LV Thạc sỹ_Improving credit risk management in BIDV thang long branch

ACKNOWLEDGEMENT I would like to thank my supervisor, Ms and my instructor, Ms…, Deputy Director of BIDV Thang Long Branch, for enthusiastic guidance and support to me during the internship period To complete this report, I have spent an enormous time and effort to collect information and practical knowledge However, because of short internship and limitation of experience and understanding, my report inevitably has shortcomings I look forward to receive recommendations from the supervisor, Ms … as well as officials at BIDV Thang Long Branch to make this report better ACKNOWLEDGEMENT ABRREVIATION LIST OF TABLES INTRODUCTION Chapter I: Credit risk management in commercial banks 1.1.Bank credit in commercial banks 1.2.Credit risk management in commercial banks 12 Quantitative model: 13 Z - Credit scoring model 13 Chapter II: Current situation of credit risk management in Bank for Investment and Development of Vietnam 22 2.1.Overview of Bank for Investment and Development of Vietnam - Thang Long Branch .22 2.2.Business performance of BIDV Thang Long Branch in recent years 26 2.3.Current situation of credit risk management at Bank for Investment and Development of Vietnam – Thang Long Branch 30 2.4.Credit risk management evaluation in Bank for Investment and Development of Vietnam – Thang Long Branch .39 Chapter III: Solutions to improve credit risk management in Bank for Investment and Development of Vietnam – Thang Long Branch 44 3.1 Credit risk management orientations of Bank for Investment and Development of Vietnam – Thang Long Branch 44 3.2.Solution to improve credit risk management of Bank for Investment and Development of Vietnam – Thang Long Branch 45 3.3.Recommendations 49 CONCLUSION 53 REFERENCES 54 ABRREVIATION BIDV CIC SBV Bank for Investment and Development of Vietnam Credit Information Center The State Bank of Vietnam LIST OF TABLES Table 2-1: Deposit classification 27 Table 2-2: Service Activities .29 Table 2.2-3: Credit classification 31 Table 2.2-4: Debt Group .33 Table 2.2-5: Credit classification in term of industries 35 Table 2.2-6: Overdue Loans 35 Table 2.2-7: Provision for loan losses 37 INTRODUCTION Rationale Credit activity is one commercial bank in addition to of the basic activities, brings much profit for other banking activities such as payments, guarantee, card services However, besides bringing back significant income, credit sector is also one of contributors to potential risks, which may lead to losses: at low level, credit risk raise cost, reduces profitability At higher level, credit risk reduces the financial capacity and reputation of the banks, being the reason of damages to other entities in the economy Credit risk is always parallel with credit activity, and cannot be completely eliminated However, banks can apply measures to detect, prevent, limit or minimize losses originating from credit risk From manager’s perspective, bankers always concede the objective existence of credit risk and an expected loss rate because of credit risk, pre-determined in the strategies of the banking activities When losses are below the expected level, the bank might consider it as a success in management Hence, the banks always concentrate on managing and limiting credit risk The Bank for Investment and Development of Vietnam – Thang Long Branch is one of the top branches of the Bank for Investment and Development of Vietnam (BIDV) with a quite stable growth However, in recent year, at this branch, bad debt accounts for a large proportion and is usually above the entire BIDV’s average Therefore, it is essential to find out solutions to improve the management of credit risk in BIDV Thang Long Branch The bank with effective business activity, strong financial capacity and wellperformed risk management will gain good reputation with customers and partners domestically and abroad This is crucial for the bank to achieve sustainable and strong growth Hence, the topic “Improving credit risk management in the Bank for Investment and Development of Vietnam – Thang Long Branch” is selected for this research Research Objective Systematizing the theoretical background about commercial bank activities and credit risk management of commercial banks Analyzing the current situation of credit risk management in BIDV Thang Long Branch to find out limitations and causes Proposing some solutions to the branch and recommendations to the Government, State Bank of Vietnam in order to improve the quality of credit risk management in BIDV Thang Long Branch Research Methodology This thesis uses the following methodologies: statistics, analysis, logical thinking, and synthesis to explain problems mentioned in the thesis Research Scope This thesis focuses on fundamental theory of credit risk management and practical operation of credit activities, current situations of in BIDV Thang Long Branch credit risk management during the period from 2009 to 2011 Research Structure Chapter I: Credit risk management in commercial banks Chapter II: Current situation of credit risk management in Bank for Investment and Development of Vietnam – Thang Long Branch Chapter III: Solutions to improve credit risk management in Bank for Investment and Development of Vietnam – Thang Long Branch Chapter I: Credit risk management in commercial banks 1.1 Bank credit in commercial banks 1.1.1 Definition of bank credit The word “credit” is derived from the Latin word “Credo” The word “credo” means "I trust you" It is defined as" an exchange which is complete after the expiry of a certain period of time after payment Credit is explained as the sale of goods and services and money claims in the present in return for a promise to pay in the future The promise usually based on the confidence and on the belief that the debtor whether a person, a business firm or a government unit will be able and willing to pay on demand or at some future time Credit therefore is defined in the following words: Credit is the right to receive payment or the obligation to make payment on demand or at some future time on account of an immediate transfer of goods However, if considering credit from the angle being a basic function of the banks, credit will be seen as following: bank credit is a transaction on assets (money or goods) between the lenders (banks and financial institutions) and the borrowers (individuals, enterprises and other economic organizations) While the lenders transferring their assets to the borrowers for using in a specific period according to the agreement, the borrowers have the responsibility of repaying the principals and the interests to the lenders at the maturity date From the definition above, the nature of bank credit is a transaction on asset that based on the repayment and has following features: – After signing loan agreement, banks will transfer their assets to the borrowers (individuals, economic organizations) only when banks believe that they will return banks at the maturity date – The borrowing party must return unconditionally to banks after ending the term In general, the repayment will more valuable than the initial lending amount This difference is called the interest Therefore, banks take the participation in credit activity with role of the lender 1.1.2 Bank credit classification Credit is a type of asset accounting for the biggest proportion in total assets of most commercial banks, reflecting the main activity of banks There are different kinds of bank credit, including 1.1.2.1 Maturity – Short-term credit: tenor is lower or equal 12 months – Medium-term credit: tenor is from 12 months to years – Long –term credit: tenor is more than years and maximum tenor could be up to 20 – 30 years, depending on the project and investment licenses Some particular situations it can come up to 40 years 1.1.2.2 Types of finance – Lending: lending is that banks give money to customers with commitment returning the principal and interest in a specific period – Discount: banks give customers amount of money in advance that is in proportion to the value of commercial papers minus banks’ earning part when they own a notto-maturity commercial papers – Leasing: banks use their money to buy the asset, and then to hire it out to customers with certain agreements After a certain period, customers must pay back the principal and interest – Guarantee: Bank guarantee means that the bank opens a written certificate to the beneficiary at the consignor's request As the guarantor, bank has the responsibilities to handle the debt or obligations instead of the consignor The rights and obligations of both parties would be prescribed by the contract – Factoring: Factoring is the sale of commercial accounts receivable invoices to a buyer, or factor, at a discount, in order to obtain cash on the invoices, with the factor assuming full responsibility for credit analysis, payment collection and credit losses on the new accounts There are usually three parties involved when an invoice is factored: the seller of the product or service who originates the invoice, the debtor is the recipient of the invoice for services rendered who promises to pay the balance within the agreed payment terms, and the factor 1.1.2.3 Collateral – Non-collateral loans or unsecured loans: are loans that borrowers don't need collateral or the guarantee of the third party They are issued and supported only by the borrower's creditworthiness, financial capacity and the effectiveness and feasibility of the projects – Collateral loans or secured loans: the loan is guaranteed by a piece of property which can be of customers or of the third party, or loan by asset derived from borrowed capital In the event the borrower defaults on the loan, the lender is entitled to the property used to secure the loan The types of loans with collateral possibility may include title loans, mortgages and other types of moderate-to-highrisk lending arrangements 1.1.2.4 The purpose of borrowing loans – Loans for business and production: serve the purposes of production and business – Consumption loans: serve consumption purposes of individuals and households 1.1.2.5 The others Besides some types of bank credit above, people can divide bank credit based on mode of lending (installment loans, loans for projects, loans based on credit limit ), the level of risk (doubtful debt, recoverable debt, non-recoverable debt) 1.1.3 Importance of bank credit 1.1.3.1 Bank credit responds the capital demand for maintaining reproduction process as well as contributes to economy development The capital demand in production and business processes is always a pressing problem to every entrepreneur Besides, the relation of selling or purchasing on account 10 movements, such as, reducing the proportion of loans to state enterprises and increasing the proportion of loans to non-state sectors; raising gradually the proportion of retailer outstanding debts compared to economics organization outstanding debts – Good sign in reducing bad debt ratio, remarkably, the bad debt ratio are from 17.51% in 2010 and more than three time higher than the schedule down rapidly to 8.53% in 2011 and lower than the schedule – The application of internal credit rating system which allows the branch to fully assess the customers on financial capacity, developmental trend of the enterprises, capacity to pay back loans, impacts of the macroeconomic environment on customer’s operations, and so on provides the branch easier access to decide the loan amount; to ensure the safety for loans, efficiency and appropriation; and to reduce considerably credit risk to the branch – Based on general customer policies of BIDV Head Office and customer credit rating classified result, the branch has built specific applicable guidelines to specific groups of customers These guidelines implementation has contributed significantly to the control and improvement of credit quality, as well as the building of an appropriate credit structure in the recent time According to the statistics of the credit risk management department, after nearly four years of new model application, operational errors decreased substantially, many procedure errors such as invalid disbursement documents, insurance expired, the lack of purchasing insurance for assets detected and overcame by cross-checking activity between departments – The branch made well the orientation and guideline for credit activity which was appropriate with the current situation of the branch 2.4.2 Limitations Besides the achievements mentioned above in credit risk mitigation, BIDV – Thang Long Branch still exists some limitations: 40 Through analysis indicators, we can see that the credit quality of the branch had bad signs: - Although the ratio of bad debts and overdue loan over total outstanding debt showed a positive sign about the decrease in 2011, but over years, these ratios of branch were always higher than entire BIDV’s average (for example, in 2009, the - bad debt ratio of the branch was about twice higher than the average) Overdue debts in both 2010 and 2011 increased compared to in 2009 on both amount and proportion, especially, the considerable rise on amount of over-360days overdue debt (eg: in 2010, over-360-days overdue debt increased 23 billion - VND, about 153%, compared to in 2009) Bad debt ratios were high and rose over years Especially, most of bad debts derived from a group of traditional customers being construction &installation, - textiles, food and steel companies, with above 93% Besides, provisions for loan loss were quite large, were quite much higher than planned figures (eg: in 2010, real provision for loan loss is 25 billion VND, approximately 69%, higher than planned one) and increases over years, reflecting high bad debt ratio and being a contributor to low operating effectiveness 2.4.3 Limitation causes 2.4.3.1 Subjective causes – Customers’ information collected is uncompleted and accurate enough In the credit approval process for customers, the credit officer mainly based on information and documents provided by the customers, but they don’t have the independently reliable information However, this is the general situation of every commercial bank because it is hard to collect completely the customers’ information, and credit information system of the State Bank of Vietnam does not - meet the branch’s requirements The absolute believe of the branch in the mortgage properties of some loans is very dangerous because the mortgage properties are only liquidated when the credit risk happens Furthermore, when the risk occurs, the bank also encounters difficulties during the collateral process to collect debts 41 – The assessment of projects and business plans of the enterprises was sometimes careless, lacked the evaluation on the impacts of the market and other objective factors, leading to risks and customers being unable to make payment timely at maturity - Because of the increasing competition in the local market, the branch has made preferential conditions for some customers on the procedures for application records, lending conditions in order to attract new customers and simultaneously to keep loyal customers Hence, a number of loans will suffer a high level of credit risk - Although the branch tries to diversify more types of customers, loans to economics organizations still accounts for a large proportion However, in the current economic context, many enterprises which are in financial trouble, especially construction, real estate and security companies, must renew debts, or impossibly repay bank debts - The credit approval process still has existed many limitations, the bank’s projects are mainly on the technical sectors: textiles, construction while the staff are mainly from economic background, so there is limited understanding on technical factors The branch has no source for supporting credit officers in analyzing the technical factors Therefore, the evaluation of technical aspect is not good, - especially for projects with medium and long term The credit officers in the branch are enthusiastic, dynamic, but most of them are still young and inexperienced in managing credit process or handling the unusual cases Besides, the credit balance over a credit officer is quite large, leading to overload, not stick to the business activities of borrowers, not fully control the - spending of loans Some credit officers, though only account for a very small number degenerate, violate professional ethics, such as: collude with customers to fake information, - which cause bad debts and losses toward the branch BIDV system switched to the new organization structure on October 2008, so there are many changes in business process As a result, some credit officers may 42 not yet adapt the new model, so they have some problems and confusion in implementing the works, which leads to gaps in credit risk management - Credit method was inflexible Additionally, some regulations about credit in the direction of the State Bank of Vietnam documents could be understood in narrow and inappropriate way, causing certain difficulties to credit activities and the quality of credit risk management - The banking technology still has numerous limitations, especially information and data system Besides, the branch still lacked information and software to warn risks to customers, software for evaluating work and the equipment for credit officers still lacked the synchronicity - The cooperation between departments and debt-solving groups is still loose, so the dealing with bad debt and off-balance-sheet debt problems is slow 1.3.1.6 - Objective causes Because of some unfavorable business conditions, such as European debt crisis, globally financial situation, high inflation the output market of some customers is reduced, revenue declines, which makes many companies be in financial hurdle and unable to return debts on time or bankrupt and be unable to pay debts to bank - The legal regulations on the credit activities are sometimes inconsistency Many documents, regulations of the Government and the SBV have been issued, but they are quite general and overlap without the specific instructions Besides, the documents usually change slower than the actual situation of banking activities - No mechanisms to support the branch in solving bad debts,the process of claims settlement, bankruptcy procedures, liquidation of assets, and enforcement of judgments are still slow, leading to unexpected losses for the bank - A number of borrowers’ subsidiary companies have officers outside Hanoi or in various regions and some collateral which are operating internationally make difficulties for the branch to monitor the use of loan, and to check the value of collateral for loans 43 Chapter III: Solutions to improve credit risk management in Bank for Investment and Development of Vietnam – Thang Long Branch 3.1 Credit risk management orientations of Bank for Investment and Development of Vietnam – Thang Long Branch 3.1.1 Credit activity orientations of BIDV Thang Long Branch - The branch commits to follow the orientations and guidance of the Government, the State Bank of Vietnam, and Bank for Investment and Development of Vietnam in order to deploy synchronously and timely solutions, specific measures supporting for the enterprises, such as: to decrease lending interest, to restructure debts-returned maturity for customers in temporary troubles - Hastening the control of cash flow in lending process, asking the enterprises to commit the maintenance of deposit remainder Resolutely solving the debt recovery in case of customers using capital - Priority credits for customers, areas follow the orientation of BIDV Head Office, focusing on traditional customers with credit rating of A or higher, small and medium enterprises, along with developing retail credit by expanding the scale of individual customers 3.1.2 Credit risk management orientation of BIDV Thang Long Branch Following the orientation of the Bank for Investment and Development of Vietnam, credit activities orientation of BIDV – Thang Long Branch from 2010 to 1012 as following: - Assessing current situation of customers in debt group to have appropriate solutions to decline the proportion of debt group over total outstanding loans, to control strictly bad debt, and to reduce the use of provision for loan losses - Improving credit risk management capacity in the branch: building credit management details by industries, customers and controlling the credit limit for 44 some industries, applying credit rating well to evaluate and to classify customers more accurately, enhancing role of self-examination and the control of credit activities in the branch - 3.2 Improving staff qualification to meet the need of the branch and market Solution to improve credit risk management of Bank for Investment and Development of Vietnam – Thang Long Branch 3.2.1 Enhancing the information collection and use in credit activity Complete, precise information about customers plays a crucial role on ensuring lending quality, limiting risks Therefore, to avoid the reality of information collected from in many cases is incomplete and inexact, the bank should implement effectively following phases: – Collecting customers’ information: at the present, the collection of customers’ information is usually based on enterprise customers’ financial statements in recent years or information provided by borrowers However, financial statements set up by customers aren’t usually audited, or if they are, they are often late, insufficient, or incorrect Consequently, besides collecting information from customers, the assessing employees need to collect more secondary information from: o Customers’ partners (eg: suppliers) o Banks that customer has ever haven relationship of borrowing, depositing, leasing, so on o Customer information center of BIDV Head office o Credit information center of the State Bank of Vietnam (CIC) – Collecting information from markets: besides information collected about customers, the employees have to exploit market information on products customers are trading, such as prediction on demand-supply situations, products’ price, and guarantee assets 45 – After that, the staff must analyze, evaluate enterprise credit ranking based on the information collected in order to consider customers’ borrowing proposals and to limit risks 3.2.2 Improving lending activity – To avoid the lending too much to a small group and reduces risk when customers hit risks and can’t pay debt back, beside traditional economic sectors like construction &installation and main borrower type being companies (at present, account for about 85% total outstanding debts), the branch should expand lending activity to other economic sectors, other customer types such as retail customers by developing more retail products &services (retail credit, POS, credit card, ) – Following and applying strictly credit process on every customer to restrict errors, risks and to enhance loan quality – Executing credit insurance, such as lending activity insurance, asset insurance, loan insurance to reduce loss when credit risk occur – Having the simple, neat procedures, however, still ensuring the safety for customers and the banks In some situations, depending on customers’ loan scale, loan purpose, borrowing history at branch , the branch can cut down some procedures – Receiving feedbacks from customers to evaluate the quality of products and services supplied by the branch to have adjustments about bank’s operation and policies that will be more suitable Besides, approaching directly customers to know well needs and demands on capital and services that customers need 3.2.3 Improving the human resource quality Credit is the main activity bringing profit predominantly to bank On the other hand, credit activity being effective or ineffective depends on the abilities of credit officers Hence, to enhance operating effect, BIDV – Thang Long Branch should apply solutions for improving the staff quality In detail, – The branch should have training courses from basic to advanced level; organize technical seminars for credit staff, such as training rules, regulations related to new 46 organizational structure; training some knowledge related to business fields that branch’s borrowers are operating: textiles, construction, – Distributing the staff suitably in term of quantity, quality to maximize their capabilities, and to avoid the overload, overlap in work which can lead to errors in credit procedures and credit risk in the future – Professional ethics is also a very important factor, especially in credit activity Therefore, credit officers must have good virtue, honesty, bravery with all situation, self discipline, dedication and responsibility in work – Standardizing the requirement for credit officers to meet the current requirements in a fiercely competitive environment among banks nowadays – About the professional qualifications, the credit officers must have strong knowledge about credit activities and credit risk management, relatively broad knowledge about guideline, regulation, policies related to credit activities – Building an equal, reasonable policy on rewards and penalties in order to improve the strict discipline in credit working area, and to reduce risks and losses for the branch 3.2.4 Monitoring and inspecting loans after lending to customers After lending, the branch should continue following solutions to recognize risks and having timely solutions to minimize risks: – Having the scientific, reasonable appraisement process of projects; evaluating well the input and output of projects to ensure payment capacity and to adjust loan term suitably toward the market and business activities of enterprises – Cooperating tightly with credit information center to have more necessary information on customers’ situations of using loans, progress of projects, operating effectiveness – Updating frequently information on economics, technology, prediction on industrial development potentials, price in the market, average profit rate of an industry or a type of product as well as concerning about the reality and future fluctuation trend of market where customer companies’ products join in 47 Considering profit coefficient of investing capital that company received to recognize timely potential risks – Building the early warning criteria system about credit risk – The early warning criteria system about credit risk reflects views and assessment of the banks on the signs reflecting the decrease of production activity and the increase of risk level of customers This system built bases on theoretical basic on banking risk management and the basis of customers which is specific of each bank – Need to build bad-debt and overdue-debt appraising system in order to hasten speedily the treatment of bad debts at bank – When customers have signs of arising bad debts, the branch need to o Find out the reasons to have suitable solutions o Help customers with revoking debts appropriated o Gives customers more advices, such as: restructures business activity, changes management system, shifts from kind of production to another, cuts down costs, clears unnecessary assets o Receive more collateral assets or the guarantees and monitor the inventory – When customers have signs of arising overdue debts: o The branch instructs, consults customers about problems like the capacity of making products and profit o Extend or adjust deadline for customers to reduce impedingly payable amount Besides, the bank continuously lends to customers to increase financial competence for customers and to recover business and production operations in case of customers being in financial hurdle, along with hastening inspective and supervisory activities o Suggest customers manage their spending budget tightly, buy some valuable assets, and reduce the inventory 48 o Offer customer should renovate business system, reorganize production activity, and renew equipment, machines and technology Besides, the bank encourages customers to withdraw deferred debts by hastening accountreceivable revoking process 3.2.5 Limiting losses when credit risk occurs – When credit risk occurs, the branch should review entire customers’ files, and then investigate and analyze deeply to specify accurately main reasons leading to risk and the level of risk – Departments quickly combine to solve bad debts and overdue debts when credit risk happens, avoiding heavier losses – In case of seeing that customers are still possible to recover business activity and return bank’s debts, the bank could give some supports to customers, such as: issue more loans, renew debts, and decrease interest rate – In case of seeing that borrowers couldn’t recover business and production activities; the borrowers are intentional to not return debts or defraud, the bank can choose some liquidation policies: ask customers to transfer debt chasing rights to the bank, sell mortgages, block borrowers’ deposit accounts at other banks, or take them to court – Using provisions for loan losses to eliminate unrecovered bad debts from onbalance sheet – Learning experiences from losses, and then building solutions to avoid similar losses 3.3 Recommendations 3.3.1 Recommendations to the Bank for Investment and Development of Vietnam 3.3.1.1 Developing the internal credit rating system In recent years, to reduce credit risk, the BIDV system has developed the internal credit rating system (assessment of financial and non-financial indicators) to classify customers following the regulations about internal credit rating, loan classification 49 under Article 7-Decision 493 as a basis to identify and to set up provision for loan losses as well as to give the customer policies, lending policies, interest rate However, it still exists some limitations in deploying process in entire system, including BIDV – Thang Long Branch Therefore, to build a more complete credit rating system, BIDV Head Office should cooperate tightly with the branches, transaction offices and learn credit rating systems of banks in developed countries to adjust suitably and deploy synchronously 3.3.1.2 Enhancing the management of credit activity – Researching and applying risk managing models that are suitable to current regulations, bank’s operating characteristics and international rules – Co-coordinating with related units in organizing training courses and cultivating knowledge in order to raise the ability of assessment, measurement, and credit-risk analyses for the officers Making provision for loan losses based on risk-level classification that suits enterprise ranking 3.3.1.3 Consolidating and improving credit information system In the dynamic economic environment and many complex changes nowadays, any organization needs to have a useful information system to succeed in business, especially, business activities in finance and banking sectors which always exists various implicit risks Therefore, information system plays an important role in operation of banks and other financial institutions However, in reality, Vietnamese banks, including BIDV, information about customers is still transparent, which will affects the credit insufficient, inaccurate and not really assessment process, and lead to potential losses in the future In recent year, the Credit Information Center of the State Bank of Vietnam has made great efforts in creating databases about enterprises borrowing capital from credit institutions, as well as evaluations on business activities and for credit assessment; however, the ability to meet these requirement is still limited Hence, the ability to use the information for credit evaluation is not high and didn’t meet the hedging requirements 50 Therefore, to support better for credit departments, the BIDV Head Office should set up a repository of customer information for the entire BIDV system by collecting customers’ information from its branches, transaction offices Besides, the bank should set up the linkages with other banks and financial institutions to be able exploit information to collect more information and database 3.3.2 Recommendations to the Government, the State Bank of Vietnam, and other related agencies 3.3.2.1 Improving management, control quality Improving the quality of Besides, macroscopic management, control of the government the government should have the detailed and suitable-to-reality plans before issuing law documents, which limits errors and faults On the other hand, the State Bank of Vietnam needs to check documents related to banking field, especially banking credit Continuously completing lending, loan guarantee regulations based on ensuring the safety for credit activity Complete the process of issuing credit, classifying debts, making and using a provision for loan losses Have detailed instructional mechanisms and policies for credit organizations to let them can be initiative in dealing with and exploiting customers’ assets The State Bank of Vietnam has to have regulations on auditing compulsorily enterprises’ financial statements Nowadays, there isn’t regulation on auditing compulsorily enterprises’ financial statements, so banks are difficult to indentify the accuracy, honesty, and reasonableness of financial statements’ data that the enterprises provide for the banks The SBV should issues regulations on standards, requirements to risk management system; stipulate on the inspection, control in banks, in debit-credit asset management system and in credit risk management system 3.3.2.2 Enhancing the operating effect of Credit Information Center (CIC) Establishing credit information system to be more helpful according to the following ways: 51 – Relying on the cooperation, the SBV makes the data connection between banks to supplement, to increase the accuracy and sufficiency of data bank, not only data about customers, but also appreciations and predictions on industries which is foundation in analyzing and appraising credit – Based on information on enterprises, industries, projects financed credit, CIC needs to summarize and to give assessment, analyses, and then to provide effective information for entire system to use in credit appraisement This data bank needs to be open in order to be possible to integrate with data banks of other banks in meeting cooperation need in currently international environment – The CIC needs to set up the relationship with organizations, service providing information in the world to possibly exploit, buy data when is necessary, with a view to respond information requirement from branches, especially information about financial situations, mother companies’ operation – foreign partner of companies, especially foreign-invested companies 3.3.2.3 Improving the inspection, supervision – Improving the inspection by catching timely technical skills, modern banking services; applying new technologies to supervise continuously commercial banks under two forms of the local inspection and the remote supervision, including: o The local inspection will enhance the validity of dealing with violation against law regulations causing by objective reasons to apply specific mechanisms o The remote supervision assists with warning timely mistakes, which provides commercial banks methods to prevent risks in business operation in general and in credit activity in particular – Researching and orienting credit-risk preventing, limiting activities; acquiring selectively experiences of developed countries to help commercial banks to grow safely and to be possible to compete with foreign credit institutions 52 CONCLUSION BIDV Thang Long Branch is one of branches having the largest operating scale in the BIDV system, is also one of banks having high total outstanding debt on Cau Giay District – Hanoi In recent years, along with credit growth, the branch always concentrate on activities of risk management, credit risk mitigation, and the application of standard mitigation techniques on reducing credit risk, improving the quality of credit risk management, toward safety and efficiency However, besides the gained achievements, credit risk management of BIDV Thang Long Branch still exists problems, limitations needed to overcome in the future By researching the theoretical basic on commercial bank activities, credit risk in the bank and credit risk management, combined with analysis the current situation of credit activities and credit risk management in BIDV Thang Long Brach, the thesis solved some following problems: First, the thesis has synthesized the basic theoretical problems on the credit risk of the banks; standardized credit risk management in the banks: concepts, classification, causes, principles, consequences, mitigation technique for managing credit risk Second, the thesis has researched the current situation of credit risk management in the BIDV Thang Long during period 2009 – 2011, evaluating the quality of credit risk management: achievements, limitations and causes Third, based on theoretical background of credit risk management and the current situation of credit risk management in BIDV Thang Long Branch, the thesis has proposed solutions to improve the quality of credit risk management, as well as to limit and to prevent risk in the branch, and given suggestions and proposals to the Headquarter of BIDV, the Government, the State Bank of Vietnam to improve regulations, business environment for credit risk management 53 REFERENCES Peter S Rose (Eighth edition) Bank management & Financial services McGraw – Hill/Irwin Saunders/Cornett (Fourth edition) Financial Markets and Institutions McGraw – Hill/Irwin Joel Bessis (Second edition) Risk Management in Banking John Wiley &Sons Phan Thị Thu Hà (2007) Ngân hàng thương mại Nhà xuất Đại học Kinh tế quốc dân Websites: - http://www.bidv.com.vn - http://www.bis.org - http://www.sbv.gov.vn - http://www.cic.org.vn - http://cafef.vn - http://vneconomy.vn - http://www.wikipedia.org 54 ... Vietnam – Thang Long Branch 3.1 Credit risk management orientations of Bank for Investment and Development of Vietnam – Thang Long Branch 3.1.1 Credit activity orientations of BIDV Thang Long Branch. .. improve credit risk management in Bank for Investment and Development of Vietnam – Thang Long Branch 44 3.1 Credit risk management orientations of Bank for Investment and Development of Vietnam – Thang. .. 3.1.2 Credit risk management orientation of BIDV Thang Long Branch Following the orientation of the Bank for Investment and Development of Vietnam, credit activities orientation of BIDV – Thang Long