(Luận văn) solution to reduce bad debt at vietinbank – gia lai branch in the period 2017 2019

t to ng UNIVERSITY OF ECONOMICS HO CHI MINH CITY hi ep International School of Business w n lo ad ju y th yi pl n ua al DUONG PHUONG LINH n va ll fu SOLUTION TO REDUCE BAD DEBT m oi AT VIETINBANK – GIA LAI BRANCH at nh z IN THE PERIOD 2017 - 2019 z k jm ht vb om l.c gm MASTER OF BUSINESS ADMINISTRATION n a Lu n va y te re th Ho Chi Minh City – Year 2020 t to ng UNIVERSITY OF ECONOMICS HO CHI MINH CITY hi ep International School of Business w n lo ad ju y th yi pl n ua al DUONG PHUONG LINH va n SOLUTION TO REDUCE BAD DEBT ll fu oi m AT VIETINBANK – GIA LAI BRANCH nh at IN THE PERIOD 2017 - 2019 z z k jm ht vb gm MASTER OF BUSINESS ADMINISTRATION om l.c SUPERVISOR: DR LE THI THANH XUAN n a Lu n va y te re th Ho Chi Minh City – Year 2020 t to TABLE OF CONTENT ng Cover page hi ep Table of content CHAPTER INTRODUCTION w 1.1 Overview introduction about Vietinbank n lo CHAPTER PROBLEM CONTEXT ad CHAPTER PROBLEM IDENTIFICATION 10 y th 3.1 Symptoms Analysis 10 ju yi 3.1.1 Bad debt increased at Vietinbank - Gia Lai Branch from 2017 to 2019 10 pl 3.2 Potential problems 12 al ua 3.2.1 Internal problems 12 n 3.2.1.1 Weak loan portfolio management 12 va n 3.2.1.2 High workload 13 fu 3.2.1.3 Employees lack of experiences and competences 14 ll oi m 3.2.1.4 Loose process of loan management 15 nh 3.2.2 External problems 16 at 3.2.2.1 Society problems 16 z z 3.2.2.2 Problems from customers’ side 17 vb 3.3 Problem validation 19 ht jm 3.4 Problem consequences 20 k 3.4.1 Reducing profit of the bank 20 gm 3.4.2 Affect the bank’s reputation 21 om l.c 3.4.3 Indirect affect to other banks 21 CHAPTER CAUSES 23 a Lu 4.1 Possible causes 23 th 4.1.2.1 Unpredictable changes of macroeconomic environment 25 y 4.1.2 External causes 25 te re 4.1.1.3 Inadequate information analysing and forecasting 24 n 4.1.1.2 Tendency to follow immediate but lack of durable profit 24 va 4.1.1.1 Lack of full awareness of loan portfolio management 23 n 4.1.1 Internal causes 23 t to 4.1.2.2 The regulatory environment with the guidance and supervision of the ng Central bank has not actively supported commercial banks in loan portfolio hi management 26 ep 4.1.2.3 The limited activity of the domestic financial market has limited banks' w ability to use a variety of tools to adjust the loan portfolio 27 n lo CHAPTER SOLUTIONS 30 ad 5.1 Alternative solutions 30 y th 5.1.1 Changing current loan porfolio management method 30 ju yi 5.1.1.1 Diversify the credit portfolio by economic sector 31 pl 5.1.1.2 Diversifying the credit portfolio by type of business 32 al ua 5.1.2 Developing a human strategy in accordance with risk management requirements n 32 va n 5.1.3 Constantly renovating the training and professional development for staff at the fu bank 33 ll oi m 5.2 Solution validation 34 nh CONCLUSION 38 at CHAPTER SUPPORTING INFORMATION 39 z z 6.1 Methodology 39 vb 6.2 Interview transcript 39 om n a Lu Appendix l.c Reference gm Executive sumary k List of diagrams jm List of figures ht List of tables n va y te re th t to LIST OF TABLES ng Table 1.1 Shareholer structure by ownership ratio which holding 5% or more of the hi charter capital ep Table 1.2 Level of Vietinbank Branch w Table 2.1 Credit balance depend on customer category from 2017 to 2019 n lo Table 2.2 Corporate customer classification principle ad Table 2.3 Credit balance classification depend on loan duration y th Table 2.4 Credit balance and bad debt of banks in Viet Nam in 2019 ju yi Table 3.1 Debt classification regulation pl Table 3.2 Debt classification in Vietinbank – Gia Lai Branch in period 2017 – 2019 n ua al LIST OF FIGURES va n Figure 1.1 Shareholer structure by ownership ratio fu Figure 1.2 Vietinbank Gorvernance model and structure ll at nh Figure 1.4 The short – term loans procedure oi m Figure 1.3 Organisation chart z z LIST OF DIAGRAMS ht vb Diagram 3.1 Initial Diagram of symptom and potential problems of Vietinbank – Gia Lai om l.c Diagram 4.2 Final cause and effect tree map gm Diagram 4.1 Initial Cause and effect map k of Vietinbank – Gia Lai Branch jm Diagram 3.2 Initial Diagram of symptom, potential problems and problem consequences n a Lu n va y te re th t to EXECUTIVE SUMARY ng Risks are always present in the operation of commercial banks today, including hi Vietinbank Banks always try to develop credit scale but at the same time ensure safety in ep operations The rapid increase in bad debt can lead to serious consequences, possibly w even bankruptcy of the bank As one of the credit-scale branches in the top of the big n lo branches of the Vietinbank system, Vietinbank Gia Lai branch has always controlled the ad bad debt situation since its inception However, in the past years, the rapid increase of y th bad debt has affected many aspects of the Branch's business operations Therefore, the ju yi urgent need is to find the underlying causes that lead to the rapid increase of bad debt pl problems in recent years to find suitable solutions for sustainable development Author al ua conduct this research to study the business activities of Vietinbank – Gia Lai Branch, n especially focus on the bad debt increasing in the period 2017 – 2019 The method of va n comparison, interviewing were used to find out the main problem the Branch is facing, fu the main cause leading to the problem and recommend some possible solutions to deal ll oi m with the problem Author hope that the research will contribute a small effort in helping at nh the organisation develop and gain maximum profit in the future z z k jm ht vb om l.c gm n a Lu n va y te re th t to CHAPTER INTRODUCTION ng 1.1 Overview introduction about Vietinbank hi Vietinbank was established in July 8th in 1988 in accordance with Decree ep No.53/1988/NĐ-HĐBT by the Minister Council After more than 30 years development, w from the beginning equity with just 22 billion Viet Nam dong, at present Vietinbank has n lo archieved the equity beyond 67,455 billion Viet Nam dong (more than 3,000 times ad higher) while authorized capital is 37,324 billion Viet Nam dong Beside that, total assets y th of Vietinbank also increased from 718 billion Viet Nam dong in 1988 to nearly 1,164,435 ju yi billion Viet Nam dong in 2018 which means encreased more than 1,600 times At the pl beginning, all system of Vietinbank just had 11,380 employees with the structure al ua including headquater in Hanoi (under 100 employees), 32 level I branches and 42 level II n branches Now all the system has nearly 23,000 employees who are working at va n headquater in Hanoi, representative offices, career units and 155 branches fu Vietinbank has not only operated in Viet Nam but also in other countries Vietinbank has ll oi m established a 100% capital bank in Laos, branches in Germany and set a representative nh office in Myanmar At this time, Vietinbank has cooperation with more than 1,000 banks at of more than 90 countries all over the world Moreover, Vietinbank also contributed z z capital in Indovina Bank which is known as the most efficient joint-venture bank in Viet ht vb Nam Its mission is “To be No.1 bank in Viet Nam baking system, providing modern jm financial and banking products and services with full utilities and meeting international k standard” The vision of the organisation is “To become a leading bank in Viet Nam and gm a regional player, being modern and multi-functional that conforms to international 10% y te re Other shareholders n IFC Capitalization (Equity) Fund, L.P va 65% n MUFG Bank, Ltd 20% a Lu State Bank of Viet Nam 5% om l.c standards” th Figure 1.1 Shareholer structure by ownership ratio (Source: Vietinbank annual report 2018) t to Table 1.1 Shareholer structure by ownership ratio which holding 5% or more of the ng charter capital hi ep Shareholder structure Number of shares Ownership Percentage (%) 2,400,204,956 64.46% 734,604,384 19.73% 200,864,399 5.39% 387,730,817 10.41% 3,723,404,556 100% Central bank of Viet Nam w MUFG Bank, Ltd n Capitalization lo IFC (Equity) ad Fund, L.P y th Other shareholders ju yi Total pl (Source: Vietinbank annual report 2018) n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm (Source: Vietinbank annual report 2018) th Industry until now and has met the technology requirements for longterm and sustainable y successfully This is the largest and the most complex project in Viet Nam Banking te re sustainably In 2017, Vietinbank made an impression in deploying the new CoreBanking n breakthrough growth, develop modern products and services, develop efficiently and va In the past few years, Vietinbank has always been one of banks have n a Lu Figure 1.2 Vietinbank Gorvernance model and structure t to development At the same time in 2017, Vietinbank also released to the public 4,200 ng billion Viet Nam dong secondary bonds This is the most enomous amout of secondary hi bonds among Viet Nam Commercial Banks which has confirmed the trademark and ep position of Vietinbank on the market Beside that, Vietinbank has archieved many w arwards and accolades in 2018 such as First-class Labour Medal (for the second time) n lo and Government’s Emulation Flag, Top 400 Most Valuable Bank Brands Worldwide, ad Top 2000 Largest Enterprises Worldwide, Viet Nam Value, Viet Nam Excellent Brand, y th Best Trade Finance Service,… ju yi In 2018, total assets of Vietinbank was more than 1.16 million billion Viet Nam pl dong, increased 6.3% when compared with 2017 and increased 22.78% when compared al ua with 2016 In this year, Vietinbank continued to be the commercial bank which had n largest asset scale in the market However, the competition in the banking system to win va n and retain customers is increasingly fierce fu Vietinbank is established in 1988 After 31 year of development, Vietinbank has ll oi m affirmed its position as a leading commercial bank, holding a key role of Viet Nam's nh curency market Vietinbank has a strong network of 148 branches in 63 provinces and at cities nationwide Vietinbank – Gia Lai Branch is known as a large branch in the system z z with trillion dong of capital and outstanding loans of up to 13 trillion dong ht vb Vietinbank – Gia Lai Branch was established in 1999 The organisation structure k jm is as the figure below: om l.c gm n a Lu n va y te re th Figure 1.3 Organisation chart (Source: Vietinbank – Gia Lai Branch internal report) t to The main departments which bring profit to the bank is corporate department and ng retail department hi Normally, it often takes two weeks for a new corporate customer and a week for old ep customer to finish a procedure to borrow the money from the bank Firstly, the customer w has to prepare all the documents meet the bank requirement Secondly, the bank officer, n lo normally the corporate banking division, will verify the documents and prepare a report ad This step is the one which need most of the time in the procedure and often take for a week y th Afterthat, the report will be send to the upper level in the bank in order to be approval ju yi After being approval, the supporting credit department will check again all the document to pl make sure that there is no mistake And finally, they will the financing for customer If al ua there is any mistake in any step of the procedure, the total time will be longer n Short – term loans procedure of corporate customers when they first time borrow va n money at Vietinbank includes steps, which are: fu Step 1: Credit officer collect documents from customers and check them At this ll oi m step, credit officer often present to customers about loan conditions and instructions for nh establishing the loan documents Also, credit officer will check the completeness and at accuracy of legal documents, loan documents, collateral records and especially the z z legality of the loan purpose After checking the documents, credit officers will depend on vb the policies and the orientation of Vietinbank in order to identify whether customers are jm ht subject to credit restriction or non-credit extension or not k Step 2: Credit officer review credit conditions, prepare and submit appraisal gm report Depending on the documents collecting from customers and other sources, credit om l.c officer analysis and review the financial situation, business plan and ability to repay principal and interest of customers Credit officer will give comments and suggestions on a Lu the lending method, loan amount, loan duration, loan security measures, disbursement n schedule and other conditions th approval y report will be submitted to higher level, normally related to the Head Office, to get te re customers In case of exceeding the authority of the Branch’s Board of Directors, the n Customer Department, the Board of Directors will consider and decide the credit limit of va Step 3: Appraisal report approval Depending on the appraisal report of Corporate t to CHAPTER SUPPORTING INFORMATION ng 6.1 Methodology hi The methods used in the research process including statistical research method, ep comparative research method, general method… w In addition, the research project also uses basic theories and scientific theories n lo about credit risk and credit risk restriction ad 6.2 Interview transcript y th Interview transcript ju yi Interviewer: Duong Phuong Linh pl Interviewee: Mr Dang Quoc Thinh - Director of Vietinbank Gia Lai al Good morning Mr Thinh How are you today? QT Hi Linh I’m good today Do you need my help? PL Yes, of course Today I need you to help me out with an interview to share me n ua PL n va ll fu your thingking about the current situation of the Branch It’s may take 15 – 20 oi m minutes Are you ok with it? Ok Linh, you can ask me about what you’re concerned PL I have read the Branch internal report in years from 2016 to 2018 and I see that at nh QT z z the bad debt ratio has been increasing rapidly Can you explain more about this? vb Yah, actually the Branch now is going through a tough time As you’ve already ht QT k jm known, the bad debt ratio was increasing rapidly in recent years because we have gm some customers which have large amount of credit balance but have difficulty in repaying the loans, for example Hoang Anh Thanh Hoa Hydroelectric JSC with l.c more than 1,300 billion dong or the Duc Long BOT project with 980 billion dong om This has lead to the amount of bad debt increased a lot, especially last year QT The problem which the bank is facing is the number of current customers is not big 39 th region’s characteristic, most of the loan purpose is related to agriculture (mainly y will affect a lot to the credit balance structure of the bank Beside that, due to the te re customers Therefore, if just one of these customers has difficulty in business, it n enough Most of the credit balance is focused on a small number of main va So what problem you think the Branch is facing now? n a Lu PL t to coffee and pepper) Most of the coffee and peeper which is traded is raw materials ng And this is depend a lot on the weather conditions That will lead to a consequence hi ep that if the weather is not good, the crops will be effected and cause a huge impact on the bank So you mean that this is the main problem of the Branch? w PL n Yes The number of customers is too small and 80% of the total credit balance is lo QT ad just depend on only 20% number of customers This means that this group of y th customers will have great influence on the operation of the Branch If only some ju yi customers in this group can not payback or they move to another bank, the pl Branch’s profit will be affected immediately al There is opinion that employees who lack of experiences and competences will ua PL n lead to this problem What you think? va Experiences and competences of employees is very important In recent years, n QT fu ll there are lots of new employees has been recruitment due to high demand This has oi m led to many employees were graduate students who didn’t have enough nh experiences Beside that, cause some good employees has moved to another bank, at it’s very difficult for Vietinbank – Gia Lai branch to recruite and train new z z employees to meet the requirement in a short time vb Why you think that the management of the loan portfolio has not been given k Actually, most of the managers in the Branch still cannot think out of the box I gm QT jm enough attention? ht PL means their way of thinking and acting are according to their habit With the l.c mindset that the main economic activities are related to agriculture, they have just om focused on loan on this purpose and of course, dismissed other loan purposes a Lu Usually at the beginning of the year, I ask the heads of departments to set up a th 40 y pursuing them This will greatly affect the goal completion rate of the rooms te re given a priority to develop, resulting in a spread in finding potential customers and n year not have a specific development orientation No industry group has been va of the chiefs and deputy managers when assigned targets at the beginning of the n specific development plan for their department and review it monthly In fact, most t to ng PL How about other causes? QT For the pursuit of profit that ignores capital safety regulations, I think this is not hi ep the case at the Branch All employees at the bank are people with good moral qualities and ability to withstand high pressure of work The Bank also regularly w inspects and signs of violations and has yet to detect errors related to this issue n lo As for external influences, other banks will be similarly affected However, the ad expression of each bank is completely different Therefore, it cannot be said that y th these are the main reasons for the ineffective management of the credit portfolio at ju yi the branch What you think the main cause? QT For me, all the causes lead to the current problem are important However, the root pl PL ua al n cause is originally comes from the human resouces I suppose that the awareness va n of loan portfolio management is an essential part to manage the loan porfolio fu ll efficiently Most of the managers at the Branch are in middle age now, which oi m make them don’t have enough knowledge and acumen in changing in the way of at nh their thinking about porfolio In order to solve the problem, it need a detailed and thorough solutions And the most important work the Branch has to is to z z improve not only the managers’ mind but also which of all the employees about ht vb loan portfolio management How about the solution? QT I always want to focus on the employees cause the people is the most important in k jm PL gm an organisation Therefore, I want to perform training about loan portfolio l.c management for all the employees to help them gain knowledge and work more om effectively n a Lu Hi Mr Viet Can I interview you some issues about Vietinbank – Gia Lai Branch? te re TV It’s my pleasure What you want to know? y What you think about current situation of the Branch? th PL n PL va Interviewee: Mr Nguyen Tan Viet - Deputy Director of Vietinbank Gia Lai TV As I see, our market share in Corporate Customers is still very low There are too 41 t to many customers who don’t use any services of the Branch Therefore, development ng potential is very large Many of our credit officers just carry old thoughts and think hi ep in the rut when finding customers just in agriculture field and tend to reject any new project Also our region’s strength is agriculture, especially cash crop, the area still w has other economic groups This is also depend on the employees’ competences but n lo it is more related to their way of thinking about portfolio management Because of ad that, I think business fields of corporate customers need to be broaden as much as y th possible It will not only bring the stable profit to the Branch but also help reduce ju yi the credit risk Do you think CIC work helpful for the Branch? pl PL al ua TV For me, at present, the information from CIC is just help us know about the size n loan of customers at other banks and whether they have bad debt or not It cannot va n show us the warning if customers really risky Therefore, I agree that the Central fu ll bank need to upgrade the system and collect more information to help commercial m banks in analysing and forecasting customers loan status oi What you think about the role of Central bank in supervising Commercial Bank operation? at nh PL z z TV From my point of view, the Central Bank just has the overal supervision for all of vb ht the banks on the market Because the procedures required to issue a specific k jm regulation take a lot of time and through multiple levels of approval, the regulations gm of the Central bank will often be outdated or even no longer suitable for market changes Although this issue has also improved significantly, it has not been able to l.c make a great impact on the loan portfolio management of commercial banks I’m fine, thank you va Ms n Hi Ms Hoa, how are you today? a Lu PL om Interviewee: Ms Nguyen Thi Hoa, chief accountant of Duc Phu Gia company n Hoa Ms My company has borrowed money from Vietinbank Gia Lai from 2016 until now Hoa The company at present owns hotel chains named Cicilia which is located in Nha 42 th Can you share with me your experience when using Vietinbank service? y te re PL t to Trang, Da Nang and HCM city I know that it takes a lot of time to collecting data, ng checking invoices and disburesement documents and completing the loan approval hi However, I was very satisfied with the Vietinbank employee’s attitude and support ep Beside that, I also appreciated Vietinbank in having new ideas to reducing the time w of waiting and encreasing the productivity n ad Ms How about Vietinbank employees? Do you satisfy with the service? lo PL I personally prefer working with experienced and qualified credit officers They y th Hoa can even advise me for effective business investment options Therefore, I think ju yi working capacity is very important It is not only useful for credit officers pl themselves but also creates their attraction and engagement with customers If al ua Vietinbank can regularly train to develop its professional competence, it will be a n major competitive advantage for other banks va n Interviewee: Mr Chung Quang Vu - credit officer fu Hi Mr Vu What you feel about your current work? Do you feel stress? QV As a credit employee, the targets set for me at the beginning of the year are always ll PL oi m at nh high Employees nearly have to think about the targets every day and try to archieve them However, the competition in the industry now is extremely z z intense.In some cases, we are forced to find ways to bypass the rules in order to ht vb have new customers jm Although I know that it is very important to observe the cash flow and business k situation of customers to realise any sign of bad debt, I don’t have enough time for gm this activity My KPI is quite high and I need to find lots of new customers to l.c archieve the KPI I often feel stress due to the huge amount of work Therefore, it om is hard for me to manage time for so many activities such as finding new a Lu customers, observing the cash flow and business situation of customers, realising n va sign of bad debt and dealing with bad debt Of course yes PL What you think about bad debt at the Branch? th NK y Hi Ms Kieu, can I interview you some issue related to your current job? te re PL n Interviewee: Ms Le Thi Nhu Kieu- bad debt dealing department’s employee 43 t to NK As from my understanding, the bad debt increased this year is related to many ng loans in the years before It could be a good loan at that time but because hi ep customer management competences is quite loose and loan management process has many gap has led to this situation w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm n a Lu n va y te re th 44 t to References ng Viswanadham N, Nahid B Determinants of Non Performing Loans in hi Commercial Banks: A Study of NBC Bank Dodoma Tanzania International Journal of ep Finance & Banking Studies 2015;4(1):70-94 Reinhart CM, Rogoff KS From Financial Crash to Debt Crisis Cambridge: w n lo National Bureau of Economic Research, Inc.; 2010 p 15795 ad Jakubik P Macroeconomic environment and credit risk Czech Journal of y th Economics and Finance (Finance a uver) 2007;57(1-2):60-78 ju Richard E ``Factors that cause Nonperforming Loans in Commercial Banks in yi pl Tanzia and Strategies to Resolve Them`` 2011 al Keeton WR, Morris CS Why banks’ loan losses differ Economic review va Agarana M, Bishop S, Odetunmibi O Optimization of banks loan portfolio n n 1987;72(5):3-21 ua fu management using goal programming technique International Journal of Research in ll Swalehe O A Study of Factors Leading to Effective Loan Repayment in z Waweru NM, Kalani VM COMMERCIAL BANKING CRISES IN KENYA: z at Tanzania Anvesha 2018;11(1):14-22 nh oi m Applied Natural and Social Sciences (IMPACT: IJRANSS) 2014;2(8):43-52 vb CAUSES AND REMEDIES Global Journal of Finance and Banking Issues jm Beisland LA, D’Espallier B, Mersland R The Commercialization of the k ht 2009;3(3):23-43 gm Microfinance Industry: Is There a ‘Personal Mission Drift’ Among Credit Officers? 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A tentative ht gm 35 k Individual Bank Loan Portfolios (February 28, 2005) 2005 jm answer based on individual bank loan portfolios A Tentative Answer Based on Edmister RO, Srivastava SC Loan portfolio composition and management 1992;9(1):119 Sounders A, Allen L CREDIT RISK MEASUREMENT, John Wiley&Sons Inc, workplace performance in Britain: Evidence from WERS 2004 Labour 2009;23:139-75 th Jones MK, Jones RJ, Latreille PL, Sloane PJ Training, job satisfaction, and y 38 te re Journal of Banking & Finance 2009;33(12):2218-26 n risk, efficiency and capitalization: A managerial behavior model for Austrian banks va Rossi SP, Schwaiger MS, Winkler G How loan portfolio diversification affects n New York 2002 37 a Lu 36 om l.c control of bank risk: An empirical investigation Journal of Applied Business Research t to Apendix Criteria to classify Branches ng hi Criteria Calculation Propo Points scale ep rtion 25% A/ Group of criterias measuring effectiveness (H) w n lo H1 = Average total credit balance of the year ju (H1) y th scale ad Credit yi pl ua al Group 80 points Group 60 points Group 40 points Group 20 points points va n fu ll x 100% m oi Beginning credit balance at nh z The Group 80 points Group 60 points Group 40 points ≤ 0% 20 points points ht vb net Group 80 points Group x 100% Group 60 points jm Net income from interest and fees k H3 = interests gm 40 points and fees Group 20 points from Average total credit balance of the year (H1) 5% 100 Group z ratio of 8% 100 Group n H2 = rate (H2) income points H1 - Beginning credit balance Credit growth 100 Group 12% om l.c a Lu (H3) n B/ Group of criteria of credit risk (Cre.KRIs) 40% n va 1.1 Debt quality criteria (R) 30% balance)ending and R1= x 100% 0.5% 100 points - 80 points 10% th debt ≤ 0.5% y (Bad credit balance + Credit sold to VAMC te re Bad t to ng debt (Total credit balance + Credit sold to 1.0% sold to VAMC balance) ending 1.0% hi 2.0% ratio 2.0% (R1) 3.0% ep VAMC w n ad ju pl debt n R2 = R1ending - R1beginning - 0.5% n fu - 1.0% ll VAMC - 0.5% va sold to points 0.2% ua debt 100 0.2% al and 40 points 20 points 0% yi bad 60 points ≤ 0% y th ng in - > 3.0% lo Changi - 80 points 60 points 40 points m oi ratio > 1.0% 20 points at nh (R2) z vb Ending credit balance + Bad credit ratio 0.2% - 0.5% - 0.5% 60 points 7% 40 points a Lu 1.0% om (R3) 80 points l.c balance in the period 0.2% gm x 100% - k jm R3 = points 0% ht debt Bad credit balance in the period 100 ≤ 0% z New bad 7% > 1.0% 20 points n (owe notes-watch) debt ending debt x 100% Ending credit balance 0.2% 0.5% 0.5% - 80 points 3% th ng group R4 = y remaini points te re l debt 100 ≤ 0.2% n ∑Structual debt remaining group 1, group va Structua - 60 points t to 1.0% (R4) 1.0% ng ration - hi ep 2.0% > 2.0% w n Ending group debt balance lo - 0.5% 0.5% yi pl (R5) points 0.2% ju debt 100 ≤ 0.2% Ending credit balance y th Group 20 points x 100% ad R5 = 40 points - 1.0% al n ua 1.0% - va 2.0% n > 2.0% 80 points 40 points 20 points fu ll Credit balance has early warning at the nh R6 = 0.2% x 100% at - 0.5% 0.5% z vb ratio - 1.0% ht 1.0% - k jm (R6) gm 2.0% > 2.0% - 0.5% 0.5% - 60 points y 40 points th 2.0% - 0% te re 1.0% 1.0% 80 points n (R7) points va Ratio 0.2% 100 n 10 days x 100% Ending credit balance 20 points a Lu less than R7 = 40 points om balance debt overdue ≤ 0.2% 1% 60 points l.c Group debt overdue less than 10 days Group 80 points z Ending credit balance balance points oi EWS 100 ≤ 0.2% m end of the period 2% 60 points t to > 2.0% 20 points ng 1.2 Concentration / Portfolio structure criteria (T) 10% hi ep Risk Weighted Assets (RWA) ending RWA/ T1 = n Total Assetsending lo Assets ju y th (T1) ad Ratio points x 100% w Total 100 Group Group 80 points Group 60 points Group 40 points Group 20 points yi pl Corporate 5% Customer n ua al Segment 100 points n va ≤ 45% fu 45% ll Total credit balance of top biggest customers > 70% 80 points 5% 60 points 40 points 20 points Individual Customer k jm gm Segment 100 om ≤ 5% l.c rs (T2) ht custome - 70% vb balance 60% z credit - 60% z biggest 55% at Total credit balance nh ratio of x 100% oi balance 55% m T2 = Credit - points a Lu 5% - 10% 80 points 40 points th > 20% - y 20% 5% te re 15% 60 points n 15% va - n 10% 20 points t to C/ Management skill criteria (Q) ng - 20% Give points for the Director hi - Above years 35 points ce in - From to years 25 points credit - From to years 15 points ep Experien w n lo departm - Below year points ad ent (Q1) y th - Above years 30 points work in - From to years 20 points manager - From to years ju Time to yi pl - Rank A oi on level 20 points m - Rank A+ ll completi 25 points fu - Rank A++ n va Target 15 points nh - Rank B or no information due to new recruitment z year - Rank C points z ht vb (Q3) 10 points at in last points n - Below year ua al level (Q2) 10 points k ii If Q1 < 10 years, Q4 is calculated as below: - Bachelor degree major in economic (full – time) - Other kinds: (i) College degree; (ii) Bachelor points va n distance-learning, part-time learning… points 100 points th Operatio Depend on the result of operational risk rating of Branch at Very 15% y D/ Operational risk rating (Op.KRIs) te re - Primary training, intermediate training… n Bachelor degree/master degree major in economic by a Lu degree/master degree major in other sectors; (iii) points om (Q4) 10 points l.c c level gm - Master degree major in economic (full – time) Academi 10 points jm i If Q1 ≥ 10 years, Q4 is maximum the time of grading t to nal risk good ng rating 80 hi Good ep points 60 Average w points n lo 40 ad Weak points ju y th yi Very 20 weak points pl 100% n ua al TOTAL n va ll fu oi m at nh z z k jm ht vb om l.c gm n a Lu n va y te re th