Commercial banking 2 assignment topic liquidity risk management of selected bank in vietnam 2

TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN -*** - Commercial Banking Assignment Topic : Liquidity risk management of selected bank in Vietnam Group – Corporate Finance CLC 60 HÀ NỘI, NĂM 2021 MEMBERS Nguyễn Hoàng Ngọc Trâm (Leader) - 11184981 Phạm Hà Anh – 11180418 Vũ Thị Thuý Anh - 11180562 Đinh Thanh Bình - 11180662 Trần Linh Chi – 11180800 Mai Ngân Hà – 11181322 Lê Thị Kiều My - 11183407 Trần Thanh Thảo - 11184638 Ngô Thu Thuỷ - 11184870 Contents I OVERVIEW OF LIQUIDITY RISK MANAGEMENT 1 Overview of liquidity risk 1.1 The definition of liquidity risk .1 1.2 Types of liquidity risks of the commercial banking system 1.3 Signs identifying liquidity risk in the commercial banking system .2 1.4 Cause of liquidity risk 1.5 Influence of liquidity risk of commercial banks 2 Liquidity risk management in commercial banks 2.1 Definition of liquidity risk management 2.2 Why does liquidity risk management matter? 2.3 The process of liquidity risk management in commercial banks system .5 2.4 The policies and liquidity risk management tools of central bank to commercial banks Lessons learned for Vietnamese commercial banks from the experiences of other countries in the world II The current situation of liquidity risk management of the Vietnamese commercial banking system and VP Bank .7 An overview of the Vietnamese commercial banking system .7 1.1 Structure of Vietnam's commercial banking system 1.2 Charter capital 1.3 Business performance 1.4 Risks in Vietnam's commercial banking system 11 The current situation of liquidity risk management of Vietnamese commercial banks 13 2.1 General situation 13 2.2 Case study: Vietnam Prosperity Joint Stock Commercial Bank – VPBank .14 Causes and effects of the liquidity risk on commercial banks 17 3.1 Causes 17 3.2 Effects 18 III Solutions for liquidity risk management of selected banks in Vietnam 19 Orientation for liquidity risk management of selected banks in Vietnam .19 Liquid risk management solutions of Vietnam's commercial system .20 Recommendations to the government, related ministry and sector 21 References 22 I OVERVIEW OF LIQUIDITY RISK MANAGEMENT Overview of liquidity risk 1.1 The definition of liquidity risk 1.1.1 Liquidity In terms of assets: Liquidity is understood as the ability to convert assets into money In terms of Bank's perspective: Liquidity is understood as the Bank's ability to promptly and fully satisfy financial obligations arising in the course of its business operations, such as payment of deposits, loans, payments and other financial transactions 1.1.2 Liquidity risk There are many definitions of liquidity risk depending on different approaches of researchers After many carefully researches, in our group’s opinion: Liquidity risk is potential loss of finance, reputation can occur due to the Bank's inability to fulfill payment obligations and make payments fully and on time as committed Liquidity risk is the financial loss of a commercial bank to overcome the insolvency of the bank 1.2 Types of liquidity risks of the commercial banking system - According to the structure: Liquidity risk can be divided into groups: Liquidity risk with early withdrawal, Term liquidity risk with correct liquidity conditions, Financing liquidity risk, Market liquidity risk - According to the origin leading to liquidity risk: Liquidity risk is divided into groups: Liquidity risk from the Debt side, Liquidity risk from the Credit side, and Liquidity risk from off-balance sheet activities 1.3 Signs identifying liquidity risk in the commercial banking system First, the bank has lost credibility in the market Second, about the volatility of bank stock prices Third, the bank raised deposit rates to abnormally high Fourth, the bank incurs losses from asset sales Fifth, there is a decrease in the ability to meet loan requirements Sixth, banks are forced to borrow capital from the Central Bank and / or from the interbank market with large scale and high interest rates Seventh, more residential deposits are withdrawn or an increase in term deposits is withdrawn before maturity 1.4 Cause of liquidity risk 1.4.1 Group of objective causes: - The instability of the macro-economy - Interest rate sensitivity - Liquidity needs of customers are getting higher and higher - The forecasting capacity of the monetary authorities is weak 1.4.2 Group of subjective causes: - Excessive credit growth compared to capital sources - Holding low-quality, inflexible assets - Inadequacies in the term structure of Assets and Liabilities - High deposit concentration, less stable deposit structure - Poor market access - Poor system of risk management and internal control - Commercial banks reduced public confidence 1.5 Influence of liquidity risk of commercial banks Liquidity risk is the result of many reasons, the risk that the commercial banking system cannot avoid in the history of existence and development, which is not expected by the managers of commercial banks, but it is still is always a permanent threat that the managers of commercial banks must find a way to deal with if they not want to face the negative effects that liquidity risk causes to commercial banks 1.5.1 Effects on operations of each bank and banking system Firstly, when liquidity risk occurs and exceeds the bank's control, the bank may fall into insolvency If there is no support from the central bank through the function of being the last lender to a commercial bank, it will go bankrupt or be merged The bankruptcy of a bank due to the insolvency can cause a chain effect affecting the operation and liquidity of the whole commercial banking system This is a lesson learned after the 1997 Asian financial crisis Second, a commercial bank must always face the trade-off between liquidity and profitability This problem can be explained by the fact that when a bank chooses a liquidity target by maintaining a surplus liquidity status, it means that there is an amount of capital that is not put into profitable investment, the larger this capital amount, the more profit the potential of the bank is reduced On the contrary, if the bank chooses high profit target by maximizing the capital it can get into profitable investment, the liquidity deficit will push the bank into liquidity risk, detrimental to the banking operation Third, if this happens, the business will be in trouble, the profits of commercial banks will be reduced due to the cost of dealing with the lack of liquidity, which will lead to contributions of commercial banks to the economy such as: promoting growth, paying taxes to the state budget is greatly affected And State management agencies will definitely pay more attention to the activities of commercial banks Again, the managers certainly didn't like this Fourth, liquidity difficulties still occur often, although in many cases, they are not too serious to cause the bank to collapse immediately, but still dangerous enough to obstruct the business for a while, causing the bank to be dominated by other organizations, or have to change business strategy Individuals and departments in charge of ensuring the right liquidity in commercial banks will normally have to find ways to maintain acceptable levels of risks, as well as in the form of trade-offs to get the best balance in activities and goals If these goals are to be taken into account, any liquidity policy must both consider securing a liability and allowing the implementation of a subsequent profit-related business strategy There are two reasons why liquidity is so important to banks First, it is necessary to have liquidity to meet new loan requirements without having to withdraw outstanding loans or liquidate loans, term investments Second, there is a need for liquidity to respond to all the daily or seasonal fluctuations in the need for timely and orderly withdrawals Because banks regularly mobilize short-term deposits (with low interest rates) and lend them with long-term terms (higher interest rates), the bank basically always has a huge need for liquidity 1.5.2 Impact on the economy When a commercial bank is insolvent due to liquidity risk, anxiety arises not only for banks with liquidity problems but also for customers of other banks In the operations of the commercial banking system, trust plays a very important role in all activities, when trust is shaken, it can lead to a series of banks insolvency in a short time, causing the whole commercial banking system to fall into chaos This chaos could be the beginning of a series of disruptions in the commercial banking system Contribution of financial intermediaries in general and commercial banks in particular to economic growth, to the State budget, to unemployment rate is very large Therefore, a collapse of a commercial bank not only affects the commercial banking system, the financial system, but also affects the economy and politics in country Liquidity risk management in commercial banks 2.1 Definition of liquidity risk management Liquidity risk management is the process of identifying, measuring, controlling and financing a bank's inability to meet its obligations to customers In other words, it creates a plan to identify key liquidity risks and then build up solutions to prevent or reduce the impact of liquidity risk, in order to make a more effective business strategy for the bank 2.2 Why does liquidity risk management matter? The first is that the liquidity risk is the presence of trade-off between liquidity risk and profitability of a bank The second reason is that if liquidity risk happens, it might cause severe consequences : starting from the loss of income or brand reputation and the most serious one is the bank will go bankrupt The third reason is that in special cases, liquidity risk will put commercial banks into insolvency and then commercial banks might face the risk of going bankrupt 2.3 The process of liquidity risk management in commercial banks system  Liquidity risk management in commercial banks  The purpose of liquidity risk management is to ensure the ability to pay promptly with reasonable costs Furthermore, it predicts the liquidity risk might happen and loss if any  Liquidity risk management in commercial banks should be deployed under the “ layers of defense model”  Recognizing the sign of liquidity risk management : the increase in assets, speed of loan higher than the speed of deposits; the quality of credit reduces significantly, the rise of capital financing costs and the focus of various funding sources on the wholesale market  Measuring liquidity risk in many different ways 2.4 The policies and liquidity risk management tools of central bank to commercial banks  Central bank regulates on the liquidity risk management at commercial banks  Specific regulations include: solvency ratio, liquidity reserve ratio, 30-days solvency ratio, short-term multi-source ratio for medium and long term loans, credit limit, loan to deposit, limit of capital contribution to buy shares, In addition, the central bank also requires commercial banks to promulgate regulations on liquidity risk management  Central bank decides to use monetary policy tools to manage liquidity risk of commercial banks such as: compulsory reserves, refinancing, interest rate, exchange rate, open market operation  Liquidity risk measurement models of commercial banking system: stress test model and early warning of liquidity stress model for commercial banking system Lessons learned for Vietnamese commercial banks from the experiences of other countries in the world Through the general study of liquidity risk and management of liquidity risk in the banking system of some countries, we can draw some lessons for Vietnam's commercial banking system as follows: Firstly, liquidity risk is a permanent risk in the banking system's business operations Secondly, liquidity risk is not only caused by the weakness in management activities of liquidity risk of each commercial bank, but it is also influenced by a series of factors outside the bank, especially factors relating to the monetary policy of the central bank Thirdly, in managing internal liquidity risk of each commercial bank, the role of a reasonable and effective liquidity risk management system is extremely important Fourthly, there should be a comprehensive liquidity risk management framework and a developed policy system Fifthly, regular and periodic reporting, inspection and supervision are indispensable Sixthly, using tools to measure and monitor liquidity risk in order to accurately calculate demand and solvency II The current situation of liquidity risk management of the Vietnamese commercial banking system and VP Bank An overview of the Vietnamese commercial banking system 1.1 Structure of Vietnam's commercial banking system The Vietnamese banking system is constantly expanding in size and diversity operational nature, type of ownership In which, commercial banks in Vietnam are divided into categories based on ownership relations: first is a group of stateowned and commercial banks and joint-stock commercial banks that are dominated by state shares, second are group of joint-stock commercial banks, and third is LLC, fourth is joint venture commercial banks, five is oversea branch of commercial bank and sixth are commercial banks with 100% foreign capital The expansion in scale, operation and the diversity of ownership forms of the commercial banking system in Vietnam has contributed greatly in promoting economic development However, there are many commercial banks with Following are two other state-owned joint stock commercial banks, Vietcombank and VietinBank, with charter capital of 37,234 billion and 27,088 billion dong, respectively Next is Techcombank with a charter capital of 35,000 billion Agribank has not officially announced the charter capital data, but in the first half of the year, the bank also has no information about the change of capital, so the bank's charter capital is expected to remain at a level 30,591 billion VND At private banks, excluding Techcombank, banks with high charter capital include: VPBank: 25,299 billion dong; MB: 24,370 billion VND; SCB: 20,231 billion dong; Sacombank: 18,852 billion Dong; SHB: 17,558 billion dong 1.3 Business performance - Capital mobilization activities According to the State Bank of Vietnam (SBV), as of the end of September 2020, the total means of payment for the economy reached more than 11.48 million billion dong, an increase of 8.63% compared to the beginning of the year Total deposits of customers in the system of credit institutions in the country as of September 30, 2020 was more than 9.48 million VND, an increase of 7.85% compared to the beginning of the year and 1, 66% compared to the end of August Specifically, by the end of September 2020, residents' deposits at credit institutions were more than 5.1 million billion, up 5.77% compared to the beginning of the year and a rose of 0.27% compared to the end of August Residents' deposits increased sharply in the first months of the year, but started to show signs of slowdown from June 2020 to September 2020 Meanwhile, corporate deposits have risen sharply again in recent months As of September 30, 2020, deposits of economic organizations (economic organizations) at credit institutions nationwide were over 4.37 million dong, up 10.39 percent from the beginning of the year and a rise of15 percent compared with the end of May 2020 Especially, deposits of financial institutions tend to grow stronger than residential deposits at credit institutions in recent years Specifically, in 2019, financial institutions' deposits at credit institutions increased by 18.59% compared to the end of 2018; while that of residents only increased by 10.36% Statistics show that, since February 2020, the deposits of financial institutions at credit institutions have decreased significantly, but since May 2020, they have increased significantly compared to the previous month Deposit growth of financial institutions remained high in June, August and September 2020 The main reason is that many businesses have a large source of cash, not only not have the need to borrow from a bank, but also have a source of money to send to the bank This can be explained by the effects of the Covid-19 pandemic, the decline in the ability to consume domestic and export goods and the ability to provide services to customers There are no investment opportunities and business expansion, and the economy is risky, so many businesses temporarily deposit money in commercial banks (commercial banks) Regarding the movement of people's deposits at commercial banks, also due to the impact of the Covid-19 epidemic, narrowed business and investment opportunities, high risks, and credit growth to the economy of the commercial banks Commercial banks had some difficulties so commercial banks in turn sharply reduced mobilizing interest rates More than year ago, the highest domestic currency deposit interest rate of commercial banks such as VietAbank reached 9% / year, SCB up to 8.6% / year from June 2020, it started to decrease and until the end November 2020 decreased to the highest level, only 7.1% - 7.3% / year Due to the sharp drop in interest rates, many people turned to investment channels to buy corporate bonds, invest in stocks, invest in real estate, buy gold This made residential deposits at commercial banks plummeted and slowed - Credit operations Regarding capital supply for economic growth, according to the State Bank of Vietnam, as of November 17, 2020, credit outstanding loans of the whole economy of credit institutions have reached more than VND 8.79 million, an increase of 7.26 % compared to the end of 2019; as low as 2/3 of the same period in 2019 (up 10.28%); in which, VND credit increased by 7.76%, foreign currency credit decreased by 0.69% For the most priority areas: Credit for agricultural and rural development, as of October 30, 2020, up 6.5% compared to the end of 2019; the export sector increased by about 10%; loans to small and medium enterprises increased 7.21%; the supporting industry decreased by 3.83%; the high-tech enterprise sector decreased by 0.81% Thus, due to the effects of the Covid-19 epidemic, supporting industries, manufacturing with high-tech applications are facing many difficulties, the scale is narrowed, and laborers are underemployed Many businesses in this field not have money to repay commercial banks 1.4 Risks in Vietnam's commercial banking system Due to its small scale and Vietnam's commercial banking system, it was born quite late; the dynamic is still poor compared to regional and international, so Vietnamese commercial banks not can avoid many risks in banking business Most common of Vietnamese commercial banks are as follows: - Credit risk Credit risk is associated with the most important and largest operations of commercial banks - credit activities When doing a particular financing, the bank tries to analyse the borrower's factors so that safety is highest Credit risk can be identified through a number of quantitative indicators in which the typical can be seen is the rate of bad debts of commercial banks This target reflects how much for every 100 dong of outstanding loan capital is bad debt - debt that cannot or is hard to recover Credit risk stems from the fault of both parties to the pocket relationship: the Bank and the borrower - Market risk Market risk is the risk of loss occurring in the balance sheet due to fluctuating prices Market risk is associated with four basic types of risk: • Interest rate risk (risk due to variable interest rates); • Equity risk (the risk of changes in security prices); • Exchange rate risk (risk due to changes in foreign currencies prices); • Commodity risk (the risk of changes in commodity prices) The standard method of capital requirement to deal with market risks will be considered for each of the risk factors including: interest rate risk, equity risk, exchange rate risk and commodity risk Specific regulations on how to calculate the minimum capital requirements to deal with these four risks according to the standard method are detailed in section A (A1 to A5) of the document “Amendment to the Capital Accord to incorporate market risks ”approved by the Basel Committee in November 2005 - Operational risks Operational risk is the risk of loss arising from internal management activities, by people, by the system, or by improper or damaged external incidents; includes legal risk, but does not include strategic risk and brand risk Banks are allowed to choose one of three ways to calculate their capital needs to provide provision for operational risks with increasing complexity and risk sensitivity, including: • The Basic Indicator Approach (BIA), • The Standardized Approach (TSA), • Advanced Measurement Approaches (AMA - Advanced Measurement Approaches) As a bank's operation becomes more complex, it is necessary to adopt a method with a higher complexity, and at the same time, not allow banks to switch back to the simpler method once approved to use the methods Advanced Conversely, if the banks are judged ineligible to continue using the advanced approach, they need to go back to the basic approach until these requirements are met The current situation of liquidity risk management of Vietnamese commercial banks 2.1 General situation In the midst of COVID - 19, it is urgent for Vietnam commercial banks to improve their own liquidity management in order to ensure their own survival as well as the ability to support and restore the economy Because of the above reasons, the regulations on liquidity risk management are the one that are regularly updated and changed Current documents can be named such as Law on Credit Institutions 2010, Circular No 06/2016 / TT-NHNN dated 25/05/2016 of the State Bank which regulates prudential ratios and limits in the operations of credit institutions and foreign bank branches The law on liquidity risk management of banks in Vietnam includes the following basic contents: the first one is the regulations of internal issues, the second one is about the liquidity ratio which needs to be followed and the last one is to pay attention to commercial banks' health in order to provide immediate solutions during the epidemic Moreover, until January of 2021, a lot of banks reckon that they are starting to build standards towards the application of Basel III internally and this is a corridor for risk management and effective use of capital Basel III is a risk management framework with stricter criteria than Basel II, announced by the Basel Committee on Banking Supervision (BCBS) in 2010 The new standard's goal is to cope with financial crises, raise the improvement of sustainability of the banking system and provide help in order to prevent possible systemic losses in the future By following both regulations and standards above, some commercial banks in Vietnam seem to overcome the difficulties and ensure sustainable cash flow 2.2 Case study: Vietnam Prosperity Joint Stock Commercial Bank – VPBank Recently, Vietnam Prosperity Bank (VPBank) was named the best liquidity risk management bank in Asia by The Asian Banker magazine Mr Dmytro Kolecko, Head of Banking Risk Management Division of VPBank, said that this is the first time a bank in Vietnam has been recognized for its liquidity risk management quality, comparable to many reputable banks in the area  Risk assessment based on customer behavior There are many criteria that The Asian Banker takes into consideration when assessing the bank's liquidity management, including: healthy balance sheet structure, ability to monitor liquidity risks and the ability to capital mobilization in the market are reflected in the diversity of capital sources mobilized by terms and subjects, and the growth rate of capital For example, to assess liquidity risk, VPBank must carry out a liquidity stress test, which ensures that the bank can maintain its liquidity reserve period for at least a month under stressful conditions according to international practice In addition, the bank also has to maintain a liquidity buffer to meet the requirements of the State Bank, rating agencies as well as strategic investors Solving the above problem is not easy for VPBank, especially when the bank is always ranked in the group with higher risk investment appetite than other banks in the industry However, thanks to regular access to higher-risk investments, VPBank has an early awareness of building a risk management system, including liquidity risk management “To build a risk management system for a bank is not easy It is a job that requires gradual, step-by-step work Banks cannot implement an effective risk management system in just nine months or a year, no matter how much money they invest and hire good experts, ”said Dmytro Kolechko, Director of Risk Management in VPBank With VPBank, since 2015, the bank has embarked on building a risk management system suitable to its characteristics Over the past years of development, the risk management system has truly become "a core part of VPBank, sustainable in the organizational culture" VPBank's director of risk management said that VPBank's management system is not only based on pure data such as contract terms or loan maturity Instead, VPBank manages risk based on actual customer behavior VPBank noticed different behaviors of customers in using the granted credit limit Individual customers tend to increase spending on weekends, while corporate and homebuyers spend a specified cycle, related to their loan All these data are collected, analyzed, and then adjusted by VPBank for optimal liquidity Up to now, the bank has about eight models to identify customer behavior assessment In addition to the basic methods, VPBank also applies advanced tools for the liquidity management system such as regression analysis, using AI to analyze "random forest" (drawing the correlation, logic between rows random behavior series of customers), as a result, the bank's liquidity is always in an abundant state  Benefit from macro policy Thanks to its good governance system meeting international standards, VPBank has also diversified capital mobilization sources such as successfully issuing USD 300 million of international bonds in 2019 and continuing to implement new loans with IFC and Propaco in 2020 In addition to good risk management thanks to internal banking, Mr Dmytro also acknowledged that VPBank's achievements are also due to the stable macroeconomy, with the leading leaders of the Government and the Bank country If we look at the overnight interest rate on the interbank market, we can see that the interest rate has been at an unprecedented low recently, showing that the liquidity in the system is very abundant This result is due to the State Bank's decisive policies to stabilize the macro-economy, such as many times cutting interest rates, or extending short-term capital tightening schedule for medium and long-term loans “Normally, in the face of unusual events such as natural disasters and epidemics, people tend to withdraw money from banks to find safer shelter However, in Vietnam everything is the opposite During the peak period of Covid19, the VPBank system recorded that customer deposits did not decrease but increased It shows the strong belief of the people in the Government, ”said Mr Dmytro A stable macro policy helps banks with effective governance systems such as VPBank promote In early September, the State Bank extended the credit limit to a number of well-performing commercial banks, including VPBank Accordingly, the bank's credit limit from 13% will be increased by 19-23% in 2020 In the future, VPBank as well as the Risk Management Division will have to meet stricter standards such as enhanced Basel II standards, Basel III standards with focus on market risks and IFRS must be done, in which training and building personnel, internal resources will be the key task that the Division continues to perform Causes and effects of the liquidity risk on commercial banks 3.1 Causes Liquidity risk can come from the side of liabilities or assets, or from offbalance sheet activities of a commercial bank's balance sheet - Objective reasons  Macro causes + Due to the economic crisis, the cost of capital mobilization increases, on the contrary, the efficiency of lending and investment declines In another respect, a crisis occurred, which reduced confidence in the financial system Organizations and residents will conduct mass withdrawals at commercial banks, regardless of term Meanwhile, commercial banks have "poured" capital into investment activities and long-term loans, so they cannot meet the abovesaid massive withdrawal needs As such, liquidity risk occurs This is the reality in the current Vietnamese economic conditions that commercial banks are also victims + Overheating credit growth is also the cause of liquidity risk The credit growth rate of commercial banks in 2007 was 53.89% The overheated credit growth of commercial banks accompanied by an inadequate investment structure, focusing heavily on real estate investment in pursuit of profits, creates high risks when the market freezes, creating imbalance Regarding the maturity between assets and liabilities because the bank has used too much short-term capital for long-term loans + From the client side, commercial banks' sensitivity to changes in interest rates, credit regulations, collateral and other tools can hardly be effectively regulated liquidity of banks  Subjective causes + Related to qualifications and skills of employees in banks Due to the lack of formalism of the management strategy of the banks and the weak planning of the banks, banks are unable to anticipate demand for loans and predict demand for withdrawals of cutomer When the demand for withdrawals exceeds the expected level, these banks will face liquidity problems + Chasing immediate profit targets should have too open lending policies, leading to lower lending conditions, poor borrowers, the inevitable consequence of credit risk and then is the liquidity risk An example is the home mortgage loan in the US: the credit crisis of the home mortgage loan for low-income people + Use imbalance in terms of term to keep capital resources mobilized and invest capital: Banks mobilized capital for a short term, but in fact, banks often use loans with longer terms + The systematic linkage between commercial banks to ensure payment security is still weak, creating an unhealthy competition, pushing interest rates up, creating a gap for customers to deposit money "make prices, increase interest rates" or withdraw money is transferred to other commercial banks, leading to weakening the system's ability to combat the lack of liquidity And there are many other reasons, depending on the political characteristics of each period in each country, each bank is different 3.2 Effects - Effect on the operations of each bank and the banking system  The collapse of a bank can affect the entire commercial banking system  The trade-off between liquidity and profitability Good liquidity, low profit or high profit, low liquidity are all detrimental to banking operations  The opportunity cost of dealing with liquidity risk  The liquidity problems will hinder the business, can easily be dominated by other organizations, or have to change the business strategy - Affect the economy: Insolvency caused by liquidity risks not only affects the commercial banks themselves but also the commercial banking system, affects the financial system, the economy and national politics III Solutions for liquidity risk management of selected banks in Vietnam On the basis of the strategic directions of developing the commercial banking system and through researching international experiences in liquidity risk management and assessing the current situation of liquidity risk of the commercial banking system, found the direction of liquidity risk management for Vietnam's commercial banking system is as follows: Orientation for liquidity risk management of selected banks in Vietnam - The commercial bank system proactively builds a framework policy on liquidity risk management, establishes specific processes to identify, measure, and control possible liquidity risk Banks need to have the ability to accurately forecast cash flows in and out, especially cash flows related to off-balance sheet commitments and liabilities obligations to proactively make action plans in unexpected liquidity risk situations - Upgrade the liquidity risk management information system of the commercial banking system, develop a strategy and process of handling liquidity risk for the entire Vietnamese commercial banking system - To rapidly and fundamentally improve financial health and improve the financial capacity of the Vietnamese commercial banking system to ensure that commercial banks have sufficient financial capacity in terms of size and quality to reach the minimum capital adequacy ratio - Improving the management and operating capacity of the Vietnamese commercial banking system Commercial banks need to well manage interest rate risk, interest rate gap, and term risk management; REPO, SWAP market; Forward; Future Enhance economic research and analysis capabilities for remote prevention of liquidity risks The system of Vietnamese commercial banks builds a reasonable liquidity contingency plan - Building a process of analyzing the liquidity level of the commercial banking system, of commercial bank branches, changing the payment system according to the current fixed limit by calculating the liquidity in the flow of credit activities Liquid risk management solutions of Vietnam's commercial system In the thesis "Liquidity risk management in the Vietnamese banking system", Dr Vu Quang Huy - Lecturer of Banking Academy has proposed a number of solutions to this problem: - Building risk management strategy, liquidity management based on building business strategy maps of commercial banks, model of liquidity management strategy - Improve incident prevention, timely detect warning signs and effectively respond to liquidity crisis - Vietnam commercial banking system added and completed internal regulations related to liquidity risk management professionally and roadmap for international integration on liquidity risk management standards - Strengthening financial capacity of commercial banks to ensure capital adequacy ratios according to international standards Vietnam commercial banks currently implement the following solutions to strengthen financial capacity and ensure capital adequacy ratios - Strengthening cooperation and linkages between commercial banks to create a healthy competitive environment in capital mobilization and lending so as not to create shocks in the money market that affect the liquidity of banks Solutions to strengthen Joint cooperation between commercial banks creates a healthy competitive environment in capital mobilization and lending so as not to create shocks in the money market that affect banks' liquidity - Apply modern equipment technologies and modern information technology softwares Recommendations to the government, related ministry and sector Dr Vu Quang Huy - Lecturer of Banking Academy also mentioned in his thesis "Liquidity risk management in the Vietnamese banking system": - Deposit insurance should participate in the banking restructuring process - Closely coordinate and create a standard information connection system between the State Bank and commercial banks, between ministries and branches with the State Bank and commercial banks - The People's Court, the General Department of Judgment Execution and the Ministry of Public Security jointly support cooperation for the highly feasible bad debt settlement - The Government restructures the economy, promotes market development, improves business capacity, and provides other macro policies so that bad debts are handled more efficiently in the coming time - It is necessary to improve the legal, institutional, stock market infrastructure and develop the corporate bond market to create a medium and long term capital mobilization channel for businesses to reduce pressure on banks to borrow capital References Nguyễn Thu Thủy, Trần Thị Vân Anh - Trường Đại học Kinh tế Quản trị kinh doanh Thái Nguyên Lại Thùy Linh, Trường Cao đẳng Kinh tế - Tài Thái Nguyên (2020), “Quản lý rủi ro khoản chi nhánh ngân hàng thương mại”, Tạp chí Tài Chính TS Phí Trọng Hiền (2020), “Quản trị rủi ro ngân hàng: Cơ sở lý thuyết, thách thức thực tiễn giải pháp cho ngân hàng thương mại Việt Nam”, Tạp chí Ngân hàng Ths Đặng Thị Lan Phương – TS Vũ Ngọc Diệp (2021), “Hiệu cho vay ngân hàng giới học kinh nghiệm cho ngân hàng TM Việt Nam”, Tạp chí Kinh doanh Hiệp hội Ngân hàng Việt Nam (2020), “VPBank đánh giá quản trị rủi ro khoản tốt cấp châu lục” Luận văn (2020), “Bài học cho ngân hàng thương mại Việt Nam quản trị vốn chủ sở hữu ngân hàng thương mại”, truy cập ngày tháng năm 2021, từ https://luanvanaz.com/bai-hoc-cho-cac-ngan-hangthuong-mai-viet-nam-ve-quan-tri-von-chu-so-huu-cua-cac-ngan-hang-thuong-mai.html? fbclid=IwAR0DkpxHrKyERTfw0eu18OyE7_b9Z1hBXV0SGhVRCBlOsDwP8vyUcyblzhM Ngọc Bích (2020), “Đầu năm 2020, bảng xếp hạng vốn điều lệ ngân hàng nào?”, CafeF Luận văn (2020), “Giải pháp quản lý rủi ro tín dụng ngân hàng” TS Nguyễn Đại Lai (2021), “Từ học quản lý rủi ro hệ thống NHTM Mỹ đến học cho hệ thống ngân hàng Việt Nam”, Doanh nghiệp Hội nhập TS Nguyễn Thanh Phong (2021), “Giải pháp hạn chế rủi ro tín dụng ngân hàng thương mại Việt Nam”, Tạp chí Tài ... identifying liquidity risk in the commercial banking system .2 1.4 Cause of liquidity risk 1.5 Influence of liquidity risk of commercial banks 2 Liquidity risk management. .. liquidity risk management of the Vietnamese commercial banking system and VP Bank An overview of the Vietnamese commercial banking system 1.1 Structure of Vietnam' s commercial banking system The Vietnamese... for liquidity risk management of selected banks in Vietnam 19 Orientation for liquidity risk management of selected banks in Vietnam .19 Liquid risk management solutions of Vietnam' s commercial