DSpace at VNU: Liquidity risk management in Lienviet Commercial Joint Stock Bank

Liquidity risk management in Lienviet Commercial Joint Stock Bank Văn Thu Hương Khoa Quản trị Kinh doanh Luận văn Thạc sĩ ngành: Kinh doanh quản lý; Mã số: 60 34 05 Người hướng dẫn: TS Chu Thành, ThS Hà Nguyên Năm bảo vệ: 2010 Keywords: Quản trị kinh doanh; Quản trị rủi ro; Ngân hàng thương mại; Quản lý tài Content TABLE OF CONTENTS ACKNOWLEDGEMENTS i ABSTRACT ii TOM TAT iv LIST OF ABBREVIATIONS x LIST OF TABLES xi LIST OF FIGURES xii INTRODUCTION CHAPTER I: LITERATURE REVIEW 1.1 Commercial bank 1.1.1 Concepts 1.1.2 Products & services provided by commercial banks vi Roles of commercial bank in economics 1.1.3 1.2 Risk management in Commercial Bank 1.2.1 Risk in commercial bank 1.2.2 Main risks in Commercial Bank 1.2.3 Risk Management in Commercial Bank 1.3 Liquidity Risk Management in Commercial Bank 10 1.3.1 Defining liquidity risk 10 1.3.2 Basel and Basel II requirements 12 1.3.3 Bank International Framework for Liquidity Risk Management in Commercial 16 1.3.3.1 Liquidity risk tolerance 18 1.3.3.2 Strategy & Policy 18 1.3.3.3 The responsibilities to manageliquidity risk 19 1.3.3.4 Liquidity Risk Management Process 21 1.3.3.5 Contingency Planning 25 1.3.3.6 Internal Audit 27 1.4 Liquidity risk in Vietnam Commercial bank system 27 1.4.1 Some typical eventsof liquidly risk in Viet Nam before year 2006 27 1.4.2 From the beginningof year 2006 to the end of year 2007: 28 1.4.3 From the beginningof year 2008 - the end of year 2008 29 1.4.4 From the beginningof year 2009 to the ending of year 2009 30 1.4.5 The first six months of year 2010 31 1.4.6 Summarized main reasons for liquiditycrunch 32 vii 1.5 State Bank of Vietnam regulations 33 1.6 Practices for liquidity risk management 37 1.6.1 The Hongkong and Shanghai Bank Corporation 37 1.6.2 Asia Commercial Bank 38 CHAPTER LIQUIDITY RISK MANAGEMENT IN LIENVIETBANK 2.1 Overview on LienVietBank 41 2.1.1 Introduction 41 2.1.2 Business Results 44 2.1.3 Organizati on structure 44 2.2 Liquidity risk in LienVietBank 45 2.2.1 SBV’s regulations on liquidity ratiosin theactivities of credit institution 2.2.2 Supplies of Liquidity 47 2.2.2.1 Liquid Assets .48 2.2.2.2 Loans repayment 53 2.2.2.3 Total mobilized funds and chartered capital 55 2.2.3 Measurement of Liquidity risk via Gap Analysis 59 2.2.3.1 LienVietBank’s Liquidity Gap report in VND (see table 2-11) .60 2.2.3.2 LienVietBank’s Liquidity Gap report in USD (see table 2-12) .63 2.2.4 Assessment on current status of liquidity risk 65 2.3 General situation of risk management at LienVietBank .67 2.3.1 From establishment to end 2008 67 2.3.2 For the year of 2009 68 viii 2.3.3 From the beginning of 2010 to now .69 2.4 Liquidity risk management in LienVietBank .69 2.4.1 Strategy and Policy .69 2.4.2 The responsibilities to manage liquidityrisk 71 2.4.3 Process of liquidity risk management 74 2.4.4 Internal Audit 75 2.4.5 Contingency Plan 75 2.5 Assessment on liquidity risk management in LienVietBank .76 2.5.1 Achievements .77 2.5.2 Drawbacks on the current liquidity riskmanagement in LienVietBank78 2.5.2.1 Strategy and policy 78 ix 2.5.2.2 Organization structure 78 2.5.2.3 Process of liquidity risk management and contingency plan 79 2.5.2.4 Management information system 79 2.5.2.5 Human resource 80 CHAPTER RECOMMENDATIONS AND SOLUTIONS 82 Some petitions for LienVietBank 82 3.1.1 Building a culture of risk management in LienVietBank 82 3.1.2 Building Liquidity risk strategy and policy 84 3.1.3 Improving organizational structure 87 3.1.4 Building process of liquidity risk management 90 3.1.5 Building contingency plan 97 3.1.6 Improving management information system 99 3.1.7 Improving human resources 100 3.1.8 Action planning 102 3.2 Some petitions for SBV 107 3.3 Some petitions forGovernment 108 Conclusion 109 REFERENCE 110 Appendix 112 Appendix 113 Appendix 114 Appendix 115 References: S.Rose, Peter, 2001, “Managing commercial banks” Ha Noi, Financial Puplisher 10 S.Rose, Peter and C.Hudgins, Sylvia, (2008), Bank management & Financial Services, McGraw Hill, Singapore Autorite Des Marches Financiers, (2009), Liquidity risk management guideline HM Treasury, (2004), The Orange Book Management of Risk-Principles and Concepts, HMSO, Great Britain Council of Standards Australia, (1999), Risk Management, Standards Association of Australia, Australia State Bank of Pakistan, (2002), Risk Management- Guideline for Commercial Banks & DFIs Basel Committee on Banking Supervision, (2008), Liquidity Risk: Management and Supervisory Challenges, Bank for International Settlements, Switzerland Basel Committee on Banking Supervision, (2008), Principles for sound liquidity risk management and supervision, Bank for International Settlements, Switzerland Bank Supervision Department, (2008), Liquidity Risk Management Guideline, The Central Bank of Barbados 10 Citibank, (1996), Introduction to Risk Management, Training and Development Centers, Asia Pacific 11 HSBC Holding plc, (2008), Capital and Risk Management Pillar Disclosures as at 31 December 2008, HSBC, United Kingdom 12 Reserve Bank of Fiji, (1995), Liquidity risk management requirements for banks, Banking supervision Policy Statement No: 9A 13 Eastern Caribbean Central Bank, (2006), Guidelines on Liquidity risk Management for institutions licensed to conduct banking business under the banking act 14 Asia Commercial Bank, Annual Report, 2008, 2009, Financial Statement, June 2010 15 Vietnam Technological and Commercial Joint stock bank, Annual Report, 2008, 2009, Financial Statement, June 2010 16 Sai gon Thuong tin bank, Annual Report, 2008, 2009, Financial Statement, June 2010 17 The Bank for Foreign Trade of Vietnam, Annual Report 2008, 2009, Financial Statement, June 2010 18 Lien Viet Commercial Joint Stock Bank, Financial Statement, 2008, 2009, June 2010 11 ...Roles of commercial bank in economics 1.1.3 1.2 Risk management in Commercial Bank 1.2.1 Risk in commercial bank 1.2.2 Main risks in Commercial Bank 1.2.3 Risk Management. .. Management in Commercial Bank 1.3 Liquidity Risk Management in Commercial Bank 10 1.3.1 Defining liquidity risk 10 1.3.2 Basel and Basel II requirements 12 1.3.3 Bank International... of risk management in LienVietBank 82 3.1.2 Building Liquidity risk strategy and policy 84 3.1.3 Improving organizational structure 87 3.1.4 Building process of liquidity risk management