DSpace at VNU: Liquidity risk management in Lienviet Commercial Joint Stock Bank

Liquidity risk management in Lienviet
Commercial Joint Stock Bank
Văn Thu Hương
Khoa Quản trị Kinh doanh
Luận văn Thạc sĩ ngành: Kinh doanh và quản lý; Mã số: 60 34 05
Người hướng dẫn: TS. Chu Thành, ThS. Hà Nguyên
Năm bảo vệ: 2010
Keywords: Quản trị kinh doanh; Quản trị rủi ro; Ngân hàng thương mại;
Quản lý tài chính
Content
TABLE OF CONTENTS
ACKNOWLEDGEMENTS .................................................................................... i
ABSTRACT .......................................................................................................... ii
TOM TAT ............................................................................................................ iv
LIST OF ABBREVIATIONS ................................................................................ x
LIST OF TABLES ................................................................................................ xi
LIST OF FIGURES ............................................................................................. xii
INTRODUCTION ................................................................................................ 1
CHAPTER I: LITERATURE REVIEW ................................................................. 5
1.1.

Commercial bank........................................................................................ 5

1.1.1

Concepts ................................................................................................ 5

1.1.2

Products & services provided by commercial banks ............................... 6

vi


Roles of commercial bank in economics ................................................. 6

1.1.3
1.2.

Risk management in Commercial Bank ...................................................... 7

1.2.1.

Risk in commercial bank ........................................................................ 7

1.2.2.

Main risks in Commercial Bank ............................................................. 8

1.2.3.

Risk Management in Commercial Bank ................................................. 8

1.3.

Liquidity Risk Management in Commercial Bank ..................................... 10

1.3.1.

Defining liquidity risk .......................................................................... 10

1.3.2.

Basel and Basel II requirements ........................................................... 12

1.3.3.
Bank

International Framework for Liquidity Risk Management in Commercial
16

1.3.3.1. Liquidity risk tolerance ........................................................................ 18
1.3.3.2. Strategy & Policy ............................................................................... 18
1.3.3.3. The responsibilities to manageliquidity risk ........................................ 19
1.3.3.4. Liquidity Risk Management Process ................................................... 21
1.3.3.5. Contingency Planning......................................................................... 25
1.3.3.6. Internal Audit ..................................................................................... 27

1.4 Liquidity risk in Vietnam Commercial bank system ....................................... 27
1.4.1 Some typical eventsof liquidly risk in Viet Nam before year 2006 .......... 27
1.4.2 From the beginningof year 2006 to the end of year 2007:......................... 28
1.4.3 From the beginningof year 2008 - the end of year 2008 .......................... 29
1.4.4 From the beginningof year 2009 to the ending of year 2009 ..................... 30
1.4.5 The first six months of year 2010 ............................................................. 31
1.4.6 Summarized main reasons for liquiditycrunch ....................................... 32

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1.5 State Bank of Vietnam regulations ................................................................ 33
1.6 Practices for liquidity risk management .......................................................... 37

1.6.1 The Hongkong and Shanghai Bank Corporation .......................................... 37
1.6.2 Asia Commercial Bank
........................................................................ 38
CHAPTER 2. LIQUIDITY RISK MANAGEMENT IN LIENVIETBANK . . . 4 1
2.1 Overview on LienVietBank 41
2.1.1 Introduction ............................................................................................. 41
2.1.2 Business Results ...................................................................................... 44
2.1.3 Organizati on structure ............................................................................ 44
2.2 Liquidity risk in LienVietBank....................................................................... 45
2.2.1

SBV’s regulations on liquidity ratiosin theactivities of credit institution

2.2.2 Supplies of Liquidity.............................................................................47
2.2.2.1 Liquid Assets .....................................................................................48
2.2.2.2 Loans repayment ................................................................................53
2.2.2.3 Total mobilized funds and chartered capital ........................................55
2.2.3 Measurement of Liquidity risk via Gap Analysis ...................................59
2.2.3.1 LienVietBank’s Liquidity Gap report in VND (see table 2-11) .....60
2.2.3.2 LienVietBank’s Liquidity Gap report in USD (see table 2-12) .....63
2.2.4 Assessment on current status of liquidity risk ........................................65
2.3

General situation of risk management at LienVietBank .............................67
2.3.1 From establishment to end 2008 ............................................................67
2.3.2 For the year of 2009 ..............................................................................68

viii

2.3.3 From the beginning of 2010 to now.......................................................69
2.4

Liquidity risk management in LienVietBank .............................................69
2.4.1 Strategy and Policy ...............................................................................69
2.4.2 The responsibilities to manage liquidityrisk ..........................................71
2.4.3 Process of liquidity risk management ....................................................74
2.4.4 Internal Audit ........................................................................................75
2.4.5 Contingency Plan ..................................................................................75

2.5

Assessment on liquidity risk management in LienVietBank .......................76
2.5.1 Achievements .......................................................................................77
2.5.2 Drawbacks on the current liquidity riskmanagement in LienVietBank78
2.5.2.1 Strategy and policy .........................................................................78

ix


2.5.2.2

Organization structure .................................................................... 78

2.5.2.3

Process of liquidity risk management and contingency plan ......... 79

2.5.2.4

Management information system ................................................... 79

2.5.2.5 Human resource ............................................................................. 80
CHAPTER 3 RECOMMENDATIONS AND SOLUTIONS ................................... 82
3. 1 Some petitions for LienVietBank .................................................................. 82
3.1.1

Building a culture of risk management in LienVietBank ....................... 82

3.1.2

Building Liquidity risk strategy and policy ........................................... 84

3.1.3

Improving organizational structure........................................................ 87

3.1.4

Building process of liquidity risk management ...................................... 90

3.1.5

Building contingency plan .................................................................... 97

3.1.6

Improving management information system.......................................... 99

3.1.7

Improving human resources ................................................................ 100

3.1.8

Action planning .................................................................................. 102

3.2. Some petitions for SBV ............................................................................ 107
3.3. Some petitions forGovernment ................................................................... 108
Conclusion ........................................................................................................ 109

REFERENCE .................................................................................................... 110
Appendix 1 ........................................................................................................... 112
Appendix 2 ........................................................................................................... 113
Appendix 3 ........................................................................................................... 114
Appendix 4 ........................................................................................................... 115

References:
1

S.Rose, Peter, 2001, “Managing commercial banks”. Ha Noi, Financial Puplisher.
10


2 S.Rose, Peter and C.Hudgins, Sylvia, (2008), Bank management & Financial Services,

McGraw Hill, Singapore.
3 Autorite Des Marches Financiers, (2009), Liquidity risk management guideline
4 HM Treasury, (2004), The Orange Book Management of Risk-Principles and Concepts,

HMSO, Great Britain.
5

Council of Standards Australia, (1999), Risk Management, Standards Association of
Australia, Australia.

6 State Bank of Pakistan, (2002), Risk Management- Guideline for Commercial Banks &

DFIs.
7 Basel Committee on Banking Supervision, (2008), Liquidity Risk: Management and

Supervisory Challenges, Bank for International Settlements, Switzerland.
8 Basel Committee on Banking Supervision, (2008), Principles for sound liquidity risk

management and supervision, Bank for International Settlements, Switzerland.
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Bank of Barbados
10 Citibank, (1996), Introduction to Risk Management, Training and Development Centers,

Asia Pacific.
11 HSBC Holding plc, (2008), Capital and Risk Management Pillar 3 Disclosures as at 31

December 2008, HSBC, United Kingdom.
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supervision Policy Statement No: 9A
13 Eastern Caribbean Central Bank, (2006), Guidelines on Liquidity risk Management for

institutions licensed to conduct banking business under the banking act.

14 Asia Commercial Bank, Annual Report, 2008, 2009, Financial Statement, June 2010
15 Vietnam Technological and Commercial Joint stock bank, Annual Report, 2008,
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16 Sai gon Thuong tin bank, Annual Report, 2008, 2009, Financial Statement, June

2010.
17 The Bank for Foreign Trade of Vietnam, Annual Report 2008, 2009, Financial Statement,

June 2010
18 Lien Viet Commercial Joint Stock Bank, Financial
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