Strategies for enhancing quality of medium and long term credit at vietcombank,graduation thesis

STATEBANK OF VIETNAM BANKING ACADEMY Faculty of Foreign Language - - GRADUATION THESIS STRATEGIES FOR ENHANCING QUALITY OF MEDIUM AND LONG-TERM CREDIT AT VIETCOMBANK Advisor : Nguyen Thi Thuy (MBA) Student : Pham Hanh Trang Class : K16-ATCB Student Code : 16A7510162 23th May 2017 STATEBANK OF VIETNAM BANKING ACADEMY Faculty of Foreign Language - - GRADUATION THESIS STRATEGIES FOR ENHANCING QUALITY OF MEDIUM AND LONG-TERM CREDIT AT VIETCOMBANK Advisor : Nguyen Thi Thuy (MBA) Student : Pham Hanh Trang Class : K16-ATCB Student Code : 16A7510162 23th May 2017 ACKNOWLEGDEMENT First of all, from the bottom of my heart, I would like to send my most sincere thanks to Ms Nguyen Thi Thuy, Faculty of Foreign Languages – Banking Academy for having supported me during my thesis writing process Without her whole – hearted instruction, I could not have accomplished this thesis Secondly, I would also like to express my great attitude toward Mr Nguyen Thanh Tung, the director of Vietcombank – Tay Ho branch and all staff in Credit Department, who enthusiastically offered me with the very first ideas on research methods, precious comments and encouragement during my internship process I have learned a lot from his precious knowledge about credits as well as his industriousness and big dedication in work Thanks to his great assistance, I have finished this thesis Additionally, I also want to show my deep gratitude toward all teachers of the Faculty of Foreign Languages, Banking Academy for helping me to cultivate background knowledge of subjects related to my research Finally, I want to give the last grateful sentence to my family and friends who always stand by me and continuously encourage me during four years at Banking Academy They are really the greatest spiritual motivation for me to make my best efforts to perfect myself and overcome the most difficult time as a student Because of limited experience and lack of time, the thesis might have many shortcomings I am looking forward to receiving any comments to make it better i DECLARATION I hereby declare that this submission is my own work towards the Bachelor in English at Banking Academy and that to the best of my knowledge, it contains no material previously published by another person, nor material which has been accepted for the award of any other degree of the Academy except where due acknowledgement bas been made in the text Signature Pham Hanh Trang ii LIST OF ABBREVIATIONS Vietcombank Joint Stock Commercial Bank for Foreign Trade of Vietnam SMEs Small and Medium Enterprises VND Vietnam dong Yoy Year-over-year Ytd Year-to-date iii LIST OF CHARTS Chart 3.1 Organizational structure of Vietcombank 21 Chart 3.2 Business performances of Vietnam Commercial Banks in 2016 23 Chart 3.3 Loan-to-deposit ratio of Vietcombank 25 Chart 3.4 Medium and long-term granting procedures of Vietcombank 27 Chart 3.5 Loan structure of Vietcombank by term during 2014-2016 period 29 Chart 3.6 Structure of medium and long-term credit by types of customers 30 LIST OF TABLES Table 3.1 Business volume of Vietcombank between 2014 and 2016 22 Table 3.2 Mobilized capital of Vietcombank in the 2014-2016 period 24 Table 3.3 Capital utilization at Vietcombank in the 2014-2016 period 25 Table 3.4 Loans to customers of Vietcombank during 2014-2016 period 28 Table 3.5 Loan portfolio based on types of industry sectors during 2014-2016 period 31 Table 3.6 Medium and long-term credit quality assessment through statistics of revenue generated from lending medium and long-term loans 32 Table 3.7 Ratio of bad debts, overdue debts at Vietcombank during 2014-2016 period33 iv Table of Contents ACKNOWLEGDEMENT i DECLARATION ii LIST OF ABBREVIATIONS iii LIST OF CHARTS iv LIST OF TABLES iv CHAPTER 1: INTRODUCTION 1.1 Rationale of the study 1.2 Objectives of the study 1.3 Research question 1.4 Subject and scope of the study 1.5 Methodology of the study 1.6 Practical implication of the study 1.7 Organization of the study CHAPTER 2: OVERVIEW OF MEDIUM AND LONG-TERM CREDIT QUALITY OF COMMERCIAL BANKS 2.1 Overview of Commercial Banks 2.1.1 Definition and function of Commercial Banks 2.1.1.1 Definition of Commercial Banks 2.1.2 Core activities of Commercial Bank 2.1.2.1 Capital Mobilization 2.1.2.2 Capital Utilization 2.1.2.3 Intermediary Operations: 2.1.3 Classification of Bank Credit 2.1.3.1 Based on terms 2.1.3.2 Based on collateral 2.1.3.3 Based on lending types 2.1.3.4 Based on risk assessment 2.2 Overview of medium and long-term credit of commercial banks 2.2.1 Definition of medium and long-term credit 2.2.2 Features of medium and long-term credit 2.2.2.1 High risk 2.2.2.2 High interest rate 2.2.3 Purposes of medium and long-term credit 2.2.4 Role of medium and long-term credit 2.2.4.1 To the enterprises 2.2.4.2 To the banking operation 10 2.2.4.3 To the economy 10 v 2.3 Medium and long-term credit quality 11 2.3.1 Criteria in measuring medium and long-term credit quality 11 2.3.1.1 Qualitative criteria 11 2.3.1.2 Quantitative criteria 13 2.3.2 Factors affecting medium and long-term credit quality 15 2.3.2.1 Objective factors 15 2.3.2.2 Subjective factors 16 CHAPTER 3: CURRENT STATUS OF MEDIUM AND LONG-TERM CREDIT QUALITY AT VIETCOMBANK 19 3.1 Overview of Joint Stock Commercial Bank for Foreign Trade of Vietnam 19 3.1.1 Brief history of establishment and development 19 3.1.1.1 Establishment and development history 19 3.1.1.2 Development in 2015-2016 20 3.1.2 Operation fields 20 3.1.3 Mission and vision 21 3.1.4 Organizational structure 21 3.2 Business performance of Vietcombank between 2014 and 2016 22 3.2.1 Business results of Vietcombank during period between 2014 and 2016 22 3.2.2 Capital Mobilization 23 3.2.3 Capital Utilization 25 3.3 Current status of medium and long-term credit at Vietcombank 27 3.3.1 Medium and long-term credit granting procedures 27 3.3.2 Key indicators measuring medium and long-term credit quality 28 3.3.2.1 Loan structure by term 28 3.3.2.2 Loan structure by types of customers 30 3.3.2.3 Loan structure by types of industry sectors 31 3.3.2.4 Income interest from lending activities 32 3.3.2.5 Medium and long-term credit quality assessment through debt categorization 33 3.4 General assessment of medium and long-term credit quality at Vietcombank 34 3.4.1 Achievements 34 3.4.2 Limitations 35 3.4.3 Causes 36 3.4.3.1 Bank 36 3.4.3.2 Customers 37 3.4.3.3 Other objective causes 37 CHAPTER 4: STRATEGIES FOR ENHANCING MEDIUM AND LONG-TERM CREDIT QUALITY AT VIETCOMBANK 39 4.1 Development orientations of Vietcombank 39 vi 4.2.2 General development orientations of Vietcombank 39 4.2.3 Development orientations for medium and long-term credit of Vietcombank 40 4.2 Strategies for enhancing medium and long-term credit quality of Vietcombank 40 4.2.1 Solutions for expanding medium and long-term credit 40 4.2.1.1 Diversifying types of capital mobilization 40 4.2.1.2 Improving the quality and diversifying the types of medium and longterm loans 42 4.2.1.3 Investment expansion 42 4.2.2 Solutions for enhancing medium and long-term credit quality 44 4.2.2.1 Reshaping medium and long-term credit policy 44 4.2.2.2 Improving quality of investment projects’ appraisal 44 4.2.2.3 Focusing on credit risk management 45 4.2.2.4 Preventing, restricting and handling overdue debt 46 4.2.3 Solutions for organizational structure and workforce 47 4.2.4 Intensifying supervision and inspection 48 4.3 Recommendations 48 4.3.1 To the State Bank of Vietnam 48 4.3.2 To the Government and other relevant organizations 49 CONCLUSION 51 REFERENCES 53 vii CHAPTER 1: INTRODUCTION 1.1 Rationale of the study In the market economy, bank credit has always been known for being a lavish operation field The fact that it is one of the most effective capital distribution and utilization channel is absolutely undeniable due to its huge contribution to the capital turnover and prompt response to the growing demand of individuals, organizations and enterprises As a vital area of the banking sector, medium and long-term credit plays an integral part in the economic recovery and development process Hence, ensuring the efficiency of medium and long-term credit operation is the overriding concern of not only banks but also the government As one of the biggest commercial banks in Vietnam, Vietcombank (Joint Stock Commercial Bank for Foreign Trade of Vietnam) has over 14,000 employees, more than 460 domestic and foreign branches Its effective management as well as operation of medium and long-term credit has had a profound influence on the banking business volume as well as the development prosperity of the country However, the significant growth of commercial banks has urged Vietcombank to expand its operation in order to take advantage of the economic scale Therefore, only by expanding credit investment and improving credit quality can the bank promote its business Stemming from this fact, I decided to write a thesis with the theme: “Strategies for enhancing medium and long-term credit quality at Vietcombank” to evaluate the current situation of medium and long-term credit quality at Vietcombank as well as figure out the causes of its shortcomings and take those as a basis to offer solutions to enhance medium and long-term credit quality at Vietcombank 1.2 Objectives of the study - Investing in theoretical knowledge related to commercial bank credit and medium and long-term credit quality - Analyzing current situation of medium and long-term credit activities at Vietcombank - Giving solutions to improve medium and long-term credit quality at Vietcombank 1.3 Research question CHAPTER 4: STRATEGIES FOR ENHANCING MEDIUM AND LONGTERM CREDIT QUALITY AT VIETCOMBANK 4.1 Development orientations of Vietcombank 4.2.2 General development orientations of Vietcombank General development orientation of Vietcombank is to become the leading bank in Vietnam, being ranked among the 300 largest banking groups in the world and fully adopting the best international practices in corporate governance by 2020 While aiming at becoming an universal bank, Vietcombank still place high priority on retail banking services In addition, setting up business plan and management strategy based on international regulations as well as improving risk management solution are the critical things to in order to ensure the safety of its operation Besides, bank needs to diversify its source of revenue and continue to expand business sectors to some new financial services that are high in profitability Investment for strengthening information management system is one of the top concern for Vietcombank With the proposed budget of about 10-15 million USD, the bank intends to upgrade the privacy, back-up, ATM, POS, Internet Banking, Mobile Banking system and Customer Service Center Network expansion including establishment of new branches trade centers and points of sale in major cities such as Hanoi, Ho Chi Minh, Da Nang and other provinces across the country However, quantity needs to be at variance with quality and business performance In term of human resources, Vietcombank will continue to not only recruit potential applicants but also attract and maintain high qualified workforce Staff training programs will be launched more frequently An appropriate mechanism and policy need to be set up in order to attract talented employees and win staff’s trust and their loyalty In addition to ambitious business goals, Vietcombank commits to social and community objectives Vietcombank always upholds “humanity” as a core value, willing to support not only customers, clients, partners but also the poor, people living in minority areas, remote areas and minority ethnic groups who undergo many 39 hardships Caring and devoting significant resources for social security are one of the key objectives set by Vietcombank on an annual basis 4.2.3 Development orientations for medium and long-term credit of Vietcombank Development orientations for medium and long-term credit of Vietcombank are listed as follows: - - Keeping the amount of annual mobilized capital at the rate of 21%, reducing the proportion of bad debts and overdue loans and focusing on dealing with nonperformance loans Increasing the proportion of medium and long-term credit of the total credit structure Concentrating on investment projects’ appraisal in order to ensure the safety of bank’s capital Diversifying types of investment projects of different economic sectors Placing high priority on risk management activities to enhance the safety of medium and long-term loans 4.2 Strategies for enhancing medium and long-term credit quality of Vietcombank 4.2.1 Solutions for expanding medium and long-term credit 4.2.1.1 Diversifying types of capital mobilization Capital mobilization is one of the basic functions of commercial banks and plays an integral part in generating revenue for the bank Thus, the first and foremost goal of each bank is to make sure that capital mobilization activities are implemented effectively and the amount of mobilized capital are as high as possible but with low cost It is undeniable that diversifying types of capital mobilization is the most effective solution to reach this objective - To the public In the present economic situation, a large percent of the capital of the public is sitting idle This fact stems from many reasons; however, the main reason is that Vietnnamese people has the habit of keeping assets as cash or gold; people in many areas or at many ages not able to access commercial banks and banking services; and of course, not everyone has the ability to use that idle capital to invest in something, and subsequently, their money has been left unused Therefore, in order to alleviate the amount of idle capital, bank needs to give emphasis on the propaganda 40 about banking services as well as expands its network to residential areas to make it easier for the citizens to connect with bank and to deposit their money Especially nowadays, commercial banks offer a variety of services including credit card, debit card, cheques, etc , which brings about a huge revenue for the banks However, many people are not familiar with these types, so the number of people using banking services still remain quite low It is obvious that if Vietcombank want to make the most of its potential, on no account should it ignore the marketing activities, especially to dwellers - To the enterprises Firms’ capital is not always being invested and sometimes, they can be left idle An appropriate propaganda and preferential policy could help the bank be able to mobilize these capitals Each branch/trade center needs to seek for an ultimate solution to increase its amount of mobilized capital in the areas that they are in charge of Only by doing so, can the total mobilized capital of Vietcombank be raised There are some methods that the bank can utilize to increase the quantity of mobilized capital: • Diversifying types of money deposited with attractive interest rate and flexible time deposits to meet the demand of customers • With traditional customers who have a good relationship with the bank, bank can offer them some preferential policies such as: providing services at a lower cost, sending them presents on special occasions, etc in order to keep them tuned to the bank and use Vietcombank’s services regularly • In terms of communicating with new or potential customers, the bank needs to provide services more quickly so that these customers can feel the good quality of Vietcombank’s services and be more comfortable during transactions Moreover, the bank needs to raise the public attention of the benefits that customers may have if they make transactions with Vietcombank and the convenience of the services provided by the bank It is no exggeration to say that on no acoount can Vietcombank neglect doing these activities if they want to maximize the growth rate of capital mobilization 41 4.2.1.2 Improving the quality and diversifying the types of medium and long-term loans Undoubtedly, if Vietcombank wants to develop and attract customers, it has to provide different kinds of products that can meet the demands of different customers Therefore, in the upcoming time, strategies for products of Vietcombank need to be worked toward the following criteria: • Continuously renovating lending system, diversifying types of loans and investments in order to catch up with changes in consumption and production demand of borrowers as well as the economy • The scale of lending should be evenly expanded to domestic and foreign companies, households, individuals, as long as borrowers are able to meet all the requirements Meanwhile, the bank can also ensure the credit security by forcing the staff to have certain number of customers and loans • In order to be in accordance with the socio-economic restructuring, Vietcombank needs to adjust its lending policy as well In the coming years, to attain this goal, the bank has to promote lending towards the leading sectors of the economy • Diversifying types of lending currencies Nowadays, in response to production and business operations’ demands of an open economy, many enterprises have a great demand for borrowing foreign currency to import machinery, equipment or production line As they will need to borrow foreign currency to pay for foreign partners, if the bank can offer a wide lending currencies’ types, then it would be a huge advantage of the bank when attracting customers 4.2.1.3 Investment expansion During the process of opening market and integration, the number of firms with foreign invested capital is increasing As one of the driving forces of globalization, foreign direct investment (FDI) commonly has the following features: having a large amount of capital source and high-qualified employees as well as an effective operation system… Thus, this can be considered as a potential source of customers that can generate a huge amount of revenue for the bank with low risk Despite the stringent lending regulations towards these kinds of companies, Vietcombank cannot ignore them and take their loans as small ones The bank needs to strengthen the 42 Banker-Customer relationship, whilst, it should also pay particular attention to foreign invested companies In addition, there is also a rapid increase in the number of small and medium enterprises (SMEs) during the past few years These kinds of business have a huge demand for medium and long-term capital to improve facility, renovating technology, expanding production and enhancing competitiveness, etc Despite the fact that granting loan for SMEs is quite risky, it is undeniable that these enterprises still have many potentials Thus, when making lending decision for SMEs, loan officers need to keep in mind that they should never lower lending standards; strictly follow the credit granting procedures; conduct due diligence in reviewing and updating customers’ information regularly to make sure that capital is allocated to good borrowers with viable business plans and guaranteed repayment source; increase after-disbursement control and reviewed to ensure that the loans are used in accordance with the original purposes Vietcombank has traditionally relied on a combination of documentary sources of information, interviews and visits, and the personal knowledge and expertise of managers in assessing and monitoring business loans However, when assessing comparatively small and straightforward business credit applications, banks may largely rely on standardized credit scoring techniques (quantifying such things as the characteristics, assets, and cash flows of owners) Using such techniques and also centralizing or rationalizing business-banking operations, generally, can significantly reduce processing costs Standardized computer-based assessment may also be more accurate and fairer than reliance on the personal judgments of local bank managers As a result, banks may now be able to offer more loans in a faster way and in larger amounts, and reduce previous high security requirements However, business lending as a whole is substantially more diverse and complex than personal and residential mortgage lending This, coupled with the large size and inherently risky nature of many business loans, tend to limit the scope and desirability of computerized credit scoring in assessment and monitoring Therefore, when making lending decision, bank needs to consider carefully whether the customers are able to pay the loan or they may fail to pay back the loan due to business loss 43 4.2.2 Solutions for enhancing medium and long-term credit quality 4.2.2.1 Reshaping medium and long-term credit policy Credit policy plays an integral part in not only ensuring that credit activities are on the right track but also determining whether the bank will be successful It is obvious that the better credit policy the bank has, the higher profitability it will get However, although it is true that the end goal of all credit policies is to maximize the bank’s revenue while minimizing the risk generated by extending credit – the ways to get there can vary depending on many factors, such as: the size, cash-flow of the bank, banking industry, and the overall economic climate Therefore, formulating a credit policy needs to base on scientific basis and make sure to diversify risks, comply with regulations and attract resources In addition, during policy making process, it is necessary to consider the following elements: mobilizing deposits into the bank, ensuring capital safety and profitability of the bank, encouraging enterprises to apply for a loan, promoting medium and long-term credit expansion, exploiting existing technologies fully, enhancing position of domestic products There are some solutions for setting up a suitable credit policy: - - - Bank needs to determine clearly which factors can be flexible in order to meet the customers’ demand such as: credit scale, credit limitation, credit duration, types of credit and especially, its priority investment sectors Due to the frequent changes of socio-economic environment, credit policy of the bank will be suitable for a certain period Thus, bank needs to undertake a research to examine the policy effect and predict the changing trend after a specific period to make an ultimate change to the policy This activity is extremely critical since one change in the State policy will result in many other changes which can cause problems for the credit activities of the bank Besides, bank also need to hold meetings between the bank and customers, create a connection between each other to handle complaints from customers immediately and to find out the suitable and unsuitable points in credit policy Based on the feedback of each meeting, bank will continue to develop good points and fix the bad points 4.2.2.2 Improving quality of investment projects’ appraisal Credit quality are normally judged based on quality of investment projects’ appraisal However, commercial banks in general and Vietcombank in particular are not paying a substantial premium to appraisal activities, which result in low quality This situation 44 happens to almost all banks in Vietnam due to limited skill and ability of staff, incorrect information of customers or wrong appraisal method, etc Undoubtedly, lending appraisal plays an integral part in ensuring an exact lending decision as well as the safety of capital and profit Because of high percentage of risk of medium and long-term loans, these activities need to be put higher priority on than the others As a means to enhance quality of project appraisal, Bank needs to set up a system of indicators that influence lending decisions These indicators must have a strong connection between each other in order to reflect the investment project precisely Basically, factors should be divided into two main groups: indicators reflecting profitability and indicators reflecting risk level of the project Besides, credit staff have to pay more attention to critical information retention during appraisal process such as: financial reports, business strategies, accounts and information about ability, skills and virtues of companies’ managers When collecting information, credit staff need to some cross-checks, verify the accuracy of information and immediately report suspicious information to the seniors 4.2.2.3 Focusing on credit risk management With the rapid growth of credit sector over the past few years, Vietcombank can totally expect to surpass its targets, growing 17.9 percent over 2016, fueled by stronger credit demand and better business conditions However, since the uncertain economic times of the past few years have had a major effect on how companies operate these days, companies that used to operate smoothly with the help of forecasts and projections now refrain from making business judgements that are set in stone Due to this fact, Vietcombank has no choice but to concentrate on risk management To be more specific, there are some solutions that should be taken into consideration such as: - Setting up an evaluation system, including indicators for assessing medium and long-term credit quality Under the standardization of credit operation, all necessary rules and regulations should be transformed into pamphlets (for example: credit pamphlet, risk management pamphlet…) This will, in turn, help credit staff understand process of granting a loan and provide them with basic knowledge to deal with any contingencies 45 - Debt department’s staff need to actively collect data on enterprises that have already gone or are about to go bankrupt as well as information of those companies’ managers 4.2.2.4 Preventing, restricting and handling overdue debt Overdue debts and rate of overdue debts are two critical indicators in judging quality of a loan Therefore, a general goal of all commercial banks is to keep this rate as low as possible There are two ways to collect the debts, one of which is that company is running a good business and be able to pay the interest fully and timely, the other one is that bank will liquidate collaterals of that firm to collect the debt Obviously, banks will want to collect the debt according to the previous way and they always have to come up with a variety of solutions to prevent and limit the amount of overdue debts Some solutions to prevent overdue debts that should be mentioned are: - The first and foremost step to when preventing overdue debts is to the bad cases arose from the customer Analyzing deeply to have an exact assessment of financial situation of customer who is considering for granting a loan will help the bank to have a close look of customer’s conditions When assessing real financial situation of customer, bank needs to consider both quantitative and qualitative indicators such as: legal status of borrower; business volume, financial situation, prestige of firm; possibility and profitability of project… - - Enhancing inspection, supervision and internal control to not only promptly recognize any bad signals of the loan but also seek for suitable solutions to prevent risks for the bank Carrying out some risk diversification’s action to minimize the risk such as associate with other financial institutions to co-finance big projects and provide loans for different economic or manufacturing sectors… Some solutions for limiting the amount of overdue debts: - Paying special attention to signals of loans that may become overdue debts such as: • Enterprise delays providing financial report • Enterprise is likely to refuse when the bank wants to inspect business activates • The amount of deposit balance decreases • The number of unpaid loans increases • Products are unable to sell 46 • There are some changes in the managing committee of the enterprise • The monthly interest and principal are often repaid lately - If identifying any unusual signals of the loans, credit staff need to anything they can within their grasp to prevent risk for the loans The bank and the customer can work together to resolve problems while ensuring benefits for both sides Some actions that can be taken in this situation are: • Asking for the guarantee of other partner who has enough financial power to pay the loan for the enterprise This requirement will help create the second source of repayment in case the first source is unsecured • Besides, bank can reduce the interest to help customer reduce financial burden or extend payment deadline with some specific conditions • If customer is unable to repay the loan, then bank has no choice but to liquidate the collaterals However, during this process, bank needs to follow regulations strictly and a whole check of the collaterals’ information • Maintaining direct control over the disposal of problem debts towards branches possessing high problem debts Assisting branches following the motto of Innovation and Discipline to recover bad debts by simultaneously employing different measures In branches with high bad debts, strictly implementing the “Good bank, Bad bank” proposal, putting forward specific criteria, solutions, and road map up to 2017 • Designing recovery plans specifically applied to each loan • Early detecting risks of loans and then applying appropriate loan settlement measures simultaneously 4.2.3 Solutions for organizational structure and workforce Credit staff (loan officer) develops loan applications by evaluating applicant information and documentation, then determine the credit worthiness of people or companies applying for loans Besides, credit analysts have to not only keep knowledge of key issues up-to-date (for example: legal, market risk and compliance issues) but also have certain knowledge about the areas that customer desires to invest in In addition, they still need to keep company credit exposures within set risk bearing limits These responsibilities are sometimes impossible if there is just one person who is in charge of many companies from different areas Therefore, there needs to be a professionalization in credit department’s workforce Bank needs to divide the staff into several independent groups that are responsible for one specific area according to knowledge and strengths Holding some events, workshops or training programs is 47 necessary in order to help employees expand their personal networks as well as enhance their abilities 4.2.4 Intensifying supervision and inspection If project appraisal is commonly considered the first step in the process of making decision whether the bank should grant loan or not, inspecting and supervising customer’s repayment are also steps that cannot be neglected Once the bank has given the customer a loan, what loan officer need to is to verify whether that loan has been used for committed purpose or not This can be done via checking up documents, bills, or contracts If the customer is conducting the business follow the initial purpose, then the bank can take it as a platform for the upcoming loan; while in contrast, bank needs to handle the issue according to the credit policy if customer not follow lending contract Additionally, credit staff need to urge customer to repay the loan every month and keep track of repay date according to terms of contract Besides, bank needs to send a report to enterprises that have overdue debts in order to remind them of the loan If enterprise is not able to repay a loan on due date, bank can consider extending the repayment period under credit policy construction In term of existing overdue debts, credit officer must continuously keep track of the enterprise’s business operation in order to promptly remove any difficulties or obstacles 4.3 Recommendations With the intention of enhancing the medium and long-term credit while expanding market as well as improving the competitiveness of Vietcombank, on no account can the bank rely on just its effort but also on the assistance of the State Bank, Government and other relevant organizations 4.3.1 To the State Bank of Vietnam Generally, the system of legal documents regulated by the State Bank of Vietnam about credit activities has had some new points which paved the way for commercial banks’ operation and help simplifying procedures associated with registering collateral, pledging assets as security for loans, lending, or selling collateral to collect non-performing loans This has resulted in a smoother operation and lower cost for 48 both consumers and commercial banks Nevertheless, some provisions about lending policies and debt securities not closely follow the real situations and have the consistence with newly promulgated legal documents Hence, the State Bank should spend more time in investigating, adding and perfecting policies related to credit activities while ensuring synchronism so as to enhance the safety and efficiency of commercial banks’ credit activities Besides, there are too many documents related to credit policies which caused several confusions to banks during enforcement process Apart from the State Bank’s enactment of lending policy, there are also other official dispatches, decisions, circulars, directive of related sectors When granting a loan, a bank needs to crossreference with several types of legal documents which apply to specific area Thus, there needs to have a solution to restructure legal document system of Vietnam to meet the demand of credit operations in a safer and more efficient way In addition, the State Bank should raise the frequency of the inspection and supervision of commercial banks Strengthening the inspection system both in quantity and quality to ensure that quality standards, such as for safe and rational use of services, are agreed upon, monitored, and enforced is undoubtedly critical The State Bank can also encourage commercial banks to improve their ability of business administration This will, in turn, help banking sector as a whole develop rapidly while ensuring law implementation The enforcement of macroeconomic stability policy needs to be done strictly, including controlling inflation as well as making sure that the financial and monetary system are working effectively In order to restrict the unfair competition in term of interest rate, the role of Banking Association needs to be enhanced; whilst, addressing the State Bank’s role in regulating market interest rate via oriented interest rate 4.3.2 To the Government and other relevant organizations Agencies body for investment project appraisal should be more responsible for the development of the economy in general and the banking sector in particular, while making sure that the appraisal without scientific and practical base The activities of these agencies are worth paying a substantial premium; otherwise, it will cause troubles for bank’s operation The Government should also consider making statutory audit compulsory for all types of enterprises This will, in turn, ensure a higher reliability of financial reports 49 In addition, The Ministry of Finance needs to have careful instructions for better utilization in accounting measurement according to the ordinance on accountancy and statistics in order to ensure accuracy, scientific contents and timeliness of financial reports, which will make it easier for loan officer to assess the company Besides, import-export administrative agencies need to ensure the stability of importexport policies as well as the trade balance This will, consequently, pave the way for banking service’s expansion in the import and export industry Lastly, Statistical authority should promote its responsibility in collecting enterprises’ data so as to be able to provide the most precise and urgent information to the banks 50 CONCLUSION Medium and long-term credit is undoubtedly one of the critical services of commercial banks, and its related activity is hereby a concerning issue to not only banking sector but also the Government in recent years due to several difficulties and limitations Hence, detecting problems and seeking for radical solutions are by no means a simple thing, which will require time, brainpower, and of course, a flawless synchronization between economic policies and regulations as well as an equal allocation of resources to development of different areas and sectors Keeping pace with the ceaseless development of the market economy and the positive growth of the whole banking system, the medium and long-term credit service of Vietcombank has affirmed its important position in expanding business and production activities of enterprises The total of medium and long-term outstanding loans increases constantly through studied years (between 2014 and 2016) As above, it can be seen that the bank has been making its best efforts in overcoming challenges and improving shortcomings about the medium and long-term capital resources in order that enterprises’ medium and long-term capital resources can be best satisfied At the same time, the bank has also concentrated on inspection and evaluation before, during and after lending process; controlling loans carefully with the purpose that it can minimize the risk level, guarantee safety for medium and long-term loans Therefore, the bank has achieved outstanding successes in improving the quality of medium and long-term credit Besides the accomplishments, however, it is unavoidable for the bank to deal with some certain limitations As a result, enhancing the operational efficiency of medium and long-term credit is a target which the branch should immediately try its best to reach as a priority In this thesis, the writer has supplied a background understanding about the credit in general and the medium and long-term credit in particular, and next, has made a deep analysis of the real situation of the medium and long-term lending activity in Vietcombank Finally, the writer also has given some suggestions on widening the medium and long-term capital scale and boosting the medium and long-term credit quality for the bank I expect that the credit service in general and the medium and long-term credit service of the bank in particular will obtain more successes in the future Furthermore, I also expect that the bank will keep and further promote its significant role in the development of the whole commercial banks’ system of Vietnam 51 in order to make much more contributions to accomplish the comprehensive construction and innovation process of the national economy During the research process, because of limited experience and lack of time, my thesis might have not avoided some shortcomings Actually, I am quite willing to receiving any comments to make it better Once again, I would like to show my sincere gratitude to M.B.A Nguyen Thi Thuy as well as all officers of Vietcombank (Tay Ho Branch) especially all staff of sale department for much encouraging and supporting me to complete this thesis 52 REFERENCES VIETNAMESE Pháp lệnh ngân hàng (1990) Luật tổ chức tín dụng (1997) NGƯT TS.Tô Ngọc Hưng TS Nguyễn Kim Anh (2008) Giáo trình nghiệp vụ kinh doanh ngân hàng, NXB Thống kê Lê Văn Tề (2009) Tín dụng ngân hàng, 10, 202-203, Nhà xuất Giao thông vận tải PGS.TS Lưu Thị Hương , Thẩm định tài dự án (2004), NXB Tài Chính T.S Nguyễn Minh Kiều (2007) Nghiệp vụ ngân hàng đại, 185, Nhà xuất thống kê Quyết định số 958/QĐ.NHNT.TCCB- ĐT Hội Đồng quản trị ngân hàng Ngoại Thương Việt Nam ngày 15/08/2008 Báo cáo thường niên Vietcombank năm 2014, 2015, 2016 Báo cáo kết kinh doanh năm 2014, 2015, 2016 Vietcombank ENGLISH Duong Thu Ha, Truong Nhat Quang New rules on debt classification and loss reserves, 1-2 Neil H Jacoby, Raymond J Saulnier (1942) Term Lending to Business, 9-12, UMI Peter S Rose (2004) Commercial Bank Management, Author House, 251-297 Shin-ichi Fukuda (2001) Working paper No 77, Business Columbia University WEBSITE www.vietcombank.com.vn http://en.wikipedia.org/wiki/Credit_(finance) http://www.voer.edu.vn/bai-viet/kinh-te/cac-nhan-to-anh-huong-den-chat-luong-tindung.html http://voer.edu.vn/bai-viet/kinh-te/vai-tro-tin-dung-trung-va-dai-han-cua-ngan-hangthuong-mai-trong-nen-kinh-te-thi-truong.html 53