Vietnam National University HCM University of Economics and Law FINAL TEST REPORT Subject Commercial Banking Teacher Assoc Prof Nguyen Thi Diem Hien Topic BANK CREDIT GROWTH AND CREDIT QUALITY IN VIET[.]
Vietnam National University HCM University of Economics and Law FINAL TEST REPORT Subject: Commercial Banking Teacher : Assoc.Prof Nguyen Thi Diem Hien Topic: BANK CREDIT GROWTH AND CREDIT QUALITY IN VIETNAM BANK SYSTEM TP.HCM, Tháng năm 2023 Vietnam National University HCM University of Economics and Law FINAL TEST REPORT Subject: Commercial Banking Topic: BANK CREDIT GROWTH AND CREDIT QUALITY IN VIETNAM BANK SYSTEM Members: Num ber Full name Phan Ngọc Bảo Hân Lê Thị Lan Anh Nguyễn Phương Nga Nguyễn Thương Ngân Thi Student ID K204040226 K204041226 K204041237 K204041247 Email hanpnb20404c@st.uel edu.vn anhltl20404c@st.uel.e du.vn nganp20404c@st.uel.e du.vn thintn20404c@st.uel.e du.vn TP.HCM, Tháng năm 2023 % Contribution 25% 25% 25% 25% COMMENTS OF THE SUPERVISOR CONTENTS Chapter 1: Introduction Chapter 2: General issues about bank credit Chapter 3: Credit growth and Credit quality Chapter 4: Roposed to promote credit growth and credit quality commercial bank in VietNam COMMENTS TABLE OF CONTENTS CHAPTER 1: INTRODUCTION .1 1.1 Reasons for choosing the topic 1.2 Objectives of the study 1.3 Object and scope of the study 1.3.1 Research subjects 1.3.2 Research scope 1.4 Research question 1.5 Research Methods 1.6 Theme structure CHAPTER 2: GENERAL ISSUES ABOUT BANK CREDIT 2.1 General bank credit problems 2.1.1 What is bank credit? What is credit quality? .3 2.1.2 Why you need a credit rating? .3 2.2 Legal basis for credit quality (Circular 11/year 2021) 2.3 Credit quality studies 2.3.1 Domestic studies 2.3.2 Foreign Studies CONCLUSION OF CHAPTER .10 CHAPTER 3: CREDIT GROWTH AND CREDIT QUALITY 11 3.1 Credit growth over the years 11 3.2 Credit quality over the years 14 3.2.1 Current status of credit quality at commercial banks .14 3.2.2 Factors affecting credit quality 18 3.2.2.1 Objective factors 18 3.2.2.2 Subjective factors 19 CONCLUSION OF CHAPTER .20 CHAPTER 4: PROPOSED TO PROMOTE CREDIT GROWTH AND CREDIT QUALITY VIETNAMESE COMMERCIAL BANKS 21 4.1 Development orientation of credit growth: .21 4.2 Solutions to improve credit quality: 22 4.2.1 Human resource development solutions: 22 4.2.2 Credit product development solutions .23 4.2.3 Other solution groups: .23 CONCLUSION OF CHAPTER .24 GENERAL CONCLUSION 25 REFERENCE 26 TABLE OF TABLES Table 1: The classification of debts and specific provision ratios for each specific debt group Table 2: The specific additional provision made by Techcombank Table 3: Domestic studies Table 4: Foreign studies Table 1: Credit growth based on each bank's credit limit 14 Table 2: Non-Performing Loan Ratio in the period 2016 - 2022 16 Table 3: Non-Performing Loan Ratio In 10 Banks from 2016 to 2022 17 TABLE OF DIAGRAMS Diagram 1: Bank credit growth overs the years 11 Diagram 2: Credit market share and average compound growth of outstanding loans in the period 2016 - 2020 .12 Diagram 3: Some banks have the highest loan growth in the first months of 2022 13 Diagram 4: Non-Performing Loan Ratio in the period 2016 - 2022 .16 Diagram 5: Non-Performing Loan Ratio in 10 banks 17 ABSTRACT The essay uses data from Vietnamese commercial banks and state-owned banks to describe credit growth and credit quality By collecting documents - information available from different sources and analyzing - synthesizing to analyze information on domestic and foreign credit quality studies, the factors affecting credit quality From the research, the essay summarizes the proposals of the state bank to help credit growth and solutions to increase credit quality, reduce Non-Performing Loan ratio of banks, thereby increasing the efficiency of the economy Keyword: Credit growth; Credit quality; Non - Performing Loan; Non - Performing Loan Ratio CHAPTER 1: INTRODUCTION 1.1 Reasons for choosing the topic In recent years, Non-Performing Loan has tended to increase in commercial banks Banks have made great efforts in handling Non-Performing Loan, especially when there is support in terms of legal basis from Resolution No 42/2017/QH14 dated June 21, 2017 on pilot debt settlement Bad credit institutions bring many good results However, the NonPerforming Loan ratio in some banks is still high, affecting credit quality and credit growth of the economy On the other hand, the complicated development of the Covid - 19 pandemic worldwide in the two years 2019 - 2020 also caused many negative impacts on the economies of many countries, including Vietnam In particular, the impact of the pandemic on the commercial banking system is not small According to the General Statistics Office in 2020, credit growth of the Vietnamese banking system increased by about 10.14% compared to 2019, but it is still a low growth rate in the past years (2013 - 2020) “According to data, millions of billions of dong have been affected by the epidemic, but the structural debt is only about 300,000 billion dong In fact, the risk of bad debt of banks is much higher than the data on the books of accounts Stopping the implementation of Circular 14 will help banks face more clearly with bad debts, " General Secretary of the Vietnam Bankers Association said (Đào, 2022) To summarize, credit quality and credit growth play an important role in the business activities of commercial banks and Vietnam's economic growth Good credit growth is a signal of economic recovery Therefore, it is necessary to identify factors affecting credit growth and credit quality of the Vietnamese banking system in order to summarize and make recommendations to help credit growth and accelerate the recovery process economic recovery 1.2 Objectives of the study Through the credit situation of banks and credit quality in Vietnam's banking system to offer suggestions and solutions to help banks improve and develop, thereby helping to enhance customers' beliefs when using the services 1.3 Object and scope of the study 1.3.1 Research subjects General study of organizational and operational models of the banking system in the market economy along with credit growth and credit quality in Vietnam 1.3.2 Research scope In terms of spatial scope: State Bank and Vietnam's commercial banking system In terms of time scope: Studying the credit growth process through which changes and developments from 2016 to present Detailed study of credit changes over the years in the banking system, especially commercial banks Affecting credit is considered by the National Bank and given their views as well as ways to overcome in the context of the inflationary economy after the covid-19 pandemic 1.4 Research question To meet aims of the study, the research questions are: Question 1: Legal basis and credit quality research? Question 2: Credit growth status and credit quality, factors affecting credit quality? Question 3: What are some suggestions for credit growth and credit quality? 1.5 Research Methods Scientific research method is considered as practical theory and finding the right methods will determine the success of scientific research Using the document collection method - the method of using information available from different sources or self-gathering through surveys and interviews is also known as a non-empirical method So the non-empirical method is to collect data based on observing everything around the research problem and usually has methods such as: interview-answer method, survey method, questionnaire method expert opinion and observation methods from which to find out the general rule of digital transformation in Vietnamese commercial banks Next is the method of analysis & synthesis – this is an important method and a premise for the following methods After analyzing and synthesizing, next are practical research methods (investigation methods, scientific experimental methods and expert methods) and theoretical research methods (hypothetical and experimental methods) history) from the aggregated data to distinguish qualitative data and quantitative data, then research to find out the nature and laws of digital transformation through practice or scientific information on pre-existing scientific texts and documents From there, it shows changes in credit growth and credit quality of banks in Vietnam 1.6 Theme structure Topic covered include 26 pages, has the following chapter structure: Chapter 1: The Beginning Chapter 2: General bank credit problems Chapter 3: Credit growth and credit quality Chapter 4: Proposal to promote credit growth and credit quality in Vietnamese banks CHAPTER 2: GENERAL ISSUES ABOUT BANK CREDIT 2.1 General bank credit problems 2.1.1 What is bank credit? What is credit quality? “Bank credit is usually referred to as a loan given for business requirements or personal needs to its customers, with or without a guarantee or collateral, with an expectation of earning periodic interest on the loan amount” (Bank Credit (Meaning, Classification) | Purpose of Bank Credit, n.d.) “The term bank credit refers to the amount of credit available to a business or individual from a banking institution in the form of loans Bank credit, therefore, is the total amount of money a person or business can borrow from a bank or other financial institution” (Twin & Khartit, n.d.) “Credit quality is a measurement of an individual's or company's creditworthiness, or the ability to repay its debt” (Brock, 2020) 2.1.2 Why you need a credit rating? Credit rating is important not only for banks but also for customers On the bank's side, customer classification will help banks prevent and limit credit risks and orientate the introduction of credit products such as unsecured loans, home loans, and car loans At the same time, the credit rating will help customers get the most accurate basis for making loan documents At the same time, based on credit rating, customers consciously improve their credit rating so that they can get a bank loan with the highest limit but enjoy the lowest interest rate (Xếp Hạng Tín Dụng Là Gì? Nâng Cao Hạng Tín Dụng Trên CIC Có Thực Sự Khó?, n.d.) 2.2 Legal basis for credit quality (Circular 11/year 2021) Circular No 11/2021/TT-NHNN stipulates the classification of assets, deduction levels and methods provision for risks and the use of provisions to deal with risks in the operations of credit institutions and foreign bank branches (Circular 11) On July 30, 2021, the SBV issued Circular 11 with effect from October 1, 2021, replacing Circular No 02/2013/TT-NHNN dated January 21, 2013 and Circular No 09/2014/TT-NHNN dated 18 March 2014 with major changes including: ● Amendment of regulations on time, order of classification and setting up of risk provisions, according to which, at least once a month, within the first seven (7) days of the month, credit institutions, foreign bank branches It is necessary to perform the debt classification and risk provisioning by the end of the last day of the preceding month, and at the same time, based on the results of the adjustment of the customer's debt group as determined by the Vietnam National Credit Information Center Nam under the State Bank of Vietnam (CIC) to adjust the results of debt self-classification and corresponding provisions; ● Amend a number of regulations on how to determine the value of security assets for deduction when making provision for risks; ● Additional amounts not required to make general provision, including purchases of promissory notes, bills, certificates of deposit, bonds issued by credit institutions, 13 4,300 billion in the months of the second quarter to save money 'room' for credit growth in the first quarter of 2022 As of the end of June, Vietcombank held VND 11,608 billion of corporate bonds, down 1.9% compared to the beginning of the previous year and down 0.7% compared to the end of March The ratio of holding corporate bonds to Vietcombank's total credit is currently only 1% Similarly, VietinBank also reduced the size of its corporate bond portfolio by 18% last quarter to VND10,967 billion - equivalent to 0.9% of total credit outstanding MB reduced its ownership of 900 billion dong of this valuable paper in the second quarter The ratio of corporate bonds to VPBank's total outstanding loans decreased by 0.23 percentage points compared to the end of the first quarter, to 9.77% MSB also actively lowered the proportion of capital in corporate bonds to 2.7% of total outstanding loans, from 3.2% at the end of the first quarter of 2022… Diagram 3: Some banks have the highest loan growth in the first months of 2022 Source: Financial Statement Q2/2022 of banks ... credit growth and credit quality in Vietnam 1.3.2 Research scope In terms of spatial scope: State Bank and Vietnam'' s commercial banking system In terms of time scope: Studying the credit growth. .. Chapter 3: Credit growth and credit quality Chapter 4: Proposal to promote credit growth and credit quality in Vietnamese banks CHAPTER 2: GENERAL ISSUES ABOUT BANK CREDIT 2.1 General bank credit. . .Vietnam National University HCM University of Economics and Law FINAL TEST REPORT Subject: Commercial Banking Topic: BANK CREDIT GROWTH AND CREDIT QUALITY IN VIETNAM BANK SYSTEM Members: