GRADUATION MASTER''''S THESIS MASTER IN FINANCIAL MANAGEMENT GRADUATION MASTER''''S THESIS MASTER IN FINANCIAL MANAGEMENT Studen Name Le Duc Nhat 1 ABSTRACT ACKNOWLEDGEMENT TABLE OF CONTENTS ABSTRACT 2 ACKN[.]
GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT MASTER IN FINANCIAL MANAGEMENT ABSTRACT ACKNOWLEDGEMENT TABLE OF CONTENTS Credit risk management at Vietnam Joint Stock ABSTRACT ACKNOWLEDGEMENT Commercial Bank for Industry and Trade, TABLE OF CONTENTS LIST OF TABLES Thanh Xuan branch LIST OF FIGURES INTRODUCTION CHƯƠNG 1: CƠ SỞ LUẬN VỀ QUẢN TRỊ RỦI RO TÍN DỤNG 10 1.1 Rủi ro tín dụng hoạt động Ngân hàng 10 1.1.1 Khái niệm rủi ro tín dụng 10 1.1.2 Phân loại rủi ro tín dụng 11 1.1.3 Nguyên nhân rủi ro tín dụng 11 1.1.4 Hậu rủi ro tín dụng 11 1.1.5 Một số tiêu đánh giá rủi ro tín dụng 12 Graduate student: Le Duc Nhat Supervisor: Dr.Tran Tat Thanh 1.2 Quản trị rủi ro tín dụng Ngân hàng thương mại 14 1.2.1 Khái niệm quản trị rủi ro tín dụng 14 1.2.2.Yêu cầu quản trị rủi ro tín dụng 14 1.2.3 Các nguyên tắc quản trị rủi ro tín dụng 14 1.2.4 Nội dung quản trị rủi ro tín dụng 15 1.3 Các yếu tổ ảnh hưởng đến quản trị rủi ro tín dụng Ngân hàng thương mại 21 1.3.1 Yếu tố chủ quan 21 HA NOI, 2020 Studen Name: Le Duc Nhat GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT ABSTRACT Thesis Title ： Credit risk management at Vietnam Joint Stock Commercial Bank for Industry and Trade, Thanh Xuan branch Pages: 68 University：Vietnam National University Graduate School：International School Date：Octorber, 2019 Graduate Student：Le Duc Nhat Degree：Master Supervisor：Dr.Tran Tat Thanh I chose this topic for my master's thesis based on the urgency of controlling and limiting risks to ensure the safety and efficiency in credit activities of commercial banks This thesis systematizes theoretical and practical issues about credit risk management in commercial banks, meanwhile evaluating the credit risk management of Vietnam Joint Stock Commercial Bank for Industry and Trade - Thanh Xuan branch Thereby, solutions will be discussed to enhance credit risk governance in the borrowing activities of banks Keywords: Risk management, credit risk, commetcial bank, outstanding debt, bad debt Studen Name: Le Duc Nhat GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT ACKNOWLEDGEMENT To complete this thesis, apart from my efforts, I have received the enthusiastic guidance of my lecturers and my supervisor, as well as the unconditional encouragement and support of family and friends throughout the research process With sincere affection and deep gratitude, I would like to express the most sincere gratitude to those who have cared for and supported me during this pressured time First of all, I would like to express my thanks to the International Faculty / Hanoi National University and all the teachers who have devotedly taught and facilitated me to help me throughout the learning process In particular, I would like to express my deepest thanks to my direct instructor - Dr Tran Tat Thanh, who dedicated, guided, edited and encouraged me in the process of completing this thesis Besides, I would like to express my sincere thanks to the Board of Directors and the Finance and Accounting Department of Vietnam Joint Stock Commercial Bank for Industry and Trade - Thanh Xuan Branch for creating favourable conditions and helping me in collecting data, as well as dig deeper into the business situation of the Branch Lastly, I want to give my greetings to all the teachers, hope they are in good health and achieve more success in their careers Thank you! Author Le Duc Nhat Studen Name: Le Duc Nhat GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT TABLE OF CONTENTS ABSTRACT………………………………………………………………………… ACKNOWLEDGEMENT………………………………………………………… TABLE OF CONTENTS …………………………………………………………… LIST OF TABLES …………………………………………………………………… LIST OF FIGURES ………………………………………………………………… INTRODUCTION …………………………………………………………………… Executive summary………………………………………………………………… Objectives of the study …………………………………………………………… 10 Object and scope of the study …………………………………………………… 10 Research methodology …………………………………………………………… 10 Structure of the study ……………………………………………………………… 11 CHAPTER 1: FUNDAMENTAL THEORY OF CREDIT RISK MANAGEMENT …………………………………………………………………… 13 1.1 Credit risk in banking operation………………………………………………… 13 1.1.1 The concept of credit risk ……………………………………………………… 13 1.1.2 Credit Losses classification …………………………………………………… 14 1.1.3 Consequences of credit risk …………………………………………………… 15 1.1.4 Assessing credit risk …………………………………………………………… 17 1.2 Credit risk management in commercial banks ………………………………… 20 1.2.1 Definition of credit risk management ………………………………………… 20 1.2.2 Requirements in credit risk management …………………………………… 20 1.2.3 Principles of credit risk management ………………………………………… 20 1.2.4 Content of credit risk management …………………………………………… 21 Studen Name: Le Duc Nhat GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT 1.3 Factors affecting credit risk management at a branch of a commercial banks 26 1.3.1 Subjective factors ……………………………………………………………… 26 1.3.2 Objective factors ……………………………………………………………… 27 CONCLUSION OF CHAPTER …………………………………………………… 30 CHAPTER 2: CURRENT CIRCUMSTANCE OF RISK MANAGEMENT IN VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE - THANH XUAN BRANCH ……………………………………………… 31 2.1 General introduction about Vietnam Joint Stock Commercial Bank for Industry and Trade - Thanh Xuan branch ………………………………………… 31 2.1.1 Historical establishment and development of the branch …………………… 31 2.1.2 Organizational structure ……………………………………………………… 32 2.1.3 Business performances and earning results of Vietnam Joint Stock Commercial Bank for Industry and Trade - Thanh Xuan branch in recent years 2.2 Actual situation of credit risk management at Vietnam Joint Stock Commercial Bank for Industry and Trade - Thanh Xuan Branch ……………… 2.2.1 Circumstance of credit risk at Vietnam Joint Stock Commercial Bank for Industry and Trade Thanh Xuan branch ………………………………………… 2.2.2 Actual situation of risk management of Vietnam Joint Stock Commercial Bank for Industry and Trade - Thanh Xuan Branch ……………………………… 2.3 Some limitations in risk management activities of the Vietnam Joint Stock Commercial Bank for Industry and Trade Thanh Xuan branch ………………… 2.3.1 Restrictions on credit file evaluation and credit rating performance ……… 33 38 38 40 43 43 2.3.2 Limitations in inspection, control and supervision Monitoring after disbursement has not been effective ………………………………………………… 44 2.3.3 Restrictions on the handling of bad debts …………………………………… 44 2.3.4 Business restrictions on credit officers ……………………………………… 44 2.4 Reasons for the limitations in risk management activities of The Vietnam Joint Stock Commercial Bank for Industry and Trade, Thanh Xuan branch…… 45 2.4.1 Subjective causes ……………………………………………………………… 45 2.4.2 Objective reasons ……………………………………………………………… 47 CONCLUSION OF CHAPTER …………………………………………………… 51 CHAPTER 3: SOLUTIONS TO STRENGTHENING CREDIT RISK MANAGEMENT OF COMMERCIAL BANK OF INDUSTRIAL AND COMMERCIAL JOINT STOCK COMPANY OF THANH XUAN BRANCH … 52 Studen Name: Le Duc Nhat GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT 3.1 Orientation to strengthen credit risk governance at Vietnam Joint Stock Commercial Bank for Industry and Trade Thanh Xuan branch until 2021 …… 52 3.1.1 Business development orientation …………………………………………… 52 3.1.2 Orientations for strengthening credit risk governance ……………………… 53 3.2 Solutions to enhance credit risk governance at Vietnam Joint Stock Commercial Bank for Industry and Trade, Thanh Xuan branch ………………… 54 3.3 Some recommendations ………………………………………………………… 58 3.3.1 Propose to the State …………………………………………………………… 58 3.3.2 For the State Bank …………………………………………………………… 59 3.3.3 Propose to Vietnam Joint Stock Commercial Bank for Industry and Trade 61 CONCLUSION OF CHAPTER …………………………………………………… 63 CONCLUSION ……………………………………………………………………… 64 REFERENCES ……………………………………………………………………… 66 Studen Name: Le Duc Nhat GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT LIST OF TABLES Table 2.1 Capital raising situation of Thanh Xuan Branch 32 Table 2.2 Outstanding loans from Thanh Xuan Branch 34 Table 2.3 The ratio of outstanding debts and bad debts 37 Table 2.4 Proportion of provision to total outstanding loans 38 Table 2.5 Lending report by industry 41 Table 2.6 Lending report by economic sectors 42 Studen Name: Le Duc Nhat GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT LIST OF FIGURES Figure 1.1 Credit Risk Classification Figure 2.1 Vietnam Joint Stock Commercial Bank for Industry and Trade - Thanh Xuan branch Studen Name: Le Duc Nhat 13 31 GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT INTRODUCTION Executive summary Vietnam’s economy in general and banking system, in particular, are in the integration process into the world, which asks the authority to affirm and develop themselves In recent years, due to the macro and microeconomic policies, the Government and the State Bank of Vietnam have directed the direction in development for the banking system Promoting FDI (Foreign Direct Investment) into the banking industry is one of Vietnam's commitments as joining WTO (World Trade Organization) Vietnamese enterprises and financial institutions have various opportunities to expand their business activities, which also leads to fierce competition among foreign and domestic companies This phenomenon brings millions of possibility of uncertainty for operating businesses into the segment As credit activities still play a major part in the business structure of Vietnamese commercial banks, credit risk is accounted for the largest proportion and has the most serious consequences When credit risk occurs, banks are likely to face overdue, bad debts, which leads to a shortage of capital allocation, low liquidity, reduced profits, and bankruptcy as well Practically, the requirement for the Board of Directors is to control credit growth along with improving credit quality and ensuring credit safety in the upcoming period In order to achieve the required return, Vietnam Joint Stock Commercial Bank for Industry and Trade needs to analyze, identify and measure the causes of credit risk, thereby proposing solutions to prevent them That is why I chose the research topic "Credit risk management at Joint Stock Commercial Bank for Industry and Trade of Vietnam - Thanh Xuan branch" to contribute a practical value in daily credit activities for the overall development of banks Studen Name: Le Duc Nhat GRADUATION MASTER'S THESIS MASTER IN FINANCIAL MANAGEMENT Review of related studies Currently, in Vietnam and around the world, there are many researches, theories and experimental models related to the prevention and limitation of credit risks In it, there are some outstanding studies as follows: - In the world: + Risk Management in Banking, Joel Bessis (1998), Dictionary of Banking, Christian Frey (1998) The document summarizes and clarifies the basic theoretical issues about credit risk management from the basic concepts of credit risk and credit risk management + Credit risk measurement models, Joke Basis (1998), Chrinko (2000), Crolina (2001) The document clarifies the credit risk measurement models of commercial banks - In Vietnam: + Testing the credit risk tolerance of Vietnamese commercial banks - A case study of Vietnam Joint Stock Commercial Bank for Industry and Trade, Vu Trung Thanh (2017) Documentation dealing with the concept of credit risk tolerance After systematizing the theoretical basis of micro-stamina test, the thesis has proposed a three-step model of Vietinbank's capital adequacy test in three economic scenarios + Credit risk management at Vietnam Joint Stock Commercial Bank for Industry and Trade, Nguyen Duc Tu (2012) Documents that clarify the rationale for credit risks of commercial banks, the need to manage credit risks, and credit risk management contents include: identification, measurement, response and control credit risk + Some credit risk restrictions at Vietnam Joint Stock Commercial Bank for Industry and Trade Hai Phong Branch, Pham Trung (2017) The document proposes solutions and recommendations to enhance credit risk Studen Name: Le Duc Nhat 10 ... 31 GRADUATION MASTER'' S THESIS MASTER IN FINANCIAL MANAGEMENT INTRODUCTION Executive summary Vietnam’s economy in general and banking system, in particular, are in the integration process into... 14 GRADUATION MASTER'' S THESIS MASTER IN FINANCIAL MANAGEMENT management, including intrinsic and centralized - Intrinsic risk: Starting from factors, own characteristics, internal characteristics... committed in the contract The arising risk is associated with credit operations, leading to financial losses such as a Studen Name: Le Duc Nhat 13 GRADUATION MASTER'' S THESIS MASTER IN FINANCIAL MANAGEMENT