Bank must be competent to prescribe and use prudential regulations (quantitative and qualitative) to control the risks in banking activities. The safety regulations are not a substitute for management decisions of the bank, but rather the prudent minimum standards to ensure that banks conduct activities reasonable.

Banking supervisory authorities need to have good coordination with other agencies and other financial supervision in the country and abroad to monitor the non-banking finance activities and international banking operations.

Prerequisites for an efficient banking supervision system is: the appropriate institutional and legal framework of banking supervision; healthy and sustainable macroeconomic policies; appropriate public infrastructure; effective market discipline; clearly procedure for resolving banking problems.