Thuyết trình môn ngân hàng thương mại credit risk management of comercial banks in vietnam

Commercial Bank
Group 6
Nguyen Linh Trang

Dang Hai Linh

Nguyen Hoang Hai

Nguyen Xuan Minh
Le Quynh Anh


Credit risk management of
comercial banks in Vietnam
facts and issues


3

Part I. Theory of credit risk and credit risk management

Entrepreneur Slides


3

Credit risk management
models

Risk
2

assessment criteria for credit list

Some models

Definition

4applied on the credit risk analysis

1

The system BASEL II in credit risk
management

5


3

Credit risk management
models

Risk
2

assessment criteria for credit list

Some models
Credit risk is the risk (potential) of loss that may occurred by borrower failure to

Definition

applied on the credit risk
response their obligations under the terms and conditions of financing contracts
4

1

The system BASEL 2 in credit
risk management

5

analysis


3

Credit risk management
models

Risk
2

assessment criteria
for credit list
Some models
applied
on the credit risk analysis
4

Definition

1

Viet Nam

Organizational risk management

The system BASEL 2 in credit risk
management
Risk measurement

 

Risk control

Focus
5

Dispersion credit risk

credit risk

management

management


a. Focus credit risk management model

Advantages
Credit risk management

3

Risk
2

(+) Managing risks with a fully system banks and ensuring a longterm competitiveness.
(+) Establishing and maintaining a risk management environment
in sync, matching with management processes.

Definition

  (+) Developing risk management policies which was consist with
the whole system.

Disadvantages

assessment criteria for credit list
(-) The construction and deployment of focus management
model requires banks to spend more effort and time.
 

Some models
(-) Staffs have to have the necessary knowledges and know
4 applied on the credit risk
how to apply theories to practice.
analysis

1
  (+) Suitable
for large-scale banks.

The system BASEL 2 in credit
risk management

5


b. Dispersion credit risk management

3

Credit risk management

Risk
This model does not have the separation between the functions of risk management, sales and operations.
Instead, the credit department performs fully three
models
functions and responses for all loan‘s preparations.

Definition

2

assessment criteria for credit list

Some models
Disadvantages

4applied on the credit risk analysis

Advantages

(+) Simple1 organizational structure.
 
(+) Suitable for small-scale banks.

(-) A lack of depth
The system BASEL 2 in credit
risk management

5


a.
 

3

The ratio of bad debt on total loans =
Risk

Bad debt is the debt from Group 3 to Group 5.

assessment criterias for
credit list

b.The ratio of provion on total loans =
Credit risk management

This ratio is higher, the credit risk of all major credit portfolio is bigger.
models
Definition

Some
models

2

4

analysis

c. The ratio of collateral on total loans
1

This ratio is higher, the credit risk is lower.

d. The ratio of risk debt on total loans

The system BASEL 2 in credit
risk management

Debt risks is from group 2 to group 5.
This ratio is higher, the credit risk is bigger.

applied on the credit risk

5

3

Risk
assessment criterias for

Z POINT MODEL

6C MODEL

credit list

Credit risk management
models of commercial bank
in

Definition

Some models

2

4

Vietnam

analysis

ESTIMATED LOSS EXPECTED
1

VALUE AT RISK MODEL

MODEL

applied on the credit risk

The system BASEL 2 in credit
risk management

INTERNAL CREDIT RATING
MODEL

5


Basel II towards implementation of the three objectives:

3

- Ensure that the method for calculating safe levels of bank capital.

Risk

- Measure the separation between operational risk and credit risk

assessment criteria for credit list
- Strengthening the governance of financial globalization banks that agreed between nations.
 

With 3 objectives, main content of Basel 2 are summarized on 3 key pillars:
Credit risk management
st

The 1 : Revolves around credit risk, minimum capital requirements, given the minimum capital
The 2

nd Definition
: Regulations on banking supervision.

models

Some models

requirements and risk assessment methods.

2

4

rd
The 3 : The requirement to disclose information about banking operations for the subjects involved.
 

applied on the credit risk
analysis

1

In which, the basic content of Basel II is to provide methods and principles of credit risk management, controlling bad debt, including:

The system BASEL II in credit
- Developing suitable credit environment
- Implementing healthy credit provision

risk management

- Maintaining appropriate management process and credit monitoring
- The Basel Committee also encourages banks to develop and improve the system of internal
credit ratings.

5


12

PART II. Practicapil application

Entrepreneur Slides


1.
SYSTEM CREDIT RISK
MANAGEMENT OF TECHCOMBANK

2.
CREDIT RISK MANAGEMENT ON
TECHCOMBANK


1. System credit risk management of Techcombank

a. Structure diagram of Techcombank risk management:


b. Chart of risk management


Build a system of internal credit ratings assigned by customer groups: residential, medium, large ...
Management credit portfolio analysis and advice on the sector, comes built into the limit for each sector, construction of
internal reports on credit portfolio management.

Develop tools, reporting monitoring and control of KRIs (the important risk indicators).
Periodically inspect, check quality and credit system modifications.
Develop risk management model as the model for the LGH, EAD, Pricing.


c. Provision of bad debts from 2014 to 2015 and the situation of Techcombank

-

Specific provision at 31/12 was determined by loans after deducting the value
of collateral has been deducted allowance rate multiplied by classification group
at 31/11 debt.

Specific provision
- General allowance at 31/12 were up at 0.75% of total loans of the debts at

Provision
General Provision

30/11 except for deposits and loans to other credit institutions and liabilities are

classified in heading irrecoverable debt
 


c. Provision of bad debts from 2014 to 2015 and the situation of Techcombank

As Circular 02/2013 / TT-NHNN , Techcombank divided into 5 groups applied debt reserve ratio for each
groups as follows:
+ Debt Eligible: 0%
+ Special Mention: 5%
+ Sub-standard: 20%
+ Doubtful: 50%
+ Debt Capital Loss: 100%



Results in the management of bad debts through the bad debt ratio index



2. Credit risk management on techcombank
a. Techcombank applies credit risk management model

 Firstly, focus credit risk management model helps Techcombank maintain and
implement credit policies which balance among targets

 Secondly, Techcombank is the first bank organized credit risk management system
which operated under international rules

 Thirdly, Techcombank separates the functions of marketing, customer relationship,

risk assessment independently with the credit provider decision, debt
management, monitoring

 Fourthly, Techcombank performs focus credit approval model and decentralizes credit
approval with different levels
 Finally, Techcombank holds the professional room with an independent credit
monitoring function


b. Problems



Firstly, ensuring credit and service qualities, in credit provider activities:
When network scale and business activities increased, the processing of credit
provider terms usually wastes a lot of time.
=> Affects the credit activities quality and competitiveness of Techcombank.



Secondly, credit risk management report information systems:
Banking technology system of Techcombank has yet to meet the requirements for
risk management. 



Thirdly, the management structure organization structure and the control of credit risk:
regulation effectively.



Finally, The debt handling:
The work of handling overdue debts, bad debt is not good, the debt settlement
process is until continue.

 

The lack of staff to develop and perform procedures,


24

PART III. Recommendations to improve credit risk management
for the commercial banking system

Entrepreneur Slides




Continuous improvement model of credit risk management consistent with the conditions of personnel, operational network and
its infrastructure



Improving the information technology system to minimize the lack of information in the expansion and control of credit to the
economy, thereby reducing the risk of rising bad loans for the banking system.



Promoting collaboration between others commercial banks, enhancing the role of CIC in order to avoid cases of multiple bank
lending rate a customer to exceed the maximum limit of the customer repayment



Monitoring and managing after the loan to be proactive to ensure that pay, find new business opportunities and expand
business opportunities.