LV Thạc sĩ_Liquidity risk management at tienphong bank

SOLVAY-BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT NATIONAL ECONOMICS UNIVERSITY Vietnam – Belgium Master Programmes MASTERS IN BUSINESS MANAGEMENT THESIS LIQUIDITY RISK MANAGEMET AT TIENPHONG COMMERCIAL JOINT STOCK BANK (TIENPHONGBANK) Hanoi, January 2010 ACKNOWLEDGEMENT I would like to thank all those kind people who advised or helped my thesis research and would like to acknowledge their contributions First of all, I would like to express my profound gratitude to PhD, my professor supervisor for his time, advice and valuable comments This thesis would not have been finished without his guidance, discussion, and encouragements It has been an extremely valuable experience to study and work under his supervision Secondly, I also thank to MBM Program for their useful guidance on academic writing methods and resource links, as well as their deep understanding to approve this exceptional case of a co-thesis They all gave me the honor of attaining such a great program Finally, I also want to show my deep gratitude to my families and my classmates for their unconditional loves and their spiritual encouragement Hanoi, January 2010 TABLE OF CONTENT ACKNOWLEDGEMENT TABLE OF CONTENT TABLE OF FIGURES LIST OF TABLES AND LIST OF ANNEXES ABBREVIATIONS EXECUTIVE SUMMARY INTRODUCTION CHAPTER I: LITERATURE REVIEW I.1 Banking Risks I.1.1 Main types of risk in the banking service I.1.2 Liquidity risk I.2 Risk management .8 I.2.1 Role of risk management in banking activities I.3 Liquidity risk management .11 I.3.1 International liquidity risk management structure .11 I.3.2 Framework for measuring and monitoring net funding requirement 12 I.3.3 Local laws and regulations relevant to risk management 19 CHAPTER II: LIQUIDITY RISK MANAGEMENT AT TIENPHONGBANK 23 II.1 Overview of Tienphongbank 23 II.1.1 Introduction 23 II.1.2 Strategy .24 II.1.3 Competition 25 II.1.4 Organizational structure 26 II.1.5 Business Segments 27 II.1.6 Performance from June 2008-September 2009 29 II.2 Liquidity risk management at Tienphongbank 31 II.2.1 Organization structure in liquidity risk management 31 II.2.2 Policy 32 II.3 Liquidity Measurement 35 II.3.1 Liquidity gap analysis 35 i II.3.2 Liquidity ratios 38 ii II.3.3 Concentration level or larger fund provide 39 II.3.4 Funding Structure 41 II.4 The problems of the liquidity risk management at Tienphongbank 43 II.4.1 Liquidity position 43 II.4.2 Problems in Liquidity risk management 44 CHAPTER III: RECOMMENDATIONS TO IMPROVE LIQUIDITY RISK MANAGEMENT 46 AT TIENPHONGBANK 46 III.1 Strengthening the liquidity risk structure 46 III.1.1 Improve the awareness 46 III.1.2 Strengthening the governance structure 46 III.2 Building Liquidity Standard 48 III.3 Building the procedures in liquidity risk management 49 III.3.1 Liquidity identifying 49 III.3.2 Liquidity risk measuring .50 III.3.3 Liquidity risk controlling .51 III.3.4 Liquidity monitoring 52 III.3.5 Reporting system .52 III.4 Others recommendations 53 III.4.1 Training program 53 III.4.2 Developing the Tienphongbank brand name .53 CONCLUSION .54 REFERENCES .55 ANNEX 56 iii LIST OF FIGURES Order Figure Figure Framework Figure The main banking risks Figure Process of managing risks Figure Liquidity Risk Management Framework Figure Tienphongbank organizational structure Figure Tienphongbank Financial highlights June 2008-September 2009 Figure Maturity Gap in VND as of 30 September 2009 Figure Maturity Gap in USD as of 30 September 2009 Figure Term Deposit Structure as of 30 September 2009 iv LIST OF TABLE Order Table Table Vietnamese laws and regulations Table Tienphongbank Financial Figure (June 2008-September 2009) Table Maturity Gap in VND as of 30 September 2009 Table Maturity Gap in USD as of 30 September 200 Table Liquidity Ratio Table Large Fund Provider Table List of 20 Larger Fund Providers as of 30 September 2009 Table Fund Structure of Tienphongbank Table Sources and Use of Fund as of 30 September 2009 TABLE OF ANNEXES Order Annex Annex Gap Analysis Report Format Annex Break down VND liquidity ratio as of 30 September 2009 Annex Break down VND liquidity ratio as of 30 September 2009 Annex The current assets and liabilities used to calculate liquidity ratios v ABBREVIATIONS Abbreviation Description SBV State Bank of Vietnam BIDV Bank for Investment and Development of Vietnam Tienphongbank Tien Phong Joint Stock Commercial Bank FPT FPT Joint Stock Investment & Technology Corporation Mobifone Vietnam Mobile Telecom Services Company Vinare Vietnam National Reinsurance Corporation ALCO Asset and Liability Committee ALM Asset and Liability Management MCO Maximum cumulative outflow OBS Off balance sheet CAR Capital Adequacy Ratio IT Information Technology RMD Risk Management Division LPMs Liquidity Procedure Manuals LRM Liquidity Risk Management USD United State Dollar VND Vietnamese Dong vi EXECUTIVE SUMMARY Risk management refers to the practices used by bank managers and risk manager to limit and control uncertainty in the bank’s total portfolio Liquidity risk management aims to strengthen the bank’s ability to meet its liabilities as they come due and minimize the risk of loss from unexpected changes in the daily business transaction Liquidity risk management has become an integral part of international business strategy, and the bank use quantitative tools to measure and analyze risk The job of the ALCO and Risk Management Division is to identify and address all possible scenarios for liquidity risk, establish support and control mechanisms for dealing with it, and set the course for the risk management team in terms of its policies and objectives To keep track of the myriad details of a risk management system, managers now rely upon a wide range of new tools and technologies- computer-based trading systems, telecommunications technology, decision support systems that quantify liquidity risk factors, and so on Intelligent liquidity risk management helps a bank stabilize cash flows, reduce risk of insolvency, and focus on its primary business In this study, the liquidity risk management is examined from the perspective of the most commonly used theories to identify liquidity risk and identify the international best practices in liquidity risk management The studies analyze the interplay of currencies, exchange rates, interest rates, and accounting systems Financial risk management is a specialized area of international accounting that requires specific training, tools and techniques, if one is to be successful in reduce risk for an international business The research assesses the case study of liquidity risk management of Tienphongbank In this research, I approached the issue by evaluating and analyzing all of the current liquidity risk management procedures and liquidity measurements which the bank has implemented, thereby, find out unreasonable factors in these procedures Taking into account of such findings, some recommendations were introduced for strengthen the banks’s liquidity risk management Having evaluating Tienphongbank’s liquidity risk management, I find out some key issues such as: insufficient framework for identifying, measuring, managing and controlling liquidity risk, no liquidity management guideline, no contingency vii plan, not setting limit for the bank’s ratio, lack of skill supervisors in this field… Tienphongbank is now facing with high liquidity risk exposure Based on limited experience and practices in liquidity risk management, I have come out to some recommendations to set up overall procedures for effective liquidity management as strengthen the Tienphongbank capability These include: Strenthen the liquidity risk structure; Building liquidity standard; Building the overall procedures in liquidity risk management viii CHAPTER III RECOMMENDATIONS TO IMPROVE LIQUIDITY RISK MANAGEMENT AT TIENPHONGBANK Risk management has become an integral part of international business strategy, and the bank use quantitative tools to measure and analyze risk The job of the Chief Risk Officer is to identify and address all types of risk, establish support and control mechanisms for dealing with it, and set the course for the risk management team in terms of its policies and objectives The bank itself has to build framework in order to identify, to control and mitigate the liquidity risk In this chapter, within the scope of this study, with the limited experience and time, I mainly focus building a procedure for liquidity risk management for Tienphongbank and give some recommendations for solving the current problems that shown in Chapter II III.1 Strengthening the liquidity risk structure III.1.1 Improve the awareness Tienphongbank must raise the awareness of all staff in liquidity risk and liquidity risk management This must be done at all departments and divisions and to all employees at front, middle and back office, from staff level to supervisor level and Board of Management III.1.2 Strengthening the governance structure Tienphongbank should set an overall strategy for the bank liquidity risk management under a sound process for measuring, monitoring and controlling liquidity risk The formality of liquidity risk management process should be appropriate for the overall level of risk incurred in the bank The bank also has to define clearly the roles and responsibilities of each department in liquidity risk management The followings are the recommended responsibilities in liquidity risk management Board of Management Approve the Liquidity Risk Management Policy for the bank and any changes to the policy • Approve Policy exceptions; notify Head of Treasury and Senior Risk Officer of material policy exceptions 46 • Approve the Funding and Liquidity Plans and the associated limits, ratios and discussion triggers against the ratios for Liquidity Reporting System with requested limits in excess of contingent capacity or Policy exceptions • Approve requests for MCO Limit exceptions if the requested limit is in excess of contingent capacity • Endorse Stress Scenarios to be performed by the bank • Receive notification of material breaches of liquidity ratio benchmarks and Market Trigger • Receive notification of a declared Contingency; review the actions to be taken in a local contingency ALCO The Asset and Liability Committee is responsible for: • Endorse the Funding and Liquidity Plan • Establish stress assumptions • Review stress test results; establish and implement action plans • Establish benchmarks for liquidity ratios Review ratios against benchmarks on a monthly basis Approve a course of action and review progress • Endorse Market Triggers; including documentation of decisions and actions • Establish Large Fund Provider Source threshold; review exposure reports • Assist in the quality control process by reviewing the reports for reasonableness, consistency and completeness Market Risk Section • Assist in the quality control process by reviewing the details of the Funding and Liquidity Plan and liquidity risk reports including: o Perform quality control review for reasonableness, consistency and completeness o Review stress scenario assumptions o Review contingent capacity schedule for accurate application and ensure that the limits are within contingent capacity • Approve the Funding and Liquidity Plans and associated limits, ratios and benchmarks against the ratios 47 • Receive notification of limit excesses; approve corrective actions and time frame • Approve stress scenario assumptions Approve any deviations in assumptions of the bank 10 • Review stress test results; approve action plans to rectify negative funding gaps, as required 11 • Approve liquidity ratio benchmarks and Market Triggers; receive actual liquidity ratios and notification of breaches of liquidity ratio benchmarks and Market Triggers Treasury Department The treasurer is responsible for: 12 • Ensure compliance with this policy, as well as any applicable regulatory requirements 13 • Ensure that all tasks in this policy required of the ‘Reporting Entity’ are carried out, including: o Manage within MCO and liquidity ratio benchmarks Report ratios and associated benchmarks to the ALCO and the Market Risk Manager o Report and take appropriate action(s) to regularize MOC limit excesses and breaches of liquidity ratio benchmarks o Establish stress assumptions; Ensure that stress testing is performed o Review stress test results o Report liquidity exposures and associated limits o Review liquidity risk reports for accuracy, consistency and completeness o Integrate the Funding and Liquidity Plan with the annual budget & planning process and balance sheet forecasts 14 15 • Execute implementation of the Contingency Funding Plan In order to develop a perfect risk management framework, Tienphongbank should have close links between the above-mentioned departments This will help to ensure decisions are made and actions are taken on time in response to a change in market condition 48 III.2 Building Liquidity Standard Tienphongbank has issue the policy about the liquidity risk to set up liquidity standard, base on that The bank has to maintain sufficient liquidity to meet all maturing obligations within months in designated stress scenarios Business-as-usual limits evaluated on contingent capacity for tenors up to months under the most conservative stress scenario The bank has to maintain sufficient liquidity to meet all maturing unsecured debt obligations due within a one-year time horizon without accessing the unsecured markets A trigger of 110% has been established against the ratio of available liquidity as compared with maturing obligations Maintain cash capital ratio of 120% at the aggregate bank and dealer level III.3 Building the procedures in liquidity risk management Tienphongbank must have a day-today liquidity management This strategy should be communicated through out the organization The strategy should also set the overall direction for liquidity risk management and the manual procedure should provide detailed guideline on every aspects and function of liquidity risk management This strategy should include appropriate policies, procedures in order to identify, to control and to reduce the liquidity risk In this part, I would lie to recommend the following procedure for improving liquidity risk management: these procedures include steps: liquidity identifying, liquidity measuring, liquidity monitoring, liquidity supervising, reporting and evaluating III.3.1 Liquidity identifying In order to identify liquidity risk, the Treasurer has to consider: - The current liquidity demand: o The short demand needed within one week: list out all money market deals and foreign exchange contacts at due date in day and the next seven days o The general demand: base on MCO and liquidity ratios - The plan liquidity demand: o The short demand: list out all payment demand, withdrawal deposit, loan demand, others demand for funding o Unusual demand 49 - The payment account’s information o The balance o The limit for minimum balance If the bank can manage well the liquidity demand, it will able to meet its funding requirements, that is, the bank can meet its cash flow obligations as they fall due III.3.2 Liquidity risk measuring The liquidity risk measuring is executed on daily basic through controlling the following reports and ratios: MCO: This report shows the maximum cumulative outflow It is used to identify funding gap It measures the unbalance of funding gap The outflow shows the liquidity risk if the bank is unable to meets its obligations as they fall due, that’s why the outflow need to be monitor and set up limits The funding gap identified within the particular time periods The difference between cash inflows and cash outflows in each period, the excess or deficit of funds, becomes a starting-point for a measure of a bank's future liquidity excess or shortfall at a series of points in time The daily liquidity ratio, the bank should base on the financial reports of the bank to calculate the liquidity ratios and set up limit for these ratio Base on these ratios, the bank can known about its liquidity position They are used to monitored daily liquidity and limit the liquidity risk in the near future The ratios need to monitor are: (i) Total current assets can be payable within the next working days/Total current liabilities can be payable within the next working days; (ii) Total loans/Total deposit from customer; (iii) Total inter-bank borrowing/Total deposit; (iv) Total sensitive source (5 large fund provider)/Total deposit; (v) The short term deposit/total long term loan (not over 30%) These ratios could be vary depend on the State Bank’s regulations and internal bank’s policy The bank should focus on changes in their liquidity ratios rather than on the level of each ratio Concentration ratio, the bank should determine how best to ‘group’ liquidity providers – e.g., by industry, market segment, etc – within its market, in order to assess potential concentration risk Cross-Currency Funding (CCF) should be established The CCF restricts the proportion of local currency assets funded by foreign currency liabilities Liquidity ratios are used to measure and monitor the changes in the structural liquidity of the balance sheet Ratios calculated at the aggregate and reporting 50 level are designed to monitor our ability to meet short-term obligations with liquid assets, identify mismatches between long term funding and illiquid assets, and review the ability of the banking business to fund customer assets through customer liabilities In addition, several measures have been developed to monitor concentrations of funding by name, product, industry or geography III.3.3 Liquidity risk controlling In order to controlling the liquidity risk, the liquidity limit must be established These limits should be approved by ALCO and be reviewed quarterly Tienphongbank can set some kind of limits as follows: Gap limits – MCO: Limits establish boundaries for market access in business-asusual conditions and must be established on a currency-specific basis Gap limit requests will be in parentheses as negative numbers Utilization, when a net negative cumulative gap in a given tenor, should be shown as a negative; when utilization is a net positive cumulative gap, it should be shown as a positive Concentration limit: Concentration limits (as of % of total deposits) should be established for the maximum level of concentration of deposits received from one customer Cross-Currency Funding Limits: this limit restricts the proportion of local currency assets funded by foreign currency liabilities Liquidity ratios: propose daily liquidity ratio Contingency Funding Plan: The contingency plan must be built and be addressed the strategy for handling a liquidity crisis and include procedures for making up cash flow shortfalls in emergency situation The contingency pan will specify immediate actions necessary for obtaining replacement funding and alternative funding sources Contingency action plans must be prepared within the following parameters: - Establish the trigger when have signal of crisis - Self-reliance (the bank is self funded without reliance on incremental intercompany funding) - Sources of liquidity are primarily derived from assets, rather than incremental borrowings - Alternative funding sources are based on tested transactions (repurchase agreements, securities loaned transactions, asset securitizations, asset sales, debt issuance and additional deposit gathering etc.) 51 - Central Bank facilities should only be considered if there is a formal facility and access to the facility will not exacerbate the situation - For cross currency swaps, credit and depth of market in the crisis must be considered Also, consideration should be given to whether local currency will be sufficient to meet foreign currency obligations in the instance that the local currency may be severely devalued - Any loan repayment must be vetted with the appropriate business and approved by the ALCO - Back-up sources of liquidity are clearly identified (Assumed availability of third party credit lines should be severely limited if commitment fees are not paid) III.3.4 Liquidity monitoring The liquidity limits are monitored whether these limits are followed the bank’s decision or not The bank should collect data and monitor their liquidity positions in more distant periods The bank may find substantial funding gaps in distant periods and should endeavor to fill these gaps by influencing the maturity of transactions so as to offset the gap Collecting data on distant periods will maximize the opportunity for a bank to close the gap well in advance The bank also needs to monitor the asset and funding portfolios These concentrate on the maturity profile of assets and liabilities Off-balance sheet items must be also monitored carefully, particularly liabilities that might require future funding; since the contracts not appear on the balance sheet, are unpredictable with regard to value and timing, and can be difficult to interpret Beside that, monitoring stress scenarios is the practical end-result of a measurement process that helps a bank prepare for a catastrophic event A regular (that is, monthly or quarterly) creation of predefined stress scenarios, can help reveal whether a bank’s liquidity profile grows more robust or fragile with the onset of improbable, though not impossible, events As with forward balance sheet reporting, stress scenario reporting is based on a set of assumptions that might or might not occur Despite the uncertainty, the nature of the bank’s liquidity profile under a stress event must be part of the monitoring process III.3.5 Reporting system Tienphongbank should build an adequate information systems for measuring, monitoring, controlling and reporting liquidity risk Reports should be provided on a timely basis to the bank’s board of directors, senior management and other appropriate personnel A strong management information system is integral to 52 making sound decisions related to liquidity The management information system should have the ability to calculate liquidity positions and base on that the banks should have the ability to calculate their liquidity positions, on a day to day basis for the shorter time horizons (e.g out to five days) and over a series of specified time periods thereafter, including for more distant periods, in order to enable them to effectively manage and monitor their net funding requirements The management information system should be used to check for compliance with the bank’s established policies, procedures and limits Reporting of risk measures should be done on a timely basis and compare current liquidity exposures with any set limits The information system should also enable management to evaluate the level of trends in the bank’s aggregate liquidity exposure Assumptions should be set out clearly so that management can evaluate the validity and consistency of key assumptions and understand the implications of various stress scenarios III.4 Others recommendations III.4.1 Training program Frankly speaking that, the liquidity risk management at Vietnamese Banks in general and at Tienphongbank in particularly is not drawn a serious attention, the main reason is that the bank lacks of experienced staff in this field That is very dangerous for the bank Tienphongbank should spend more time on recruiting and training staff who are in charge of controlling risks Managing liquidity risk is a sophisticated process, if the bank can not manage well, it may lead the bank to bankruptcy when the bank is unable to meets its obligations as they come due, thus Tienphongbank should quickly develop the risk management executive team both in number and quality to meet the requirement III.4.2 Developing the Tienphongbank brand name In order to increase the profits and minimize the liquidity risk, Tienphongbank need to build a strong brand name in the financial market That is a constant process in which many factors must be managed from business development plan to employees’ behaviors These factors have to be actively and consistently managed in order to build strong brand Should introduce the Tienphongbank’s image to customers Products and services are also decisive factor in building reputation for the brand Thus, Tienphongbank need to enhance its products and services quality; Add more convenient functions to the existing products and services Beside that, Tienphonkbank also need to build prestige with other counterparty in market in daily operation and maintain the financial capacity 53 CONCLUSION Nowadays, the liquidity risk management task is becoming an increasingly important financial area for the bank of any size or scope of operations With the dramatically growing costs of losses from different risk sources, the bank can gain a competitive cost advantage through the development of a set of costeffective and efficient liquidity risk management strategies The advantages of a well-managed liquidity risk management program include not only a lower total loss cost and an improved business bottom line, but also an increased predictability of future losses and cost An efficient risk management program will not only reduce the level of losses incurred by a bank, but it will also help the bank improve its financial performance and employee morale Thus, Ensuring adequate profitability and liquidity are the two objectives of the management of any bank Lack of liquidity is often one of the first signs that a bank is in serous financial trouble Therefore, identifying, measuring and controlling risks have never been more important than ever in the management of Vietnamese banking systems Although Tienphongbank has built the regulation on liquidity risk management since establishment, but the study of Tienphongbank liquidity risk management practice reveal some problems The study has pointed out the shortfalls is the governance structure is still incompleteness, the bank has not yet built the Contingency Funding Plan, the limits are not setting up for the Gap analysis, the liquidity ratios and lack of internal control in daily operation The most important recommendations is that Tienphongbank needs to review the liquidity risk management and set up the overall liquidity strategy in including structure, risk management tools, information system, contingency plan and supervision The limitation of thesis is that the author can not develops the liquidity risk management strategy in more details due to the time constraints and scope of this study The author need more technical skills and should study more from international practices But the author belief that the study of the Tienphongbank case has also bring out a need for further study in building liquidity risk management for the Tienphongbank itself and for the whole banking system in Vietnam 54 REFERENCES Anthony M Santomero, Commercial Banking Risk Management, The Wharton Financial Institutions Center, 1997 P11-12 Basel committee, Sound practices for managing liquidity in banking organizations, Bank for International Settlement, Feb 2000, p3 Banks Erik, Liquidity risk – Managing Asset and Funding Risks, Palgrave Macmilan, 2005, p5-6, p134-136 Bank Training and Consultancy, Seminar on “Global best practices in AssetLiability Management, Treasury & Risk Management”, Ha Noi, 26 February 2009 Bessis, Joel, Risk Management in Banking, , John Wiley&Sons, Ltd, 4th edition, 1999, p13-15 Bruno Brühwiler: Materials of Risk Management workshop, University of Applied Sciences Northwestern Switzerland, 2007 - 2008 Joseph F Sinkey, JR, Commercial Bank Financial Management, Pearson Education, Sixth Edition, 2002, Page 442-443 Rose, Peter S, Commercial Bank Management, McGraw-Hill, 4th edition, 1999, p348-360 State Bank of Vietnam, Decision 457/2005/QD-NHNN, “The Regulation on prudential ratios in the activities of credit institutions”, 2005 10 State Bank of Viet Nam’s web site: http://www.sbv.gov.vn/vn/home/index.jsp 11 Tienphongbank Annual Report 2008 12 Tienphongbank Audited Financial Statements, for the period from o1 January 2009 to 30 September 2009 13 Tienphongbank, Decision No 88/2008/QD-TPB.NV “Liquidity Management Policy”, 8th July 2008 14 Tienphongbank, Decision No 63/QD-TPB.TTV “Assets and Liabilities Committee”, 20th March 2009 55 Annex 1: Gap analysis report format Unit of currency Item TIME TO MATURITY O/N 2D1W 1W1M 1M2M 2M3M 3M6M 6M9M 9M12M 1Y2Y ASSETS Cash and Cash Equivalent Deposit at Credit Institution Equity Treasury Bond Individual Loans Corporate Loans Other Assets TOTAL ASSETS LIABILITIES Deposit from Credit Institution Deposit from Individual Deposit from Economic Org Other Liability TOTAL LIABILITIES ASSETS-LIABILITIES 56 >2Y Annex 2: Break down VND liquidity ratio as of 30 September 2009 Tenor Items 2-7 days day days-1 month 1-3 months > 3-6 months >6 months Total I Current Liabilities 1.Deposits of State Treasury Deposits of other domestic and oversea CIs Borrowing from the State Bank 10.08 - 133.0 131.0 - - - - 217.00 100.0 500.0 - - 960.08 - - - - 131.05 Borrowing from other domestic and overseas CIs - - - - - - - Receipt of funds from co-financing lending - - - - - - - 1,009.02 197.1 558.31 487.8 254.3 232.60 2,739.25 Funds financed, entrusted for investment 8.74 - - - - - 8.74 Funds mobilized in forms of issuance of valuable papers - - - - - - - 409.11 - - - - - 409.11 43.22 - - - - - 43.22 1,480.17 461.2 775.31 587.8 754.3 232.60 4,291.45 36.87 - - - - - 36.87 0.74 - - - - - 0.74 228.3 - 987.53 Deposits of economic organizations, inhabitants Financing commitments 10 Other Liabilities TOTAL LIABILITIES II Current Assets Cash Deposits at the State Bank Deposits at other domestic and overseas CIs 345.23 - 264.00 150.0 - - - - - - 0.88 115.4 58.08 243.6 242.9 557.10 1,218.12 - - - - - 3,009.22 3,009.22 3.00 - - - - - 3.00 Financing commitments to be received 225.05 - - - - - 225.05 Other assets 247.41 - - - - - 247.41 TOTAL ASSETS 859.18 115.4 322.08 393.6 471.2 3,566.32 5,727.94 Lending to other domestic and overseas CIs Lending to economic organizations, individuals Investments in securities Capital contribution, joint venture participation, share purchase Total current assets can be payable within the next month/Total current liabilities can be payable within the next month 43.72 Total current assets can be payable within the next working days/Total current liabilities can be payable within the next working days 94.08 - 57 Annex 3: Break down USD liquidity ratio as of 30 September 2009 Tenor Items 2-7 days day days-1 month 1-3 months > 3-6 months >6 months Total I Current Liabilities 1.Deposits of State Treasury 0 0 0 10,525 13,800 9,600 10,000 43,925 Borrowing from the State Bank 0 0 0 Borrowing from other domestic and overseas CIs 0 0 0 Receipt of funds from co-financing lending 0 0 0 1,289 129 858 4,712 1,250 381 8,619 Funds financed, entrusted for investment 0 0 0 Funds mobilized in forms of issuance of valuable papers 0 0 0 Financing commitments 10,212 0 0 10,212 10 Other Liabilities 12,223 0 0 12,223 TOTAL LIABILITIES 34,249 13,929 10,458 4,712 11,250 381 74,979 Cash 622 0 0 622 Deposits at the State Bank 370 0 0 370 Deposits at other domestic and overseas CIs 1,093 9,000 9,000 10,000 29,093 Lending to other domestic and overseas CIs 0 0 0 Lending to economic organizations, individuals 0 2,445 5,861 2,357 19,097 29,760 Investments in securities 0 0 22,727 22,727 0 0 0 12,587 0 0 12,587 203 0 0 203 14,876 11,445 14,861 12,357 41,824 95,362 Deposits of other domestic and oversea CIs Deposits of economic organizations, inhabitants II Current Assets Capital contribution, joint venture participation, share purchase Financing commitments to be received Other assets TOTAL ASSETS Total current assets can be payable within the next month/Total current liabilities can be payable within the next month 4.84 Total current assets can be payable within the next working days/Total current liabilities can be payable within the next working days 6.21 58 Annex – The current assets and liabilities used to calculate liquidity ratios Current Assets shall include: a Cash; b Gold c Deposits at the State Bank d The positive difference between demand deposits at other credit institutions and demand deposits from those credit institutions; e Time deposits at other credit institutions which have become due f Securities issued or guaranteed by the Government of Vietnam: (i) With the remaining term of year and less: 100% of the book value (ii) With the remaining term of more than year: 95% of the book value g Securities issued or guaranteed by credit institutions which are operating in Vietnam: (i) With the remaining term of month and less: 100% of the book value (ii) With the remaining term of more than month to year: 95% of the book value (iii) With the remaining term of more than year: 90% of the book value h Securities issued by the government of OECD countries (i) With the remaining term of year and less: 100% of the book value (ii) With the remaining term of more than year: 95% of the book value i Securities issued by banks of OECD countries: (i) With the remaining term of month and less: 100% of the book value (ii) With the remaining term of more than month to year: 95% of the book value (iii) With the remaining term of more than year: 90% of the book value k Drafts of export documents, which have been accepted for payment by foreign banks with the remaining term from month and less: 100% of the amount stated in the draft l 80% of secured loans, financial leases which become due (principal, interest) within a period of month 59 m 75% of unsecured loans which become due n Other kinds of securities: (i) With the remaining term of month and less: 100% (ii) With the remaining term of more than month to year: 90% (iii) With the remaining term of more than year: 85% o Other due receivables Current Liabilities shall include: a The positive difference between deposits of other credit institutions and deposits at those credit institutions, which have become due; b 15% of demand deposits of organizations (excluding deposits of other credit institutions), individuals; c Value of lending commitments made by the credit institution, which have become due; d All other liabilities which will become due 60 ... liquidity risk 21 management policy, evaluate the liquidity risk that Tienphongbank has encountered, the reason leading to the liquidity risk at Tienphongbank 22 Chapter II LIQUIDITY RISK MANAGEMENT AT. .. Books  Internet Overview of Tienphongbank Analysis of Liquidity risk management at Tienphongbank Recommendations to improve Liquidity risk management at Tienphongbank Scope of study The scope... liquidity risk management at Tienphongbank? (iii) What should be improved for the bank? ??s liquidity risk management? What are the recommendations for the bank in order to control the liquidity risk?