LV Thạc sỹ_Solutions to minimize credit risks in JSC bank for Vietcombank

TABLE OF CONTENTS Page CHAPTER 1: ORENTICAL FRAMEWORK OF CREDIT AND CREDIT RISK IN COMMERCIAL BANKS 1.1 1.2 The theory of bank credit 1.1.1 The concepts of bank credit 1.1.2 The roles of bank credit 1.1.3 The forms of bank credit 1.1.3.1 Lending 1.1.3.2 Guaranties Credit risks in commercial banks 1.2.1 Types of risks in banking operations 1.2.2 The concepts of credit risk 1.2.3 Types of credit risks 1.2.4 Causes of the credit risk in commercial banks 1.2.4.1 Objective causes 1.2.4.2 Subjective causes 11 CHAPTER 2: THE REALITY OF CREDIT RISK MANAGEMENT IN JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM - THANH CONG BRANCH 2.1 Overview of Joint stock commercial bank for Foreign Trade of 14 Vietnam and Thanh Cong Branch 2.1.1 History of foundation and development 14 2.1.1.1 Vietcombank 14 2.1.1.2 Vietcombank – Thanh Cong Branch 14 2.1.2 Management structure and organization 15 2.1.3 Real business situations 16 Supervisor… … – Advanced Class 2.1.3.1 Capital mobilization activity 19 2.1.3.2 Lending activity 19 2.1.3.3 Service activity 21 2.2 Activities of credit risk management in Vietcombank- Thanh 22 cong Branch 2.2.1 The reality of credit activities 27 2.2.2 The real situations of credit risk and credit risk management 27 2.2.2.1 Policies on credit risk management of Vietcombank 32 2.2.2.2 Credit risk situation in Thanh Cong Branch 32 2.2.3 Evaluation of credit risk management activities in VCB 2.2.3.1 Achievements 2.2.3.2 Drawbacks 33 38 3839 CHAPTER 3: SOLUTIONS TO MINIMIZE CREDIT RISK IN VIETCOMBANK - THANH CONG BRANCH 3.1 Development orientations of Vietcombank - Thanhcong Branch 41 3.2 Solutions to reduce credit risk in Thanh Cong Branch 41 3.2.1 Collecting information 43 3.2.2 Enhancing control 43 3.2.3 Improving quality of staff 44 3.2.4 Improving customer’s policies and loan evaluation process 45 3.2.5 Providing loan loss provision 46 3.3 Recommendations 49 3.3.1 Recommendations related to the Government 50 3.3.2 Recommendations related to State Bank of Vietnam 50 3.3.3 Recommendations related to Vietcombank 51 CONCLUSION 52 REFERENCES 53 APPENDIX Supervisor… … – Advanced Class ABBREVIATION VCB – Vietcombank SBV – State Bank of Vietnam CIC – Credit Information System Supervisor… … – Advanced Class EXECUTIVE SUMMARY This thesis aims to study how credit risk affects commercial banking operations, and then propose solutions to minimize it This thesis depicts real situations of credit risk management in a commercial bank, namely Vietcombank – Thanh Cong Branch Credit risk is one of the oldest and most important forms of risk faced by banks as financial intermediaries Managing this kind of risk always is one of the predominant challenges in running a bank Chapter is for the introduction of fundamental concepts of credits and credit risk, how they affect a commercial bank in particular Rules and factors of bank credit are also briefly discussed as well as the very basic idea of other risks in banking operation Types of credit risk were mentioned, of course, then the chapter ends in exposing subjective and objective causes of credit risk Chapter gives a picture of Vietcombank in general, and its Thanh Cong branch in particular with recent business activities such as capital mobilization, lending, etc Credit risk management’s real situations in five years are thoroughly analyzed and explained according to different type of bank credit Underlying reasons for the pattern of credit risk are discovered and presented Chapter aims at proposing recommendations and solutions for the complex circumstances around VCB – Thanh Cong Branch’s credit risk management It also suggests strategies for lending activities in next several years Supervisor… … – Advanced Class LIST OF TABLES Table 2.1: Outstanding loans of VCB – Thanh Cong Branch Table 2.2: Classification of credit according to type of user Table 2.3: Classification of credit according to type of industry Table 2.4: Classification of credit according to maturity Table 2.5: Credit risk situation in Thanh Cong Branch 2005 -2009 Table 2.6: Overdue loan of Thanh Cong Branch 2005 -2009 Table 2.7: Classification of overdue loan according to customer solvency Table 2.8: Classification of overdue loan according to types of currency Supervisor… … – Advanced Class LIST OF CHARTS Chart 2.1: Capital mobilizing at Thanh Cong Branch 2005-2009 Chart 2.2: Lending situation of VCB- Thanh Cong Branch 2005-2009 Chart 2.3: Number of cards of Thanh Cong Branch 2005-2009 Chart 2.4: Import and export payment of the Branch 2005-2009 Chart 2.5: Number of customers of Thanh Cong Branch 2005 -2009 Supervisor… … – Advanced Class INTRODUCTION Rationale One remarkable feature of world economy in recent decades is the fast development in financial sector and banking industry It is clear that striving for a prosperous financial and baking attracts more and more attention, wisdom, and knowledge of humanity Following the world’s trend as well as positive changes of country, especially after Vietnam officially joined the International Trade Organization (WTO), in recent years, Vietnam’s banking system has made significant changes in structure, scale, and diversification in the term of organization types Commercial banking system is expected to continue to promote it roles to support in capital, investment, and financial services to make economic growth prosperously and stably Banks perform different services: deposits, loans, remittance services, payment transactions The modern world banking trends to operate more kinds of services to make more profit However, in the current period, in most countries including Vietnam, the main source of income is from credit activities Vietcombank- Thanh Cong Brach belongs to Vietcombank and operates in Hanoi In the past few years, in spite of significant achievements on many aspects, this bank also has to confront with difficulties in managing credit risks To assert its position in the market, Vietcombank – Thanh Cong Brach needs to find solutions to manage credit risks smoothly and efficiently That is the main reason the internee chose the theme “Solutions to minimize credit risks in Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)- Thanh Cong Branch " as the topic for his graduation thesis Research Objectives - To study the general theory of bank credit in business activities of commercial banks - To analyze and assess the real situations of credit risk management at Vietcombank – Thanh Cong Branch Supervisor… … – Advanced Class - To propose solutions and recommendations to improve credit risk management activities at Vietcombank – Thanh Cong Branch Research Object and Scope Research Object: Credit risks and credit risk management in commercial banks – Research Scope: Credit activity in this minor thesis is considered in term of lending, not guaranty Time and data was conducted in five years from 2005 to 2009 Research Methodology The minor thesis was studied based on dialectical materialism and historical materialism, statistical theory; and implemented in accordance with analysis, demonstration, synthesis method, comparison charts Research Structure Title: “Solutions to minimize credit risks in Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)- Thanh Cong Branch” Research Structure Introduction Chapter I: Orentical framework of credit and credit risk in commercial banks Chapter II: The reality of credit risk management in joint stock commercial bank for foreign trade of Vietnam (Vietcombank) – Thanh Cong Branch Chapter III: Solution to minimize credit risk in Vietcombank – Thanh Cong Branch Conclusion List of references Supervisor… … – Advanced Class CHAPTER ORENTICAL FRAMEWORK OF CREDIT AND CREDIT RISK IN COMMERCIAL BANKS 1.1 1.1.1 The theory of bank credit The concepts of bank credit Credit refers to the granting of a loan and the creation of debt Credit is considered as mutual relationship between lenders and borrowers with promise to repay both principal and interest after a certain period Credit reflects an economic relationship in which individual or organization gives another individual or organization the right to use an amount of asset with specific conditions about interest rate, time of repayment, and payment method We can realize some typical features of credit: - Credit requires faith: The concept of credit indicates that credit is the lending with promises of repayment in specific time; these promises show credibility and trust between lender and borrower Credibility is invisible factor, however it cannot be absent from any credit activities, and is embraceable element of credit activities - Credit happens in a specific period Lender gives borrower rights to use loans in term of money or goods within a specific period After borrowing period, borrower has to repay loan’s principle plus interest - Credit includes refund process This is the thing to distinguish credit from other economic categories After lending, lender profits from loan by addition amount of money called interest In addition to three basic characteristics mentioned above, credit also has such characteristics as potential risk, guarantee, supply, rule of demand, and competition, etc 1.1.2 The roles of bank credit Bank credit has a great deal to with the economic health of its region; it supports communities and nations by providing credit to finance the development of new Supervisor: … … – Advanced Class businesses, sustain existing activities, and create jobs so that living standard can grow over time Bank credit helps to increase economic efficiency Enterprises usually business based on equity and debt One of the important sources of debt is bank’s loans, because this kind of source usually meets firm’s demands in term of quantity and duration Inversely, in order to borrow money from bank, enterprise has to business effectively to meet bank’s requirement As a result, enterprise must change time by time, search new market, develop technology… and these things increase market efficiency It also contributes to market’s continuous movement, increases money transferring, and supports business strategies, monetary policy 1.1.3 The forms of bank credit In Vietnamese market, bank credit usually is divided into two big groups: lending and guaranty 1.1.3.1 Lending Banks make a wide variety of loans to a wide variety of customers for many different purposes- from purchasing automobiles and buying new furniture, taking dream vacations, or pursing college educations to constructing homes of office buildings There are some orders to the diversity of lending by grouping loans according to their purposes- we consider what customers plan to with the proceeds of their loans Loans may be divided into seven broad categories, delineated by their purposes: a) Real estate loans: are secured by real property- land, buildings, and other structures- and include short-term loans for construction and land development and longer-term loans to finance the purchase of farmland, homes, apartments, commercial structures, and foreign properties b) Financial institution loans: include credit to banks, insurance companies, finance companies, and other financial institutions c) Agricultural loans: are extended to farms and ranches to assist in planning and harvesting crops and supporting the feeding and care of livestock Supervisor: … … – Advanced Class 41 - To reorganize the organization structure towards division management at Head Office and to restructure branches’ organization; to improve management competence and discipline observation by staff - To upgrade technology to meet increasing demand from customers as well as to serve business management and administration - To encourage international an public relations; to enhance promotion of Bank’s products, services and brand within the network and in the market - To issue and consolidate internal policy in compliance with legal requirements to meet international standard and minimize operational risks - To continue working with strategic partners, to issue more stocks to increase legal capital and lift CAR ratio to 10% Based on resolutions and guidelines by Vietcombank and 2009 operation results; Thanh Cong branch set out key targets for credit activities in 2010 as follows: total mobilized funds increase by 20% against 2009, outstanding debt increases 25% compared to 2009 In which, loans to small and medium enterprises counts for 50% of total loans, retail loans count for 10% of total loans - To utilize mobilized funds effectively through the development of new investment forms towards economic restructuring of the city: service - industry, information, tourism, trade, technology transfer, work force training, insurance, telecommunication, import and export Bank wants to focus on some specific sectors more: to lend developing industries with high technology, manufacturing industries, export – import; and make loans to firms, enterprise to build new residential areas - To diversify, apply new lending products and methods such as home loan, cofinanced project ; to expand and develop operations: discount, re-discount, commercial paper, and project financing, currencies exchange - To make loans to develop real estate market in Hanoi in order to help city to develop fund for clearance, which participate in socio-economic development and construction of new urban areas, improve city’s infrastructure Supervisor: … … – Advanced Class 42 - To continue to implement strict regulations of Vietcombank and maintain the use of capital through direct investment and co-financed projects based on safe and effective principals 3.2 Some solutions to reduce credit risk in Thanh Cong Branch In the competitive market of banking industry in the area, to achieve these goals above, Thanh Cong branch needs to change, bring strategies, solutions out as following: 3.2.1 Collecting Information In credit activities, information plays a very important role The inaccurate, incomplete information not only creates credit risk but also affects the business results of the branch Therefore, branches need to diversify the sources of information to improve the quality of information in order to support credit operations well - To collect information sufficiently, in addition to documents, papers sent by the customer; Bank needs to exploit information strictly by meeting directly with customers A friendly, open atmosphere when talking to customers is an effective way to gather information In addition, credit officers should visit enterprises regularly and extraordinarily to obtain reliable and precise information - Moreover, loan officers can collect the necessary information via publications, guidance documents, on the internet or other means of communication These kinds of information will bring loan officer helpful references about status of customers or firms’ market segment - Another source of information is from colleagues, clients, business partners to obtain info about the strengths and weaknesses of the product, services on the market at the time of evaluation - Besides, the information obtained from other banks, management agencies, consulting firms, audit firms that relates to manufacturing aspects of firm should be very helpful - External sources of information are very diversified and plentiful; however, they are not accurate, so Bank needs to filter, classify, and create their own sets of data Branches need to build a team to collect, classify, process and store date about each Supervisor: … … – Advanced Class 43 segment of specific projects, documents and decisions of the General Director; documents of the State Each kind of information should be processed scientifically, facilitated to search and use for credit purposes Besides, branches need to enhance staff’s awareness and responsibility if security of data - Bank should develop better information systems and to diversify the sources of collected information If bank follows step – by - step criteria above, it will have relatively complete and accurate information system about customers, projects, thereby, enhancing the exactitude credit rating, as the result, credit risk will decrease 3.2.2 Enhancing Internal control Branches need to complete an appropriate organization structure, create conditions to staff to promote their abilities and responsibilities in a high degree The tight coordination among divisions in the branch, between the branch and the other branches will create a united and tight close organization In addition, loan officers should establish and strengthen relationships with the credit departments of other banks in order to learn and exchange experiences together to improve the quality of credit Staff should be divided into groups, each group will be in charge of certain products, an industry, or a kind of projects such as production projects, commercial projects, the construction projects This will specialize loan officers in each area, help them to have deep understating about specific segment, increase safety and effectiveness in credit activities Branches should hire evaluation experts: In the case of large, complex loans; bank may need experts’ advice (experts outside the bank) This is very important, reasonable, and necessary Using the outsourcing staff needs regulations associated benefits and responsibilities for taking their advantage of the knowledge in evaluation and preventing disclosure of confidential information of customers Branches need to strengthen inspection and supervision in term of implementation and time constrained of investment projects to minimize credit risk that may occur Supervisor: … … – Advanced Class 44 3.2.3 Improving Quality of Staff In the banking industry, credit activities can be considered the most complex work The credit report shows the subjective evaluation of the loan officers about financial capability, business performance, and debt repayment ability of customers based on criteria, carefully review and analysis This work requires the qualified staff with compatible capacity, knowledge, and professional expertise Therefore, due to improve credit quality and limit credit risk, the Branch needs special attention to improve the quality of credit department - Branch should open regular training courses Loan officers need to keep up with the guidelines and policies of State and Government in term of law, economic and social activity, and regime and credit professional rules Training classes may be taken by to the high-qualified staff or experts who have depth knowledge and experience The bank can also invite the faculty of universities and outside experts to acknowledge employees The Branch should encourage loan officers to read, study, and keep up-to-date with decisions of the State, regulations, and guidelines of the Bank - Branches should also encourage staff self-study and improve their own capacity More specifically, the branch should create conditions such as time and fund so they can get chances to study postgraduate courses, master's degree, or doctorate Branch can also provide fund support to the loan officer to attend information technology, foreign language courses; help them understand the modern facilities, advanced technology, so on - Branch needs to inspect, monitor, and evaluate periodically level of loan officers to have plans to train them or move them to work in suitable staff Branches also need to consider, select high- qualified staff to be promoted - The branch should have a satisfactory and fair remuneration The branch should reward in time to encourage and motivate employees who achieve good business results Simultaneously, Branch must have suitable treatment with employees who have lack of responsibility Supervisor: … … – Advanced Class 45 3.2.4 Improving Customer Policies and Loan evaluation Process *) Improving Customer Policies Base on customer policies, the branch can identify main customers, retain traditional customers, and attract new customers who business well, effectively If many customers know and use the branch’s services, bank will have more investment opportunities and credit activities will be expanded Thus, bank need to step up the customer relation Focus on forms of capital mobilization based on expansion and diversification of mobilization methods; diversify the banking services, continue to implement solutions to improve the quality of banking services such as banking network, technology The Branch needs to monitor changes in the currency market, interest rate, fees charged by banks in the area to offer a flexible interest rate policy, appropriate fee to retain old customers and attract new potential customers Bank should actively seek potential customers, projects, feasible business plans; then, Bank can provide capital timely, support enterprises according socio-economic development oriented of Hanoi Positively apply preferential policies to customers such as gifts for customers with large deposit, regular transactions; give great customers VIP card; preferential policies on charges, interest rates, and brand promoting, product propagandizing; follow strong culture of Vietcombank: Agile, civilized, polite, attentive to customers Provide consulting services to clients: The relationship between bank and customer is a mutual relationship, interaction, and mutual development Credit activities of banks have close connection with the business activities of customers; customers conduct business well, effectively, the solvency of loans will be higher, and banks can reduce the credit risk that may incur Bank has relationships with customers operating in many different fields of economics Therefore, the banks get a lot of information and experience, understanding about economic, technology, society that customers hardly access Since then, banks can offer advice to customers as guidelines about other customers, efficient sector to invest, technology in order to customer did business well In Supervisor: … … – Advanced Class 46 addition, loan officers can regularly communicate with customers to gather information about their status, and then can give them advice about business plans, financial management scale to suit practical situation If bank does this work well, the branch can capture timely information about customers, after that it can not only helps customers in production and business operations, but also reduce risks for banks In lending process, the customer is asked to submit several crucial documents bank needs in order to fully evaluate the loan request, including complete financial statements and, in the case of a corporation, board of directors’ resolutions authorizing the negotiation of a loan with the bank Once all documents are on file, the bank’s credit analysis division need to conduct a thorough financial analysis of the applicant, aimed at determining whether the customer has sufficient cash flow and backup assets to repay loan The credit analysis division then needs to prepare a brief summary and recommendation, which goes to the appropriate loan committee for approval On larger loans, members of the credit analysis division may give an oral presentation and discussion will ensue between staff analysts and the loan committee over the strong and weak points of a loan request Usually a loan officer or other staff member needs to enter information about new loan customer in a computer file known as a customer profile The file show what services the customer is currently using and contains other information required by management to monitor a customer’ condition and financial service needs *) Improving Loan Evaluation Process Once a customer decides to request a loan, an interview with a loan officer usually follows giving the customer the opportunity to explain his or her credit needs That interview is particularly important because it provides an opportunity for the loan officer to assess the customer’s character and sincerity of purpose If the customer appears to lack sincerity in acknowledge the need to adhere to the terms of a loan, this must be recorded as weighing against approval of the loan request Supervisor: … … – Advanced Class 47 The branch needs to apply advanced methods of evaluation project loans, pay attention to evaluate the effectiveness of project, time value of money as well as the discount rate chosen and appropriate depreciation methods Solutions related to the bank’s organization operating for the project evaluation: bank should focus on solutions for organizational operating in order to professionalize lending evaluation process Branch need concerns strict process (the most important step that directly affects the quality assessment and moreover, the quality of loans) Specifically, because of differences in project scale, business sector, production, so the allocation of staff’s duties needs to base on their capacity, moreover, management risk requires tight coordination, mutual assistance of every staff members Since then, the responsibility of officers is enhanced The detailed provisions, the specific responsibilities of each officer need to be evaluated according to the results of investment projects Credit department and loan evaluation department should work independently Besides, organizational evaluation in entire system should be improved in order to coordinate with other banks in the area tightly Solution for collecting and analyzing information related evaluation process: the branch should strengthen internal information system as well as collecting outside information to overcome moral hazard and asymmetric information Human resources: Humans are the dominant factor that affects loan evaluation a lot Therefore, to improve the quality of evaluation, firstly, bank should improve the capacity of staff in term of education, ability, experience, and professional ethics Besides, the branch must regularly check staff appraisal, review and transferred the staff appraisal does not meet the job requirements to other jobs Besides the solutions above, Bank should also develop equipment, technology system for the entire operations of the bank as well as loan evaluation process 3.2.5 Providing Loan Loss Provision It is highly unlikely that bank can offer a wide variety of loans to its customers without having some of those customers fail to repay either part or all of their loans The branch understands that a small percentage of their customers will fail to pay them back Supervisor: … … – Advanced Class 48 or perhaps pay them back at a slower rate than first stipulated To account for these circumstances, banks include on their income statement a loan loss provision, which is a negative charge against pre-tax earnings intended to simulate the financial hit of these defaulted loans The Branch has to take into account many other factors when determining their particular loan loss provision If a bank is in the habit of handing out risky loans, then it should need to have a fairly high provision to keep its reserves replenished in case of multiple defaults On the other hand, a bank that is particularly conservative about the types of loans it offers and the clientele those loans attract need not have a relatively high provision In addition, the pervading economic climate may also affect how much the bank needs for a loan loss provision When the bank gives up on receiving its repayment for a loan, it is known as a charge-off After a period of recession, the branch often receives payments for these charged-off loans as the economy recovers and borrowers start to regain their financial footing These recovered loans may be used to strengthen the bank's loan loss reserve and allow for more aggressive lending 3.3 Recommendations These solutions are only something that Vietcombank- Thanh Cong needed to to minimizing credit risk Besides, the branch also needs the help of the Government, the State Bank, and Vietcombank- headquarter to support it credit activities 3.3.1 Recommendations related to the Government - First, Government needs to promulgate standard regulations about mandatory audit and disclosure balance sheet for firms The audit must be conducted periodically and regularly; financial reports of enterprises must be audited before providing the bank to analyze Simultaneously, sanctions should also be clearly stated for businesses trying to provide false data to banks Currently, Government still manages business accounting loosely, as the result, frauds happen unceasingly and affect bank’s performance a lot Therefore, Government should promulgate regulations that go along with sanctions to Supervisor: … … – Advanced Class 49 ensure honesty and clarity in the financial statements and reflect all business activities of the enterprises - Government should build industry average indicators: Ministry of Finance in conjunction with relevant ministries should build a system of industry indicators for each period as a basis for credit ratings of commercial banks These indicators will be adjusted periodically, kept up-to-date to the new situation, be public, and be widely used not only commercial banks - The State should strengthen management of commercial bank’s credit activity Since commercial banks play an important role in the economy, the Government’s management of banking activities is paramount Specifically, Government should build, supplement, and perfect system of legal documents, mechanism policies to ensure banking and credit activities to operate effectively, develop healthier - Going along with regulations and sanctions, Government needs to strengthen inspection and supervision to credit institutions, and Government should enhance SBV’s role in periodic supervision and inspection banks in order to detect and handle violations in the field of credit - In addition, Government should build, strengthen, and improve or set up statistics agencies that are in charge in conducting and collecting credit information, assessing and rating companies Achieving a comprehensive information system needs coordination between various ministries and agencies such as Ministry of Finance, Ministry of Planning and Investment, General Statistics Office and the industry leaders first of all, they need to collect, exchange, process and standardize information about enterprises, then publish, distribute information periodically and regularly Through the specialized agencies, these activities will be facilitated 3.3.2 Recommendations related to State Bank of Viet Nam - SBV needs positive measures to improve quality and increase central role of Credit Information Center Credit Information Center needs to have standard information about firms, business organizations; information needs to easy to credit institutions access and be kept up-to-date Supervisor: … … – Advanced Class 50 - In addition, the CIC could expand the information provided, including economic information, financial activities of firms or industry analysis to assist commercial bank’s customer scpring and credit rating Data need to be not only diversified but also accurate, timely CIC needs to gather double-side information, access updated information from Ministries such as Ministry of Planning and Investment, Ministry of Trade Commerce, General Statistics Office At the same time, CIC needs to approach external sources of information, establishes relationship with foreign credit rating organizations to exchange and enrich credit information State Bank should set a goal to make CIC become major and reliable sources for credit institutions 3.3.3 Recommendations related to Vietcombank - Because of limitation in term of capital, human resources, Thanh Cong Branch cannot establish its own completed and diversified information and data collection system Thus, building a standard system for all transaction centers and branches is reasonable The system will collect all basic information of clients who had credit relations with banks These information can be very basic about customer name, business section, numbers of using services in Vietcombank network, scale and duration of each loan, and especially the results of principal and interest payments and notices (if any) Sources of information can be divided by many different criteria for easy references such as industry, firm size, loan term There is also consolidated information updated from newspapers, magazines about specialized industry, development trend in domestic and foreign market which loan officers need to pay attention when analyzing customer This information and data collecting system can also act as an information network for risk prevention in credit activities of Vietcombank - Informatics Centre is responsible for establishing storage systems along with credit files stored in papers and documents; and stored data need to be integrated into internal networking the entire banking system of Vietcombank in order to enrich information and operate efficiently In addition, network security must be tight in order to secure business secret Supervisor: … … – Advanced Class 51 - Vietcombank needs to improve regulations about customer analysis and especially, customer’s financial situations from the workshops organized by State bank of Vietnam Simultaneously, Vietcombank needs to recruit financial professors who have qualified abilities to hold important positions in the bran Supervisor: … … – Advanced Class 52 CONCLUSION In current integrated market, risk in business is inevitable, especially in banking section, which not only is complex but also has a great deal to the entire economy This is not a new problem anymore, but it still attracted a lot of attention of domestic and foreign financial experts Credit activity in Vietnamese market, which usually fluctuates, contains many risks This requires commercial banks to find appropriate measures to manage and minimize risks, then improve business performance and achieve sustainable growth From theory and practice, with the theme: " SOLUTIONS TO MINIMIZE CREDIT RISK IN JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIET NAM- THANH CONG BRANCH” The thesis mentioned the following issues: Firstly, the interne had researched basic theories and knowledge about risks in the banking industry and credit risks: definitions, concepts, types and causes of risk in credit operations Secondly, the interne investigated the credit situation in the branch based on data from 2005 to 2009 in order to find out the bank’ achievements and limitations in credit activities Finally, the interne suggested some solutions to contribute to credit risk management in VCB- Thanh Cong Branch with the purposes of minimizing credit risk, improving bank’s profit, being in accordant with the motto "Efficiency, safe and sustainability." The interne hopes that this thesis could contribute small proportion in strengthening risk management in Vietcombank- Thanh Cong branch In the study process, the interne did try a lot, however the interne’ knowledge and awareness about banking environment still have restrictions, thus, the interne hope to receive feedbacks from supervisors, lectures and others who concern about this topic I sincerely thank Ms Nguyen Thi Thuy Duong – the enthusiastic lecturer- for her helpful and devoted direction and guidance to help me finish this thesis Supervisor: … … – Advanced Class 53 REFERENCE Anthony Saunders – Marcia Millon Cornett (2005) Financial Markets and Institutions: An Introduction to the Risk Management Approach (3rd ed.), Mc Graw – Hill Eugene F Brigham – Phillip R Daves (2008) Intermediate Financial Management (10th ed.) South- Western Cengage Learning Peter S Rose – Sylvia C Hudgins Bank Management & Financial Services (8th ed.) Mc Graw – Hill Kimmel – Weygandt – Kieso Financial Accounting (4th ed.) Wiley Plus Alchian, A.A., and W.R Allen, University Economics (Belmont, Calif.: Wadsworth Publishing, 1964) Alderfer, E.B., and H.E Michel, Economics of American Industry, 3rd ed (New York: McGraw-Hill, 1957) Vietcombank – Annual Financial Report 2005 – 2009 Vietcombank – Credit Handbook Websites: - www.vneconomy.vn - www.vfr.vn - www.vietcombank.com.vn Supervisor: … … – Advanced Class 54 SUPERVISOR’S JUDGMENTS Supervisor: … … – Advanced Class CRITIC EVALUATION Supervisor: … … – Advanced Class ... reason the internee chose the theme “Solutions to minimize credit risks in Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) - Thanh Cong Branch " as the topic for his graduation... “Solutions to minimize credit risks in Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) - Thanh Cong Branch” Research Structure Introduction Chapter I: Orentical framework of credit. .. bank 1.2 Credit risks in commercial banks 1.2.1 Types of risks in banking operations Risks are uncertainties resulting in adverse variations of profitability or in losses In the banking universe,