CREDIT RISK MANAGEMENT AT MILITARY BANK – THANG LONG BRANCH

Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B TABLE OF CONTENTS i Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B ACKNOWLEDGEMENTS First and foremost, I want to use this opportunity to thank my parents who always trust on me whenever I make them disappointed Thanks to their unconditional love and support that I can complete my four years in the university Thank you lord, for bringing all good friends and family who are always with me through my up and down, especially Khanh, who helps me understand how theories are applied in the real world and the business activities as well Thank you my friends, Hang, My and Diep, who are always there to suppport and encourage me no matter what happens A heartfelt thanks to my supervisor Assoc.Prof - Ph.D Dang Ngoc Duc for his enthusiastic guidance and useful advices during the time I conducted this thesis I would also like to send my great thanks to my colleagues at Military BankThang Long Branch for giving me the chances to my internship and support me throughout the internship period Without their advice and guidance, I would not be able to complete this thesis ii Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B ABBREVIATION CIC Credit Information Center CR Credit Risk CRM Credit Risk Management MB Military Bank iii Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B LIST OF TABLES iv Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B LIST OF FIGURES v Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B STATUTORY DECLARATION I herewith formally declare that I myself have written the submitted Barchelor’s Thesis independently I did not use any outside support except for the quoted literature and other sources mentioned at the end of this paper Hanoi, 31/05/ 2016 Do Thu Ha vi Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B ABSTRACT Credit activity is one of the basic activities and primarily generating profits for commercial banks in Vietnam nowadays On the other hand, credit risk (CR) always brings unpredictable consequences for the economy as well as the commercial banks (CBs) The statistics show that the risk of lending activities account for 70% of total risk of commercial banks Although there has been restructuring in profits for commercial banks, the revenues from credit tends to decrease and revenues from service tends to increase, but in Vietnam, operating income for loans still account for 60% - 70% of the total income of the commercial banks Loans are primarily lucrative source but it also contains many risks, determining the existence and development of the commercial banks Nowadays, financial and monetary markets suffering from complicated developments and it directly affects the lending activities of commercial banks, the risk of lending activities is incresing and becoming hard to control than before In particular, during the financial liberalization and international integration, risks in lending activities increased due to the unpredictable fluctuations of the world’s economy Risks in lending activities not only affect the commercial banks but also the economy Therefore, controlling the risks in lending activities becomes more and more important in each credit operations Small and medium enterprises in Vietnam develop very dynamic and powerful in both quantity and quality in recent years It contributes significantly for the national economic This kind of enterprises is particularly concerned and given good conditions by the government With the specific characteristics of the scale there which consistent with management capabilities and operational orientation of MB, SMEs are focused on investing credit and becoming mainstream customers From the awareness of the effects of credit risk and the reality in credit risk activities for SMEs in Military Bank – Thang Long Branch , the author has chosen the topic: " CREDIT RISK MANAGEMENT AT MILITARY BANK – THANG LONG BRANCH ".The goal of thesis is to concretize general theory of credit risk, solutions to limit credit risk, using theory into practical in order to assess the limitations of credit risk activities and make recommendations to limit credit risk in Military Bank – Thang Long Branch Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B Acknowledging the important role of MB- Thang Long branch in the operation of the bank, I have spent my internship time at the branch to research and investigate deeply characteristics CRM of the branch To be detailed, the general result of my investigation includes: + Basic issues of credit risk and credit risk management + Analysis of credit risk management of SMEs at the branch + Strength and weakness of CRM in the branch; reason for current situation and direction of development in the future Data within the report is collected from a wide variety of official sources, such as bank websites and other data provided by the branch During the paper,the author decides to apply some theories and real-life findings to analyze, compare and generalize the data Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B CHAPTER I : BASIC ISSUES OF CREDIT RISK AND CREDIT RISK MANAGEMENT 1.1 Overview of credit risk 1.1.1 Definition of credit risk Bank credit is the credit relationship between banks, credit institutions and economic organizations, individuals on the principle of repayment The principal repayments of credit means that the implementation of the value of goods on the market, and the interest repayments of credit is the realization of surplus value in the market Therefore, credit risk can be viewed as business risk, but in view of banks According to Thomas P.Fitch, credit risk is the type of risk occurs when the borrower fails to repay the debt under a contractual agreement Apart from interest rate risk, credit risk is one of the primary risks in credit (Dictionary of Banking Terms, Barron’s Edutional, Inc., 1997) Credit risk, according to the most basic concept, is the risk of loss of principal or loss of a financial reward stemming from a borrower's failure to repay a loan or otherwise meet a contractual obligation 1.1.2 Causes of credit risk 1.1.2.1 Commercial banks Arranging unethical and unprofessional staff which lead to the failure in evaluating financial situation, collateral and business plans of customers Lack of ethics, leading to process credit left to pursue personal interests; appraisal sketchy, records matter, lacking control checks, assessment of collateral values are not right with the actual value On the other hand, the distinguish between rights and responsibilities in the credit granting decision is unclear, the manager is not bound tightly to their responsibilities as a result the doubtful loans continued to rise Credit approval process and lending process are lack of discipline; not focus on annalysing customers, abusing mortage assets For SMEs and personal loans, the bank's lending decisions primarily based on experience but the analysis was limited and inaccurate, lending decisions lack of scientific basis and it does not reflect the situation as well as the possibility of using the capital Lack of supervision and management after loan Banks often focused on the verification and loose the control of capital after lending Inspecting debt is an Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B important responsibility of loan officers banks, partly due to troubling aversion to customers, not provide timely and adequate information that banks require Lack of customers’ information or reliable credit information to analyze before granting credit Partly because of limited collecting channels to analyze information efficiently The cooperation between banks is too loose, the role of the CIC is not really effective In financial management, repayment capacity of a customer is a specific figure, with its maximum limit Without exchanging information, as a consequence, a client can lend at many banks which exceeds this maximum limit 1.1.2.2 Customers Using the funds for improper purposes, not willing to pay the debt, creating bogus records, unclear purchase contracts to banks Due to the size of firms and small capital so they will be unlikely to produce highly competitive products As the business expanded, the investment focus mostly on physical assets but rarely changing the management Lack of compliance with accounting standards as banks will be difficult to estimate the financial situation of enterprises The appraisal reports are impractical, therefore banks have always considered part of collateral severe as the last solution to prevent credit risks 1.1.2.3 Others factors  Unstable economic environment With fast and unpredictable changes in the world market: Economy of Vietnam mostly relies on imported raw materials such as steel, petroleum, fertilizers,etc as well as the major exported items such as textiles, agricultural,etc Liberalization of trade and international integration increases the competitive pressure on firms and banks Due to limited capital, technology, management skills, many companies and banks are not strong enough to create competitive products, then they lose customers which lead to losses and bankruptcy Economic development lack of direction, assigning, specialization labor and macroregulation of the state led to the spontaneous development of the industry, companies and banks caught up in the economic syndrome Therefore, when market becoming satiation or being back to the balance of supply and demand , the excess occurred, causing difficulties and losses for these investments, lending of banks and enterprises  Political risk Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B take care of this issue and alleviate emerging terrible obligations, Military Bank ought to manage the issues as follows: Firstly, there should be staff in level-1 branches who specialized in processing and recovering problematic debts which both balance sheet and off-balance sheet ones They Recovery team may be called as a result problematic debts can be recovered intensely Staff of this team should not be nominated to engage fot other jobs but fully use their time on debt collection as well as recovery Moreover, there should be an extquisite lawyer in resolution of economic arguments in such a team Secondly, the bank should send staff of debt recovery team to specialized training courses in order to improve their skills, knowledge and experiences because debt collection and recovery are different from the constitutional lending and assessment Accompany with deeply greedy recognition of credit regulations and procedures, staff of this team should also have deeply knowledge of laws and the ability to analyze customers’ psychology and persuade them Thirdly, debt recovery team should review loans cautiously as per monthly credit reports prepared by credit officers, then analyze and divde loans into groups 1,2,3,4 and Group includes standard debts, group consists debts needing special attention, group contains subprime debts, group includes doubtful debts and group is consisted of potentially irrecoverable debts Fourthly, Military Bank should entrust power to this team to handle any antidotes as determined by existing laws to recover debts in the most effective manner 3.2 Finish credit procedures Military Bank are developed lending procedures very strictly and scientifically However, there are still some defects in the implementation processes ranging from debt collection, assessment, approval to inspection of loan aims and the receipt of applications To make the procedures more effctive, there should be more accurate monitoring in the following phases: 43 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Phase Do Thu Ha - Advanced Finance 54B Frequency Methods Investigation of customers’ applications: Legal documents: legal potency of documents, management capability, credit prominence, changes in management positions, changes of matrimonial status and income sources - There should be participation of competent agencies for comparisons of information prepared by customers (such as tax agency, department of planning and investment, etc.) Frequently Collateral documents: legality - Interview customers in person and related people - Financial documents: financial capability, etc - Credit Information Center of the State Bank (CIC) Loan files: sufficiency, validity, etc Recognize and define the risk trends - Pay visits and on-site inspection (infrastructure, management capability) Spend enough time working with borrowing firms Monthly Assessment of loan procedures and repayment capability Verify the customers’ equity and obligate them to Each loan proposal make clear specific sources of their equity - Recognize upon financial statements as well as income sources from plans they are involved in Evaluate customers’ Monthly financial capability and manufacture and trading to consider the profitability of loans - Give quarterly and annual financial statements, reports to tax agencies, vouchers, customs declarations, etc - List of receivables to be gatheres 44 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Phase Do Thu Ha - Advanced Finance 54B Frequency Methods - Debt reports - Schedule of receivables to be collected and payables to be paid Obligate customers to report on their performance Monthly or Quarterly of production and trading Assess the aspects of: sector risks, business risks, potential risks, economic policies, market information, etc Understand the repayment sources clearly, i.e profitability of the loan scheme and other incomes that customers accomplish in case of any problems with the major source - Base on benchmarks such as: profitability, exploitation and use capability, loan use and Monthly During assessment - Verify original documents as well as determine liabilities - Verify legality of documents Appoint a professional assessment team to strictly analyze the feasibility before credit approvals Large projects Inspection of loan use after disbursement Check loan purposes 15 days after disbursing/ frequently 45 - Apparently understand and closely monitor the loan use Indicate any reasons for stubbornness - Describe the real debts use as compared to submitted documents or original plans Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Phase Check repayment sources Performance, plan and feasibility of projects Do Thu Ha - Advanced Finance 54B Frequency Methods - Control customers’ incomes In case of any club deals, confer with clients to transfer their incomes and service use to Military Bank Frequently - Correlate the practical implementation of projects with the initial project: inputs, consumption markets, infrastructure, existence and status of collaterals or mortgaged assets at the time of surveillance Frequently Moreover, in case of any changing in staff which result in transmit of documents from one credit officer to another, there must be fair regulations on delivery responsibilities and agendas There may inaugurate regulations on credit activities to record disbursements, collections, movements of collaterals, business and financial cases to ensure the stability and convenience in follow-up and bringing of documents among credit officers, especially for allied projects as well as medium and long-term loans 3.3 Improve the quality of human resources As hereby considered, the writer concentrates on the quality improvement of two key persons who are credit officers and credit risk officers Make recruitment straightforward and come up with suitable requirements which are closer to job qualifications To assist the progress of the improvement of credit officers’ quality, initially recruiters must be certified with career ethics, strong knowledge, methodological training, understanding different aspects such as economics, techniques, society, etc Military Bank should expand specific strategies to support credit officers and risk officers with astute training not only to comply with the present needs but to aim to the economic integration with both regional and international countries 46 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B Training credit officers in general and credit risk officers in particular requires to match with the greatest business operations, so they should be vigorous, sensitive and be aware of market knowledge Moreover professional sectors that their clients are doing business as it is directly involved in the quality of debts This will be dificult to be achieved when a credit officer or a risk officer is appointed to be in charge of various firms spanning in a variety of sectors As a result, there should be professionalization among credit officers and risk officers Military Bank should appoint each officer to be responsible for certain aspect of trading and production classified by industry depending on each staff’s qualification and proficiency This may enable credit officers and risk officers to be more easy in monitoring and having a close attachment with clients during use of loans Simple model as below: Regularly organize training courses on operations, markets, technology, computing and foreign languages, which are factors to help credit officers and risk officers more resolute and fearless in their jobs Thus, Military Bank should enable and encourage them to further study to improve their knowledge and qualifications and give them chances of study and research The management and avoidance of credit risks are complicated, diversified, and related to every economic sectors, as well as laws of both local and international legal systems In order to prevent overlaps and conflicts to ensure the compliance of both 47 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B local laws and international practices, credit officers and risk officers should have deeply understanding of laws Hence, Military Bank should regularly organize discussions and conferences on related legal issues, assign staff to join training courses or invite law experts to hold lectures in branches Risk officers must be capable of predict knowledge, foreign languages, information of technology, belligerence, and ability to analyze and process information Based on such, information of customers as well as from mass media is thoroughly abused for the basis of analyzing and predicting potential credit risks This is a long-term but essential plan for managing credit activities Military Bank should organize relations with research centers and institutes, as well as training institutions in banking and risk management to reach the most up-to-date knowledge to qualify its staff For alleviation of credit risks, it is neccessary to raise the obligations of each staff, and attach credit officers’ as well as risk officers’ obligations with their benefits There should be obvious rewards and sanction As credit officers often deal with risks, there should be a special compensation policy to encourage credit officers to prevent risks of career ethics Military Bank should have proper treatment and remuneration policies to advocate staff to further develop their ability and sense of responsibility towards every dimes of the bank’s capital For instance, export financing is now known as the highest risk potential, the management and monitoring of this financing is really difficult among various aspects to officers, as a result there should be more reasonable restitution policy to staff involved in this kind of activity Besides, there should be a specific human resources planning so that training programs may be prepared efectively Key staff should be sorounded with not only knowledge of risk management but also knowledge of business administration as well as human management, etc 3.4 Customer classification and assessment procedures In order to to improve the expertise of credit management and mollify credit risks, the assessment and classification of clients is of great significance Due to customer assessment and classification, the bank hout create specific credit policy suitable for each clients Because of the persistent movements of clients’ business activities, information gathering and customer assessment must be collected regularly for flexible policies appropriate to each specific period to avoid rigidity and subjectiveness 48 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B As mentioned above, the classification of customers applied now in Military Bank is still too plain, the application of internal rating system should be deployed promptly in the future to make clear the credit quality to set out measures on bad debt recovery for the existing credit portfolio and help the specific credit decision-making as well as efficient risk management of the new credit portfolio, playing critical roles in gradually declining backdated debts and monitoring new arising debts of Military Bank Customer classification Scoring financial and non-financial indicators are used by the bank to classify customers so that it may have applicable credit policies for each customer and group of customers Debt classification: Debts are segregated by quality and risk degree Debts have low rate of risks and vice versa are always at high qualities The bank segregates debts frequently to investigate, analyze and set out timely measures to face with risks arising in each loan to guarantee the capital security and profit accomplishment Credit risk ratings in branches: Branches of the bank’s entire system should be allowed to figure out risk degrees of credit affairs so that directions and solutions of weaknesses may be timely issued to manage potential risks, mitigating risks and improving the efficiency and quality of credit activities Create tools and models to measure risks of credit activities The bank’s credit activities aim to building a safe and effective credit portfolio Loans should be reasonably classified in sectors and industries as per dictated limits to prevent reduntdant consolidation on certain sectors, scatter risks for the best profitability and diminish credit risks Credit portfolio: Credit portfolio must be checked and there should be frequent reports on risk trends, major risks, highly risky sectors of the portfolio and measurement of risk mitigation On the basis of the review and analysis of risks affecting the income, reduce possibility and capital loss of the existing portfolio (due to changes of business environment, state policies, movements of enterprises themselves and reasons caused 49 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B by the bank internally, etc.), the credit portfolio should be rectified timely and reasonably to harmonized the portfolio of high risky assets and low risk assets, which may accordingly conceive reasonable incomes and controlable risks 3.5 Develop customer policies in credit activities from Military Bank: The bank developed customers policies basing on customer classification upon financial and non-financial indicators Due to results of customer classification, the bank will apply precise policies to each customer and group of customers in the direction of more arrangements to highly ranked customers and vice versa: + Policies on interest rates of loans and related fees + Conditions for loans (collaterals, credit line, etc.) + Other supporting services (export and import financing, support on foreign exchanges, etc.) Customer policies are developed strictly from the poiny of view deeper and wider cooperation with manufaturers and merchants on the basis of short-term and long-term economic benefits Criteria for client classification should be organized such as VVIP customers, VIP customers, and potential customers upon their history, prestige level and services in use and to be used by customers The bank should apply priority policies flexibly within the framework imposed by the laws There should be priorities to rise deposit interest rates for enterprises with large amounts, decrease fees of payment services as well as interest rates for enterprises with large amounts of outstanding and reputation in repayment Procedures should be optimally clarified within possible conditions as long as credit efficiency and capital sufficiency ratios are guaranteed 3.6 Credit policies There should be innovations in credit policies of Military Bank, as follows: 3.6.1 Set out practical ratios in credit activities: Credit inhibits for the whole bank’s system: Compatible to regulations of the laws and orientations of the State Bank, relying on the bank’s business strategies, the bank will consider and make decisions over essential credit limititations from time to time + Scope limits and credit growth rate 50 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B + Outstanding limits over the total risk-weighted assets + Fraction of outstanding by time + Fraction of outstanding by economic sectors + Fraction of medium and long-term loans over total outstanding + Bad debt rate over total outstanding loan + List of sectors and fields confined from credit assigning, or assigning with special circumstances or prohibited from credit granting Credit restrains by sectors, goods, and geographical regions: Simultaneous analysis and reports should be generated on development trends, capital demands, level of risks of industries, sectors and goods in the market to relieve risks due to credit consolidation on some key conditions Relying on the bank’s financial competence and capital demand amusement, the bank uses applicable credit limits to industries, goods and geographical areas in each certain period of time: + Credit consolidation limits by industries and products + Credit consolidation limits by essential economic regions Credit limits by clients Basing on regulations of the State Bank as well as practical operations and development strategy, the bank develops and satisfies with credit limits to a client and a group of relevant clients 3.6.2 Widen loans secured by collaterals Currently, the market and economy are facing with a lot of sophisticated movements; credit activities include lots of highly potential risks One of the measurement to guarantee the security and decrease losses in case of risk existence is to support loans secured by collaterals as they are secondary origins for debt recovery However, the assessment of collaterals should be equitable, interchangeable and fully comply with legal conditions Collaterals should be observed frequently and collateral information should be fully grasped for re-evaluation in case of any huge disturbance Time for collateral re-interpretation should be ruled as follows: Re-assess guarantee assets Times Realestate year/1 time PersonalProperties months/1 time 51 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B Stocks Weekly Regularly refurbish information on collaterals of the same type through the market and auction centers for basis of evaluation Military bank aligns to strengthen loans clinched by collaterals while clients’ assets especially state-owned assets are much lower than their outstanding with the st bank Since July 2010, the Law on State-owned Enterprises will turn into invalid and all state enterprises are transferred to the new models of One-member State Limited Company or Joint Stock Company operating in compliance with the Law on Enterprises Therefore, to increase collaterals, Military Bank should have the following measures: Require customers to enhance collaterals In addition to the firm’s assets, personal assets (Chairman of the Board of Directors’, Director’s, Chief Accountant’s, Member of the Board of Directors’, etc) can be used to guarantee loans with the bank Asurrance of debt recovery rights, guarantees of the Corporation may also be used Decrease outstanding steadily if customers fail to reach conditions of collaterals as per regulations of the bank 3.6.3 Dissipate credit risks Diversify customers: Enlarge loans to every economic sectors, every segments of clients to prevent extremely centralized loans to one customer and mitigate risks in case of clients’ inability to repay Through risk analysis of bank, NPLs are mainly centralized in state enterprises Although Military Bank has recently set out the orientation of customer strategies, there should be, from the point of view of the thesis’ writer, more appropriate measures to disburse its lending to private sectors, small and medium enterprises and households, etc and to be resolved to hinder loans to ineffective state enterprises Execute credit protection: This is an estimation to partition credit dangers demonstrated under methods of loaning protection, resource protection, and obtaining protection In Vietnam as of now, just resource protection is accessible To relieve dangers to guarantees, the bank obliges borrowers to buy protection to secure the entire estimation of pledges 52 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B sold with the bank and exchange the recipient rights to the bank At first, Military Bank ought to apply this on extensive clients, for example, hydropower plants and expansive scaled tasks Expand speculation fields.In request to broaden venture fields effectively and securely, Military Bank ought to build up a steady and long haul business methodology basing on the accompanying issues: + Closely take after the credit introduction of the entire framework in the coming time, and parts of simulative speculations of the State and the Government to create arranges and decide fields of ventures + Base on the introduction of credit exercises of Military Bank in certain financial territories, the useful preferences and hindrances of the regions to decide fields of venture For districts with points of interest in creating businesses and little commercial ventures, there ought to be an introduction to create interests in the pattern of growing credits to the handling business, administrations of trading social items like elastic, espresso, and so on., fare endeavors with stable markets, and undertakings of purchaser products with high intensity Additionally, medium and long haul credits and huge undertaking financing ought to be diminished Needs of capital ought to be given to organizations required in fares and shopper products Encased loaning from creation to utilization and fare ought to be increasingly executed In parallel with the positive rebuilding of extents in the credit structure, Military Bank additionally concentrates on building and building up a reasonable client base, including financial gatherings, enormous partnerships of the nation, who are putting resources into key commercial ventures and fields which assume critical parts in monetary improvement, for example, power, concrete, vitality, and so on 3.7 Book procurements to counterbalance dangers: The bank must group resources much of the time; book and utilize procurements to handle dangers in operations, incorporating credit exercises with a specific end goal to initiatively prepare dangers emerged and make the bank's account solid The order of advantages, booking and utilization of procurements in keeping money operations should conform to directions of the State Bank every once in a while 3.8 Put resources into current data innovation Military Bank is presently under the procedure of quick coordination into the global and territorial groups Keeping in mind the end goal to adjust to joining necessities and help the administration with better resource administration, framework 53 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B security, particularly credit hazard administration, Military Bank is currently actualizing the modernization framework to be specific IPcas Phase I which has worked well and Phase II which is presently under execution Be that as it may, there are still a few inadequacies, for example, the framework can't give notices when a bank in or out of the framework gives an advance which ends up having dangers of reimbursement, can't give notices when the client utilizes security to contract with various banks, and so on In this way, it is urgent to better finish the data innovation framework Set up and apply programmed programming projects to order clients, credit hazard rating for clients who are financial associations and score card for individual clients to establish the framework for settling on advance choice Apply programming innovation to survey whether medium and long haul tasks are effective or not On such premise, quick and exact results are given for credit officers to settle on advance choices Proceed to enhance and upgrade the part of system and framework organization as when data innovation turns out to be more grown, cutting edge items, for example, home keeping money, web managing an account, universal card, money withdrawal card, and so on can be effectively hacked, in this manner hurting clients' trust in Military Bank Built Early Warning System: Example common risk signals in StaticEarly Warning Systems as bellowed, (Source: Joetta Colquitt (2007), “Credit Risk Management – How to avoid lending disasters and maximize earnings” McGraw Hill, pp 150-152) These frameworks are described by the meaning of individual danger flags that are checked at customary interims and typically in a computerized way They are utilized both as a part of the retail and the corporate client section Commonly, the 54 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B danger signals utilized are doled out focuses to weight their criticalness Exceptionally created models of this kind adjust the activity got from the early cautioning framework with the aggregate number of focuses and also with the dissemination design What's more, such frameworks are connected to a client contact database which contains data about contacts with the client over the span of the business relationship and about the client s responses for every situation 55 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B CONCLUSION Credit risk management has been investigated and developed for many years in the world, but in Vietnam this issue has not been studied and disseminated adequately The scientific research on this issue has just been made in recent years At practical level, the law of credit risk management is very limited and does not cover the entire contents of the implementation process Banks and credit staff have not yet qualified and mean to reach out to new knowledge in this field from world Credit information system just takes the first step in development Therefore, the study to improve credit management is necessary and meaningful not only for banks but also for the economy In this thesis, I have used a lot of theories and gave solutions in order to improve credit management quality at Thang Long Branch The content of this thesis has achieved all targets that aiming before First and foremost, the thesis gave basic overview of credit risk and credit risk management, theoretical framework as well as Basel regulations Moreover, the thesis also introduced about Military Bank – Thang Long Branch thoroughly and reflected current situation at the branch Process of CRM as well as the bank’s regulation are included in order to make it clear about the branch’s credit management quality Finally, basing on shortcomings which have been found out, the author gave some solutions and recommendations to control and prevent credit risks at Thang Long branch Besides, the author hopes that Government, SBV and Military Bank can provide regulations for improving credit risk management quality 56 Supervisor: Assoc.Prof.Ph.D Dang Ngoc Duc Do Thu Ha - Advanced Finance 54B REFERENCES VIETNAMESE Quyết Định 18/2007/QĐ-NHNN sửa đổi quy định phân loại nợ , trích lập sử dụng dự phòng để xử lý rủi ro tín dụng hoạt động ngân hàng tổ chức tín dụng heo định 493/2005/QĐ-NHNN Thống đốc Ngân hàng nhà nước ban hành Ngân hàng TMCP Quân Đội – Chi nhánh Thăng Long, Báo cáo tổng kết năm 201, 2012,2013,2014 Ngân hàng TMCP Quân Đội, Quyết định số 838/ QĐ-MB-HS ENGLISH Dr Ir.Tony Van Gestel and Prof Dr Bart Baesens (2008), “Risk Credit Management” Oxford University Press Didier Cossin and Hugues Pirotte (2001),“ Advanced credit risk analysis Financial Approaches and Mathematical models to assess, Price and Management credit risk” , John Wiley and sons, LTD Andrew Fight (2004), “Credit risk management”, Elsevier Butterworth – Heinemann publisher Joetta Colquitt (2007), “Credit Risk Management – How to avoid lending disasters and maximize earnings” McGraw Hill, pp 150-152 WEBSITE https://mbbank.com.vn 57