Quản trị rủi ro thanh khoản tại ngân hàng thương mại cổ phần liên việt

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS VAN THU HUONG LIQUIDITY RISK MANAGEMENT IN LIEN VIET COMMERCIAL JOINT STOCK BANK MASTER OF BUSINESS ADMINISTRATION THESIS Hanoi - 2010 VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS VAN THU HUONG LIQUIDITY RISK MANAGEMENT IN LIEN VIET COMMERCIAL JOINT STOCK BANK Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisors: Dr Chu Thanh MBA Ha Nguyen Hanoi - 2010 TABLE OF CONTENTS ACKNOWLEDGEMENTS ABSTRACT TÓM TẮT LIST OF ABBREVIATIONS LIST OF TABLES LIST OF FIGURES INTRODUCTION CHAPTER I: LITERATURE REVIEW 1.1 Commercial bank 1.1.1 Concepts 1.1.2 Products & 1.1.3 Roles of com 1.2 Risk management in Commercial Bank 1.2.1 Risk in commercial bank 1.2.2 Main risks in Commercial Bank 1.2.3 Risk Management in Commercial Bank 1.3 Liquidity Risk Management in Commercial Bank 1.3.1 Defining liq 1.3.2 Basel and Basel II requirements 1.3.3 International Framework for Liquidity Risk Management in Commercial Bank 1.3.3.1 Liquidity risk tolerance vi 16 1.3.3.2 1.3.3.3 The responsibilities to manage liquidity risk 1.3.3.4 Liquidity Risk Management Process 1.3.3.5 1.3.3.6 1.4 Liquidity risk in Vietnam Comme 1.4.1 Some typical eve 1.4.2 From the beginni 1.4.3 From the beginni 1.4.4 From the beginni 1.4.5 The first six mon 1.4.6 Summarized mai 1.5 State Bank of Vietnam regulation 1.6 Practices for liquidity risk manag 1.6.1 The Hongkong a 1.6.2 Asia Commercia CHAPTER 2.1 Overview on LienVietBank 2.1.1 Introduction 2.1.2 Business Results 2.1.3 Organization stru 2.2 Liquidity risk in LienVietBank 2.2.1 SBV’s regulations on liquidity ratios in the activities of credit institution vii 2.2.2 Supplies of Liquidity 2.2.2.3 Total mobilized funds and chartered capital 2.2.3 Measurement of Liquidity risk via Gap Analysis 2.2.3.1 LienVietBank’s Liquidity Gap report in VND (see table 2-11) 2.2.3.2 LienVietBank’s Liquidity Gap report in USD (see table 2-12) 2.2.4 Assessment on current status of liquidity risk 2.3 General situation of risk management at LienVietBank 2.3.1 From establishment to end 2008 2.3.2 For the year of 2009 2.3.3 From the beginning of 2010 to now 2.4 Liquidity risk management in LienVietBank 2.4.1 Strategy and Policy 2.4.2 The responsibilities to manage liquidity risk 2.4.3 Process of liquidity risk management 2.4.4 Internal Audit 2.4.5 Contingency Plan 2.5 Assessment on liquidity risk management in LienVietBank 2.5.1 Achievements 2.5.2 Drawbacks on the current liquidity risk management in LienVietBank 78 2.5.2.1 Strategy and policy .78 viii 2.5.2.2 2.5.2.3 Process of liquidity risk management and contingency plan 2.5.2.4 2.5.2.5 CHAPTER RECOMMENDATIONS AND SOLUTIONS 3.1 Some petitions for LienVietBank 3.1.1 Building a 3.1.2 Building L 3.1.3 Improving 3.1.4 Building p 3.1.5 Building c 3.1.6 Improving 3.1.7 Improving 3.1.8 Action pla 3.2 Some petitions for SBV 3.3 Some petitions for Government Conclusion REFERENCE Appendix Appendix Appendix Appendix ix LIST OF ABBREVIATIONS ACB Asia Commercial Bank ALCO Asset and Liability Committee BOD Board of Directors BOM Board of Management CAR Capital Equity Ratio HR Human Resource LVB LienViet Commercial Joint Stock bank NPLs Non performing loans SBV State Bank of Viet Nam Sacombank Sai Gon Thuong Tin bank TCB Vietnam Technological and Commercial Joint stock bank VCB The Bank for Foreign Trade of Vietnam x LIST OF TABLES Table 1-1: Products & services provided by commercial banks Table 1-2: Summarized the principles of Basel 14 Table 1-3: International Framework for Liquidity Risk Management in Commercial Bank 17 Table 1-4: The differences between Decision No.457 and Circular 15 & 13 .36 Table 2-1: Business Results - LienVietBank 44 Table 2-2: Comparison of the liquidity ratios 46 Table 2-3: The ratio of liquid assets to total assets 49 Table 2-4: Comparison of the ratio of liquid assets to total assets 50 Table 2-5: The average ratio of the component to liquid assets 51 Table 2-6: Comparison of the portion of the items out of liquid assets 52 Table 2-7: Some indicators of loans quality 54 Table 2-8: Comparison of loans quality by NPL ratio 55 Table 2-9: Comparison of LDR 55 Table 2-10: Mobilized funds from corporate and individuals of LienVietBank 57 Table 2-11: LienVietBank’s Liquidity Gap report in VND 62 Table 2-12: LienVietBank’s Liquidity Gap report in USD 64 Table 2-13: Summarize assessment on current status of liquidity risk in LienVietBank 65 Table 3-1: Recommendation for Process of liquidity risk management (content) 91 Table 3-2: Recommendation for Contingency plan sample 98 Table 3-3: Recommendation for Action planning 103 xi LIST OF FIGURES Figure 1- 1: Three pillars of Basel II 13 Figure 2-1: Comparison of the ratio of liquid assets to total assets 50 Figure 2-2: Total mobilized funds of LVB 56 Figure 2-3: The number of accounts of incoming customer deposits 58 Figure 2-4: Rating liquidity risk management in LVB 77 Figure 3-1: Overview on chapter 3……………………………………………… 81 Figure 3-2: Recommendation for Organization structure 87 Figure 3-2: Recommendation for Process of liquidity risk management (procedures) 95 xii INTRODUCTION Necessity of the thesis The nature of the bank is making a profit based on business risk In banking activities many types of risk exist (credit risk, liquidity risk, market risk, etc.) In Vietnam, the banking activities are often associated with credit risk However, liquidity risk, the type of risks that can immediately make a bank collapse is less focused, because if the banking activities took place on a normal schedule, the risk was not disclosed Only when a certain event happens to have a negative impact on the bank, then the liquidity risk is exposed, in the worst case, banks have no liquidity, leading to bankruptcy, and affecting the entire banking system In Vietnam, liquidity risk can be a problem just say "old problem" was just a matter of "new problem" Calling it "an old problem" is because any bank manager knows about this kind of risk, understands the importance of it and they are also managing liquidity risk based on experience and traditional methods And calling it "a new problem" is because not many banks in Vietnam really understand it and find ways to reach new approaches to liquidity risk management by international standards Only after the events on the liquidity risk from 2006 through to now did banks begin to explore and consciously implement the management of liquidity risk, according to a scientific and more systematic method The starting point of that process must be derived from the banks which are fully equipped with theoretical knowledge about liquidity risk management LienVietBank was established in April 2008, and in more than years the bank has gained outstanding achievements in business results, but besides that, the issues of risk management are all complex The organizational structure is not stable, risk management personnel frequently change, the bank only cares about cross-evaluation between departments, the office of risk management has always been underestimated due to the subjective perception that the risk management department does not generate benefits not only profit but also hinder business activities 3.1.8 Action planning 102 Table 3-3: Recommendation for Action planning ACTION PLAN Building a culture of risk I management in LVB Organization of seminars, which invite renowned experts on risk management presentation to banks Training courses on risk management, linking theory with practice Establishing the system of discipline, sense of compliance with the law and internal regulations Established consultants unit related to ethical issues in LVB Building liquidity risk strategy, II policies, processes Build a project team member by the board on top 103 Select the appropriate consulting firm Give out a comprehensive analysis of all types of banking risks Build a model of integrated risk management Practicing Integrated Risk Management Building liquidity risk strategy and policy Review liquidity risk strategy Approve the strategy The project team members of Risk Management Division BOD, BOM, The project ALCO-committee team - members of Risk Management Division The project team members of Risk management Division The project team members of Risk Management Division The project team members of Risk Management Division BOD The project team members of Risk management Division BOD, ALCO, BOM 104 Building process of liquidity risk 11 management III 12 Review and Approve 13 Building contingency plan 14 Review and Approve Improving management Information technology Division The project team members of Risk management Division Information technology Division, The project team BOD, ALCO, BOM Information technology Division, The project team The project team members of Risk management Division Information technology Division, The project team BOD, ALCO, BOM 105 Recruit new employees IV Improving organization structure Establish ALCO committee Restructure Risk Management Division and establish Liquidity Risk Management Dept V Design specific training Improving human resources Training BOD, BOM, HR BOD, BOM HR BOD HR, The project team BOD HR, The project team 106 3.2 Some petitions for SBV Develop legal frame which is both stable and flexible for banking operations Apply monetary policy instruments flexibly in order to minimize the possible shock towards commercial banks The planning and managing of monetary policy instruments must be in accordance with market principles in order to stabilize the currency, to curb inflation and to foster stable economic growth The degree and frequency of the application of policy instruments must be carefully considered in order to enable commercial banks to approach the refinancing sources from SBV, thus SBV plays the role of the ultimate lender effectively Consolidate and develop the money market in terms of size and quality Diversify and standardize debt instruments in the money market, reasonably loosen criteria for market entrance, standardize transaction procedures and modes in order to support commercial banks to improve funding effectiveness and enhance the prevention of liquidity risk Develop non-cash payment, channel the payments to interbank payment system in order to enable SBV of Vietnam to monitor, control and send out the warnings on liquidity risk Strengthen the inspection of credit institutions and develop early warning systems: management quality enhancement, close cooperation between SBV inspector and commercial banks, sufficient investment, reinforcement of forecasting competence and development of early warning systems so as in case of negative changes both domestically and overseas affecting the banking systems commercial banks can actively take precaution and necessary steps, thus reduce risks and damages Tighten the procedure for issuance of banking license; closely monitor banking operations, specifically at small, newly established banks; ensure the business growth to be accordance with current 107 regulations on safety standards, reduce systematic risks Promote the activities of derivatives market: derivatives such as forward contracts, currency swaps, and options are effective hedging instruments widely used in global financial markets yet very new and underdeveloped in Vietnam At the current stage, SBV of Vietnam acting as the monetary policy administrator should issue legal documents and guidance to facilitate the operations of this market, create conditions for commercial banks to participate the market and promote the market development Promote the information propaganda, especially when there are changes in monetary policy management, implement public orientation, improve intellectual standards and enhance public trust in the banking 3.3 Some petitions for Government Stabilize the macro-economic environment Control and promptly cope with potential causes of macro-economic instability Monitor and manage closely the overall current account balance, currencycommodity balance; monitor and reduce trade deficit and government overspending 108 Conclusion Through research on both theoretical and practical, the thesis has shown the importance of liquidity risk management to ensure sustainability and growth in specific business activities of banks But in LienVietBank, liquidity risk management has not received proper attention and investment of the board of directors Recognizing this, the author has studied in depth theoretical issues, refer to the recommendations of the Basel Committee, review and evaluate basically current situation of liquidity and liquidity risk management in LienVietBank On that basis, the thesis offers recommendations and solutions to improve liquidity risk management, ensuring the feasibility, scientific and consistent with the development orientation of LienVietBank 109 REFERENCE S.Rose, Peter, 2001, “Managing commercial banks” Ha Noi, Financial Puplisher S.Rose, Peter and C.Hudgins, Sylvia, (2008), Bank management & Financial Services, McGraw Hill, Singapore Autorite Des Marches Financiers, (2009), Liquidity risk management guideline HM Treasury, (2004), The Orange Book Management of Risk-Principles and Concepts, HMSO, Great Britain Council of Standards Australia, (1999), Risk Management, Standards Association of Australia, Australia State Bank of Pakistan, (2002), Risk Management- Guideline for Commercial Banks & DFIs Basel Committee on Banking Supervision, (2008), Liquidity Risk: Management and Supervisory Challenges, Bank for International Settlements, Switzerland Basel Committee on Banking Supervision, (2008), Principles for sound liquidity risk management and supervision, Bank for International Settlements, Switzerland Bank Supervision Department, (2008), Liquidity Risk Management Guideline, The Central Bank of Barbados 10 Citibank, (1996), Introduction to Risk Management, Training and Development Centers, Asia Pacific 11 HSBC Holding plc, (2008), Capital and Risk Management Pillar Disclosures as at 31 December 2008, HSBC, United Kingdom 12 Reserve Bank of Fiji, (1995), Liquidity risk management requirements for banks, Banking supervision Policy Statement No: 9A 13 Eastern Caribbean Central Bank, (2006), Guidelines on Liquidity risk Management for institutions licensed to conduct banking business under the banking act 110 14 Asia Commercial Bank, Annual Report, 2008, 2009, Financial Statement, June 2010 15 Vietnam Technological and Commercial Joint stock bank, Annual Report, 2008, 2009, Financial Statement, June 2010 16 Sai gon Thuong tin bank, Annual Report, 2008, 2009, Financial Statement, June 2010 17 The Bank for Foreign Trade of Vietnam, Annual Report 2008, 2009, Financial Statement, June 2010 18 Lien Viet Commercial Joint Stock Bank, Financial Statement, 2008, 2009, June 2010 111 Appendix Organization Structure of LienVietBank (2008) 112 Appendix Organization Structure of LienVietBank (June 2010) 113 Appendix LienVietBank Liquidity Profile (GAP report) Date : Currency: Assets Cash Balances with SBV Current Account with other credit institutions Placements with & loans to other credit institutions Investment in Securities Loans and advances to customers Investment in other entities and long term investments Fixed Assets Derivatives and other financial instruments Other Assets Total Assets Liabilities Due to government and borrowing from SBV Deposits and borrowing from other credit institutions Deposits from customers (no fixed term) Term deposits from customers Certificates of deposits and bonds Other liabilities Shareholders' equity Total liabilities and Shareholders' equity GAP GAP Cumulative GAP/Total assets 114 Appendix LienVietBank - Daily Liquidity Ratios Date: by Liquidity Risk Management Dept Ratios Payment reserves ratio Cash position ratio Credit commitments ratio Liquid securities ratio Loan to Deposit ratio Deposit structure ratio Off-balance sheet commitment ratio 115 ... summarized as below: Table 1-1: Products & services provided by commercial banks1 Products & Services Liability products Asset Products Electronic banking Other Services 1.1.3 Roles of commercial bank... mobilize saving for investment in industrial project or making loans to individuals The investors borrow from banks to finance the projects Special funds are provided to the investors for the Source:... long-term financing or borrowed too much from the interbank market to provide for adjustment lending had to increase deposit rates to attract funds from corporate and individuals From July to November,