A survey on the short term lending quality of vietinbank cua lo branch,graduation thesis

Graduation Thesis Banking Academy STATE BANK OF VIETNAM BANKING ACADEMY Foreign Language Faculty  GRADUATION THESIS A SURVEY ON THE SHORT-TERM LENDING QUALITY OF VIETINBANK – CUA LO BRANCH Student Class Lecturer : Nguyen Thi Van Anh : ATCA- K12 : Tran Thi Thu Thuy (M.A) 25th May 2013 Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy ACKNOWLEDGEMENTS I would like to express my deep gratitude to my supervisor, Tran Thi Thu Thuy for her valuable and constructive advice and stimulating suggestions from the beginning to the final step Without her useful guidance and persistent help, the informative and smooth dissertation would not have been possible My special thanks are extended to the staff of VietinBank Cua Lo branch who enabled me to visit their offices and provide me with sufficient data for the research Their generosity meant a lot to me Assistance and encouragement provided by my family and friends were greatly appreciated Their supports urged me to pursue the final goal of the research Finally, I am particularly grateful for my readers, who spend their precious time for reading my graduation thesis Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy ABSTRACT It is undeniable that the improvement of the short-term lending quality in banks has increasingly been gaining the importance in the domain of banking system As credit activities are the most profitable services with the highest risk, it is extremely necessary to enhance the lending effectiveness in order to limit the short-term lending’s limitations and promoting the development of country However, banks have currently experienced the difficulties and the short-term lending quality has been negatively affected In order to address this issue, a survey on short-term lending quality of VietinBank Cua Lo branch was conducted to identify the limitations of the short-term lending quality and sort out the reasons and then propose recommendations to enhance the lending effectiveness Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy LIST OF ABBREVIATION Vietinbank : Vietnam Joint Stock Commercial Bank for Industry and Trade SNCs : Syndicated loans JIT : Just in time NPL : Non-performance Loan WTO : World Trade Organization ID : Identity Card PESTEL : Political, Economic, Social, Technology, Environment and Law Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy LIST OF CHARTS AND TABLES Diagram 3.1: Total outstanding loans of VietinBank Cua Lo branch 2010-2012 26 Diagram 3.2: Outstanding loans based on maturity 27 Diagram 3.3: The main limitations in short-term lending quality .31 Diagram 3.4: The main sources for collecting customer’s financial situation 32 Table 3.1: Results of capital mobilized in VietinBank Cua Lo branch 24 Table 3.2: Total outstanding loans based on maturity 26 Table 3.3: Bad debt ratio of VietinBank Cua Lo branch .28 Table 3.4 Classification of debts at VietinBank Cua Lo branch 28 Table 3.5: Profit rate from lending and profitability rate of short-term lending at VietinBank Cua Lo branch 29 Table 3.6: Efficiency ratio of using capital at VietinBank Cua Lo branch 30 Table 3.7: The seriousness level of reasons for the limitation in the short-term lending quality 33 Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy TABLE OF CONTENTS ACKNOWLEDGEMENTS ABSTRACT LIST OF ABBREVIATION LIST OF CHARTS AND TABLES CHAPTER 1: INTRODUCTION .1 1.1 BACKGROUND TO THE STUDY 1.2 AIMS OF THE STUDY 1.3 RESEARCH QUESTIONS 1.4 SCOPE OF THE STUDY 1.5 METHODS OF THE STUDY 1.6 OUTLINE OF THE THESIS CHAPTER 2: THEORETICAL BACKGROUND 2.1 TH EORETICAL BACKGROUND OF LENDING ACTIVITIES 2.1.1 Definitions of lending 2.1.2 Importance of lending 2.1.3 Categories of lending 2.1.3.1 Peter S.Rose, Sylvia C.Hudgins’ s classification 2.1.3.2 Others classifications based on other purposes 2.2 THEORETICAL BACKGROUND OF SHORT-TERM LENDING 2.2.1 Definition of short-term lending 2.2.2 Characteristics of short-term lending 2.2.3 Forms of short-term lending of commercial banks 2.2.3.1 Short-term lending to business .8 2.2.3.2 Short-term lending to individuals and families 10 2.2.4 Role of short-term lending to the economy .11 2.3 THEORETICAL BACKGROUND OF SHORT-TERM LENDING QUALITY .12 2.3.1 Definitions of short-term lending quality 12 2.3.2 Factors affecting the quality of short-term lending 13 Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy 2.3.2.1 Objective factors 13 2.3.2.2 Subjective factors 15 2.3.3 Indicators for assessing lending quality 18 2.3.3.1 Qualitative indicators 18 2.3.3.2 Quantitative indicators 19 CHAPTER 3: METHODOLOGY AND DATA ANALYSIS 23 3.1 RESEARCH METHODOLOGY 23 3.2.1 Observation of the real report 23 3.2.2 Interview .23 3.2.3 Questionnaire .23 3.2 DATA ANALISIS .24 3.2.1 Observation analysis 24 3.2.1.1 Short-term capital mobilization 24 3.2.1.2 Outstanding loans and bad debt ratio 25 3.2.1.3 Profitability rate of short-term lending and efficiency ratio of using capital at VietinBank Cua Lo branch 29 3.2.2 Interview and questionnaire analysis 30 3.2.2.1 Limitations of the short-term lending quality at VietinBank Cua Lo branch 30 3.2.2.2 Causes 32 CHAPTER 4: FINDINGS 34 4.1 LIMITATIONS 34 4.2 REASONS 35 4.2.1 Causes from VietinBank Cua Lo branch 35 4.2.2 Causes from enterprises 36 4.2.3 Causes from the economy of Vietnam 37 CHAPTER 5: RECOMMENDATIONS AND CONCLUSIONS 38 5.1 RECOMMENDATIONS 38 5.1.1 Solutions for improving short-term lending quality at VietinBank Cua Lo branch 38 Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy 5.1.1.1 Improving the process of loan justification in making credit decision .38 5.1.1.2 Improving credit analysis and data sufficiency .39 5.1.1.3 Improving the monitoring step 40 5.1.1.4 Improving customer policies .41 5.1.2 Recommendations 42 5.1.2.1 Recommendations to Vietnam Joint Stock Commercial Bank for Industry and Trade 42 5.1.2.2 Recommendation to the State Bank of Vietnam .43 5.1.2.3 Recommendation to the government 44 5.2 CONCLUSIONS .44 REFERENCES APPENDIX Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy CHAPTER 1: INTRODUCTION 1.1 BACKGROUND TO THE STUDY Lending is undeniably one of the most important activities in the domain of banking Banks play a special role in providing external funds to the economy and its lending services create handsome profits for both customers and banks As a key component of the financial system, banks allocate funds from savers to borrowers in an effective manner These lending activities help to make the overall economy operate more efficiently These services, however, are the highest – risk field of commercial banks when recently the bad debts ratio in banks has been significantly increasing As the global competition is widely happening, companies are driven themselves to increase their services Accordingly, irrespective of lending risks, the company demand of borrowing money to improve products is considerably imperative more than ever It is likely that the development and prosperity of corporations from agriculture to industry field depends partly on banking credit activities Specifically, short-term lending is one of the popular ways from which both individual and institutional customers can obtain funds Small businesses and start-up companies most often need short-term loans instead of long-term debt financing If short-term lending quality is cultivated and improved, it will help commercial banks well function as a credit intermediary in the economy and limit the problems of bad debts and overdue debts as well Also, good lending quality helps heighten the effectiveness of using capital of corporations Enterprises have the responsibility to repay the principal and interest on due date Hence, companies must make efforts to use loans profitably in order to assure the payment contracts In other words, good short-term lending quality reflects the low level of risk and high profitability for both customers and banks All in all, the researcher understands the significance of cementing short-term lending quality To provide a deeper view about short-term lending quality, problems affecting the quality and suggested solutions in Vietinbank – Cua Lo Branch, the topic “A survey on the short-term lending quality of Vietinbank – Cua Lo ” is investigated Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy 1.2 AIMS OF THE STUDY The study is carried out in order to firstly provide better understandings of the importance of short-term lending quality in the commercial banks’ operation and business Secondly, the current situation of short-term lending in Vietinbank – Cua Lo Branch is presented and analyzed to find out its achievements and remaining problems And then the study digs deeper into Vietinbank’s problems and its causes Finally, the researcher proposes some solutions and recommendations to improve the short-term lending quality at Vietinbank – Cua Lo Branch 1.3 RESEARCH QUESTIONS The research aims at identifying the problems and figuring out the solutions to enhance the short-term lending quality at Vietinbank – Cua Lo Branch Accordingly, the study is done to answer the two following questions (1) What were the problems affecting the short-term lending quality at Vietinbank – Cua Lo Branch during the 2010-2012 period? (2) What should the branch to improve the current situation? 1.4 SCOPE OF THE STUDY The study is conducted only based on the activities of Vietinbank – Cua Lo Branch The data is obtainable between 2010 and 2012 Hence, the evaluation of the short-term lending at Vietinbank – Cua Lo Branch can be practical during the 20102012 period 1.5 METHODS OF THE STUDY Firstly, the research is implemented with regards to both qualitative and quantitative analysis The data is collected through the real reports of outstanding loans, overdue debts, bad debts and profitability in Vietinbank to have the initial evaluation of the short-term lending quality in Vietinbank – Cua Lo Branch At the same time, the instruments like interview and questionnaire would be applied to keep the record on the existing situation of short-term lending quality during the period from 2010 to 2012 1.6 OUTLINE OF THE THESIS The study includes five main chapters as follows: Chapter I: Introduction – This chapter presents the overall view on the thesis topic with the reason to implement the study, its scope and the methods of the study Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy customers The shortcomings of these steps are a catalyst for consecutive mistakes in the lending process Finally, it is loan management that causes the shortcoming of the short-term lending quality After accepting the customers’ loan request, it is totally crucial for the credit officers to continuously control all the customer activities However, sometimes the credit officers at VietinBank Cua Lo branch carried out carelessly the step of monitoring and depended on information supplied by customers It led to the problem of asymmetric information The careless attitudes of some credit officers caused the later problem detection 4.2 REASONS 4.2.1 Causes from VietinBank Cua Lo branch The first reason for these shortcomings is the fund limitation Since Vietnam took part in WTO and is in the process of development, both individual and business customers have had demand to borrow money and invest Nevertheless, although the amount of capital mobilization is annually increasing, it is still not sufficient for both the traditional customers and the potential customers Therefore, it is the bank’ decision to grant loans for the regular customers who have a good credit worthiness It is a reason why some potential clients’ loan requests are not accepted Another reason being responsible for these drawbacks is data insufficiency The insufficient information results in the limitations of lending process and the false assessment of the financial health of each business There are several ways that bank could obtain the information The sources include the customer’s balance sheet, income statement, client profile with business banking information, interviews, field visits and other external information from magazines, newspapers and the internet Nevertheless, the credit officers at VietinBank Cua Lo branch usually depended on the information supplied by the customers and other financial documents Undeniably, the information indicated partly the current status of the customers’ finance To understand a whole picture of the company’s financial strength and future prospects, the credit officers must carry out many field visits to assess frequently the customer’s location and the condition of the property Nguyen Thi Van Anh 35 ATCA-K12 Graduation Thesis Banking Academy The final cause from VietinBank Cua Lo branch is the monitoring of loans If the monitoring of loans was professional and careful, the bank’s management of loans would be better In this step, the credit officers must be active to collect data periodically of loan usage However, the significant dependence on the financial statement and the accounts transaction supplied by customers brought about the wrong assessment Because some borrowers who faced the loss of business tried to supply the insufficient documents of loans usage and created the fake account transactions For the credit officers at VietinBank, in stead of performing plan and site visits to recheck the customer’s collateral value and updating information on the feasibility and the effectiveness of loan usage, they had tendency to depend on the information provided by customers 4.2.2 Causes from enterprises The poor performance of business customers results in their loss and their inability of debt payment Since the customers could not pay on due date, the shortterm lending quality is dramatically affected To start with, it is the corporation’ limited management capacity that puts both their business and VietinBank in danger It is the fact that almost small companies at Cua Lo town are established by one or more leaders who are not specialized and knowledgeable They are rich traders and their administration skills to manage and operate one company are quite poor Therefore, in spite of having good plans, they could face the failures because of a badly-organized business Since the company operation does not run smoothly, it could cause the company’s poor performance Also, the management capacity of company also refers to their marketing, technology and employment Specifically, when company products are not widely advertised, the goods may be less competitive in the market and the company’s competitiveness is also influenced Accordingly, the leaders who lack of necessary skills to operate smoothly and efficiently their business can hamper the company’s development Equally important, the enterprises’ dishonesty also leads to the problems of the moral hazard and the asymmetric information In some cases, since customers faced the financial problems and still wanted to borrow funds from banks, the customers Nguyen Thi Van Anh 36 ATCA-K12 Graduation Thesis Banking Academy supplied the insufficient data to the bank Their dishonest activities was not only illegal but also affected considerably the short-term lending quality 4.2.3 Causes from the economy of Vietnam The economy of Vietnam is the final factor being responsible for some limitations of the short-term lending quality at banks in general and at VietinBank Cua Lo branch in particular It is irrefutable that the high inflation is a headache in all fields from the banking system to the whole industry Since the inflation rate of Vietnam economy was two digits in 2011 and touched 18,6%, it created a very hardship time for businesses, individuals and banks as well As the inflation rate increased, the prices of commodities and raw materials grew up dramatically Therefore, the increased input costs led to the decreased company profits The production of goods became limited and the unemployment rate climbed As the results of these problems, borrowers became cautious and their confidence of investing was impeded more seriously than ever before All these problems contributed directly to the stagnation of Vietnam economy in general and VietinBank in particular In addition, 2012 was a difficult period for the Vietnam economy due to the complicated economic situation globally and domestically Therefore, the tight credit policy and the limited disbursement influenced both the capital supply and capital demand These problems affected the short-term lending quality in banks Nguyen Thi Van Anh 37 ATCA-K12 Graduation Thesis Banking Academy CHAPTER 5: RECOMMENDATIONS AND CONCLUSIONS 5.1 RECOMMENDATIONS 5.1.1 Solutions for improving short-term lending quality at VietinBank Cua Lo branch It is irrefutable that lending is one of the most profitable and risky activities in the domain of banking Lending activities could promote the development and thriving of banks but also put banks in danger Since VietinBank Cua Lo branch faced the difficulties for enhancing its short-term lending effectiveness during 2010-2012, it has been necessarily implemented some effective strategies to limit its weaknesses and improve its competitiveness as well 5.1.1.1 Improving the process of loan justification in making credit decision Loan justification before making credit decision is the first step and important part in the process of giving credit The irresponsible loan justification of bankers may result in the loss of bank since they decide to grant loans to the customers who could not use funds effectively Therefore, all the steps in the process of loan justification need to be carried out carefully and responsibly by the staff Firstly, it is possible that when the credit officers in VietinBank Cua Lo branch receive the customers’ application package, they must check the sufficiency and validation of the documents Specifically, it includes the loan request, the legal document (ID card, house registration book, business registration certificate), the financial documents (balance sheet, income statement, cash flow statement, notes), the business plan and supporting documents of loan usage plan (purchase contract, invoices, receipts) and the collateral documents like car registration, certificate of land use right, valuable papers This step is notably imperative since thanks to this, the credit officers can check the possibility and the profitability of the customers’ plans The credit bankers are encouraged to apply this step for both the potential and traditional customers The possibility is that on account of close relationship with the traditional customers, some staff grant loans for the customers without checking these documents Secondly, after checking these documents, bankers usually have a short interview with the customers That interview is considerably crucial because it provides an opportunity for the loan officers to Nguyen Thi Van Anh 38 ATCA-K12 Graduation Thesis Banking Academy assess the customers’ characters and the sincerity of the purpose In this interview, the credit officers must listen in details the plan of their customers and then analyze the possibility of their investments After that, the credit officers at VietinBank Cua Lo branch should take into consideration other factors like the customers’ record of borrowing experience to have more confirmed information Another imperative point is that VietinBank Cua Lo branch should specialize in the justification process to improve the quality of short-term lending Possibly, the loan justification should be divided into many parts and each banker is responsible for a specific part to create high specialization skills for each staff Also, the customers need to be grouped as well Bank could group them according to their investment fields, from agriculture, transportation, fishery and forestry to stock and hospitals For each type of customers, VietinBank could have correspondingly the credit officers who are specialized in this field The credit officers’ understandings and experience contribute directly to the right loan justification, improving the lending effectiveness in VietinBank Cua Lo branch All in all, the right loan justification at the beginning of lending process is the stepping-stone for the better loan effectiveness 5.1.1.2 Improving credit analysis and data sufficiency Credit analysis is the process of checking the customers’ information in details VietinBank Cua Lo branch recognized the important role of credit analysis but they often made a fault in the process of the credit analysis Besides, the sufficient data could help bank make a right credit analysis Accordingly, VietinBank Cua Lo branch is advisable to enhance their credit analysis and data sufficiency Firstly, when it comes to the credit analysis, VietinBank should consider carefully the system of 6Cs including character, capacity, cash, collateral, conditions and control Specifically, the customers’ character shows their willingness to repay the loans Basically, it is an evaluation of the business owner’s personal history and his background Other factors, like capacity, conditions are also crucial Therefore, the credit officers are responsible for considering all factors immediately for both traditional and potential customers The bankers at VietinBank Cua Lo branch had tendency to forget the factor of conditions It may be the political condition or economic, social and technology conditions or law Many banks apply the method of Nguyen Thi Van Anh 39 ATCA-K12 Graduation Thesis Banking Academy PESTEL analysis (P- political, E-economic, S-social, T-technology, E-environment and L-law) or the Porter Model to evaluate the feasibility of plan in specific conditions Hence, VietinBank Cua Lo branch can try to study and imitate their method to have logical and effective strategies to assess the customers’ investment plan Many customers’ plans accepted by VietinBank Cua Lo branch looked so good in paper but turned out the loss because of the influence of social conditions and technology Secondly, it is undeniable that the sufficient data contributes directly to the better credit analysis It is apparent that the bankers at VietinBank Cua Lo branch have usually depended on the internal information resources including the balance sheet, income statements and activity reports These sources could provide them the reliable information of customers However, they may collect information from other sources, namely, customer interviews, field visits and external information resources like magazines, newspapers, industry journals and the internet The additional information possibly helps them understand more about the customer’s strengths and weakness 5.1.1.3 Improving the monitoring step Lending activities are the most risky bank activities In fact, both lenders and borrowers could face a lot of potential risks After accepting the customers’ loan request, the bankers at VietinBank did not usually recheck the customers’ business leading to the risks and loss It is a reason why VietinBank Cua Lo branch must improve their monitoring Lending monitoring is a necessity for a sound lending program at VietinBank Cua Lo branch It is advisable that the credit officers must monitor and recheck continuously to ensure that the terms of the loan are being followed and all required payment of principal and interest rate are being made as promised There are some typical ways that bankers at VietinBank Cua Lo branch can apply to continuously and periodically monitor the loans, namely, performing plan and site visits, obtaining and analyzing interim and annual financial statements, updating information on the feasibility and the effectiveness of loan usage, checking the account transactions of customers, monitoring security collateral and update collateral value assessment Several customers tried to violate the terms and hence the monitoring of VietinBank may early Nguyen Thi Van Anh 40 ATCA-K12 Graduation Thesis Banking Academy detect the problems and then take corrective action as soon as necessary and prudent Equally important, it is advisable that VietinBank Cua Lo branch also should specialize the monitoring step Some specific staff who have skills and experience are responsible for monitoring and rechecking customers As the monitoring could significantly limit the loss for VietinBank, it is necessary for them to improve their monitoring process immediately 5.1.1.4 Improving customer policies Convenient customer policies are a key to promote the customer loyalty but VietinBank Cua Lo branch did not always create the convenience for the customers Clearly, the main customers at VietinBank Cua Lo branch are the traditional customers who are in the close relation with the bank time to time VietinBank’s policy of strengthening the relationship with the traditional clients is reasonable Nevertheless, they should expand their new and potential customers at the same time It is feasible that banks need to continuously spread to the new clients through advertising the image and reputation in the mass of media Also, for the new customers whose loan requests are not accepted by VietinBank Cua Lo branch, the credit officers should additionally advise and persuade them to use other services of the bank and simultaneously introduce some lending policies which are suitable for their financial conditions When it comes to the customers whose loan requests are accepted, VietinBank Cua Lo branch may possibly advise customers how to use the capital effectively, making the customers’ plan more profitable and efficient Thanks to the additional consultancy, the bank could create a good image in the new customers’ mind Finally, the bank may consider sending the new customers a thank-you note and a discount on a future purchase about a week after processing their return and take that opportunity to ask them for comments about their experience Accordingly, VietinBank possibly knows the weaknesses in the customer policies and improves their strategies In conclusion, the maintenance of traditional customers and the expansion of potential borrowers partly ensure the lending effectiveness at VietinBank Cua Lo branch Nguyen Thi Van Anh 41 ATCA-K12 Graduation Thesis Banking Academy 5.1.2 Recommendations As the banking sector faced the hardship time during 2010-2012 affecting the development and thriving of other fields from agriculture, industry to fishery and forestry, this area always needs to be controlled and closely monitored by the government and the State Bank of Vietnam In other words, the destiny of all banks in general and VietinBank Cua Lo branch in particular depends partly on the guidance and monitoring of the government and the State Bank of Vietnam VietinBank Cua Lo branch is the credit institution under VietinBank Accordingly, their operations are influenced directly by VietinBank, the State Bank of Vietnam and the government In order to improve the short-term lending quality at VietinBank Cua Lo branch, some following recommendations are proposed 5.1.2.1 Recommendations to Vietnam Joint Stock Commercial Bank for Industry and Trade The mission of VietinBank is to become Vietnam’s leading financial and banking corporation that operates in diverse areas, as well as provides products and services that conform to the international standards While the short-term lending is one of the main sources generating the profit for VietinBank, they should pay more attention to the quality of the short-term lending Hence, VietinBank has to have appropriate and suitable strategies to improve its credit effectiveness Firstly, it is necessary for VietinBank to speed up the mission of the capital mobilization As the demands of borrowing are daily increasing, this task is increasingly gaining the importance The sufficient and rich sources of capital mobilization not only help VietinBank maintain its liquidity but also create more opportunities for them to attract the potential customers Secondly, VietinBank is recommended to improve their customer policies The maintenance of traditional customers and the orientation of specific new customer groups should be the subject of VietinBank priorities By offering many incentives and facilities for the new customers, VietinBank may possibly increase their profits from the lending activities The additional consultancy is totally beneficial for VietinBank Nguyen Thi Van Anh 42 ATCA-K12 Graduation Thesis Banking Academy Thirdly, the recommendation is that Vietinbank needs to cement the internal control system and its inspection and investigation activities to carry out the better credit analysis and monitor the customers’ activities continuously Also, the improvement of human resources is recommended It is advisable that staff must be recruited and retrained for a specific task The specialization of each banker leads to the profession in doing their jobs because they are trained for this area and possess the specific skills and the hands-on experience to solve the problems better than other staff To specify, the credit bankers who are specialized in evaluating the collateral values will be suitable for doing the job involving the credit analysis and the debt collection The specialization in all banking activities, especially the lending activities could help the bank limit maximally the risks and the losses Finally, VietinBank is advisable to cooperate closely with the State Bank of Vietnam to manage effectively the credit programs and update the new decisions to operate legally 5.1.2.2 Recommendation to the State Bank of Vietnam The State Bank of Vietnam controls and monitors all the activities in the domain of banking system Therefore, the State Bank of Vietnam needs to issue the new policies and guidance to help all banks operate efficiently and smoothly To start with, the legislation documents about the commercial banks’ operation in Vietnam has not perfected yet leading to the difficulties of solving the banking problems Also, the time of changing and adjusting some regulations and legislation documents is so long It can take a year or several years to change one legislation document because of the complicated procedures Hence, it is recommended that the State Bank of Vietnam should speed up the process of reviewing all the unsuitable policies and documents Also, the building of additional regulations, decisions and circulars for guiding the implementation of the law on the credit institutions should be prompted and qualified to ensure the safety and efficiency in the lending activities Equally important, another recommendation is that the State Bank of Vietnam can establish many accessible data banks for the usage of both customers and commercial banks The establishment of data banks in all provinces and the major cities creates favorable conditions for customers to assess all banks and then choose Nguyen Thi Van Anh 43 ATCA-K12 Graduation Thesis Banking Academy the most suitable bank to send the loan requests Also, in terms of banks, they can easily collect the financial information of many large corporations and their borrowing experience records The availability and accessibility of the important information may limit significantly the asymmetric information problems and cultivate the lending quality as well 5.1.2.3 Recommendation to the government The government directly monitors and manages all the State Bank activities Therefore, the strengthening of government regulations is totally necessary for the operation of both the State Bank and the commercial banks It is crucial that the government improves the regulatory environment and sustains the stable political environment The stable conditions facilitate the smooth operation of the domestic market and attract the foreign investment plans, promoting the development of corporations and banks In addition, the government and other ministries have to cooperate to improve the legal system, especially the Enterprise law and Land law in order to facilitate the operation of both enterprises and banks More guidelines of the procedure for certification of property ownership should be issued to help banks solve the problems of collateral and debt collection Other codes and legal documents relating to the banking system, especially the law on mortgage and the documents for determining the ownership of mortgage need to be supplemented and completed It is also necessary to cement the activities of court and enforcement to increase the legal effects of judgment and reduce the time of proceeding In conclusion, the close monitoring of government facilitates the State Bank’s operation and the destiny of commercial banks 5.2 CONCLUSIONS The stability and development of banking systems are the decisive factor contributing to the thriving of a country Under the pressure of inflation, crisis of the economy and the tough competitiveness in the banking system itself, VietinBank has also faced a lot of problems Although VietinBank Cua Lo branch has gained many achievements, it still needs to figure out some effective solutions to enhance the lending quality in general and the short-term lending in particular The limitations in Nguyen Thi Van Anh 44 ATCA-K12 Graduation Thesis Banking Academy the short-term lending could put not only the bank but also other enterprises in jeopardy Accordingly, the improvement of lending effectiveness is considered as the decisive goal and important target of VietinBank Cua Lo branch After the internship time at VietinBank Cua Lo branch, a survey on the shortterm lending quality of VietinBank Cua Lo branch was conducted Although the shortterm lending quality is such a complicated issue, the survey tried to figure out some issues Firstly, a survey provided the brief theoretical knowledge about lending, the short-term lending and the short-term lending quality, the factors affecting the shortterm lending quality and the indicators for assessing it Also, the subject of the study Vietinbank Cua Lo Branch and the data collection instruments were carefully presented in the thesis Additionally, the thesis provided the analysis and assessment of the short-term lending, indicating its limitations and the causes Finally, some solutions and recommendations were proposed to improve the short-term lending quality at VietinBank Cua Lo branch Nevertheless, due to the constrain of time, limited knowledge and hands-on experience, the mistakes and limitations are inevitable All comments to improve the thesis are welcomed Nguyen Thi Van Anh 45 ATCA-K12 Graduation Thesis Banking Academy REFERENCES Guin, L (2011) Matching Principle Kentucky: Murray State University Gitman, J., & McDaniel, C (2008) The Future of Business: The Essentials Retrieved from April, 2013, from http://books.google.com.vn/books?id=vH5as4jR4skC&pg=PA542&dq=short+t erm+loans&hl=vi&sa=X&ei=82RjUcTXNoyziQemooC4Bw&ved=0CDMQ6A EwAQ#v=onepage&q=short%20term%20loans&f=false Nguyen, Van Tien (2012) The Commercial banks Administration Ha Noi: The Statistics Publishing House Nguyen, Thanh Tu., & Nguyen, Thi Hong Nhung (2013) Bad debts in Viet Nam, the reasons and solutions Retrieved from April, 2013, from http://luattaichinh.wordpress.com/2013/02/25/thuc-trang-no-xau-cua-cc-tctd-oviet-nam-nguyn-nhn-v-mot-so-giai-php-tu-chnh-sch-php-luat/ Rose, S., & Hudgins, C (2005) Bank Management & Financial Services (7th ed) New York: The McGraw – Hill Companies Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy APPENDIX Appendix 1: Questionnaire Directions: Please indicate your opinion with each of these statements Place an “” mark in the circle of your answer Q 1: What were the main sources for collecting customer’s financial situation during 2010- 2012 in Vietinbank – Cua Lo Branch?  A The financial statement supplied by customers  B Magazines, the internet and the financial statement supplied by customers  C Field visit, the interview and the financial statement supplied by customers  D Others Q 2: What were the main limitations in short-term lending quality in Vietinbank?  A Lending process, loans management and customer policy  B Loan structure, customer policy and fund limitation  C Internal and external supervision, lending procedure and human resource  D Internal and external supervision, interest rate and human resource  E Others Q 3: Please rank the seriousness level of reasons for the limitation in short-term lending quality by circling A, B, C, D or E A= Most serious B= Very serious C= Quite serious D= Little serious E= Not serious at all Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy Fund limitation A B C D E Data insufficiency of customers A B C D E The customer’s limited management capacity A B C D E Harsh economy conditions A B C D E The monitoring A B C D E Nguyen Thi Van Anh ATCA-K12 Graduation Thesis Banking Academy Appendix 2: Interview Question 1: What were the limitations of the short-term lending quality in Vietinbank – Cua Lo Branch during the 2010-2012 period? Question 2: What were the main reasons causing these limitations? Nguyen Thi Van Anh ATCA-K12