Credit risk management for personal banking at mbbank son tay town branch

Cohort 2015 – 2017 MASTER’S THESIS CREDIT RISK MANAGEMENT FOR PERSONAL BANKING AT MBBANK-SON TAY TOWN BRANCH AUTHOR: PHUNG LE SON SUPERVISOR: ASSOC PROF DR.NGUYEN VAN DINH Ha Noi - 2017 ACKNOWLEDGEMENT I declare that this master’s thesis is my own research and the data and the material used in this thesis have clear sources and references to all the sources The result of this thesis is honest and derived from the actual situation of the organization In order to complete this master’s thesis I owe a lot of people many thanks for their supporting First of all, I would like to express my endless thanks and gratefulness to my supervisor Dr Nguyen Van Dinh His kindly support and continuous advices went through the process of comletion of my thesis Without his assistance the thesis would have been done effectively So far, I would like to thank all the lectures and staffs of International school – Vietnam National University Hanoi and University de Nantes for their teaching and supporting me to achieve knowledge and experience My special thanks to all staffs and management’s branch of MBBank Son Tay for their kind assistances and support in providing me data and advices to complete the research Finally, I would like to express my special thanks to my parents for their endless love and motivation Thank you! ABSTRACT The objective of the topic is to investigate the status of credit risk management for personal customers of MBBank-Son Tay Town Branch, thereby proposing appropriate measures to improve credit risk management for personal customer at the branch In the research process, the topic uses a variety of methods to analyze and research Research data in the topic is mainly secondary data collected by the author from literature reference Secondary data collected in the topic is data related to business operations, credit activities, and credit risk management activities of Military Commercial Joint Stock BankSon Tay Town Branch in period 2014-2016 through annual statements, financial statements, general statements and internal documents of the branch, research works, reference books and legal documents of the State In addition, the author uses methods for data analysis such as descriptive statistics method, comparative methods, synthetic analysis method, and expert method From the process of researching the status of credit risk management at MBBank - Son Tay Town Branch in combination with various methods of research and analysis, the topic has pointed out remaining restrictions in credit risk management at the branch Specifically, such restrictions are the ratio of overdue debt and bad debt at the branch tending to increase over the years, ability of assessment and information collection about customers remaining limited, capacity of credit officers remaining limited, internal credit rating system remaining unreasonable From these limitations, the author proposes appropriate solutions to improve credit risk management for personal customer at MBBank-Son Tay Town Branch TABLE OF CONTENTS ACKNOWLEDGEMENT ABSTRACT INTRODUCTION Rationale Objectives The subject and the scope of the research Research methodology Structure of the thesis CHAPTER OVERVIEW ABOUT RESEARCH SITUATION, THEORETICAL BASIS ABOUT CREDIT RISK AND CREDIT RISK MANAGEMENT 10 1.1 Overview about research situation 10 1.2 Banking credit activity 11 1.2.1 Concept of credit activity 11 1.2.2 Concept of personal credit 11 1.2.3 Characteristics of personal credit 12 1.2.4 Credit classification 12 1.3 Banking credit risk 13 1.3.1 Concept of credit risk 13 1.3.2 Concept of personal credit risk 13 1.3.3 Classification of personal credit risk 14 1.4 Credit risk management 14 1.4.1 General issues about credit risk management 14 1.4.2 Credit risk management policies and procedures 15 1.4.3 Criteria of evaluation for credit risk management 21 1.5 Factors affect credit risk management 23 1.5.1 Subjective factors from bank 23 1.5.2 Objective factors 24 CHAPTER RESEARCH METHOD 26 2.1 Approach 26 2.2 Research method 26 2.2.1 Secondary data collection method 26 2.2.2 Data analysis method(Secondary data processing) 26 2.3 Research criteria system 27 CHAPTER STATUS OF CREDIT RISK MANAGEMENT AT MBBANK – SON TAY TOWN BRANCH 28 3.1 Overview about MBBank – Son Tay Town Branch 28 3.1.1 Process of formation and development of MBBank – Son Tay Town Branch 28 3.1.2 Organizational structure, function and task of MBBank – Son Tay Town Branch 29 3.1.3 Business operation results of MBBank – Son Tay Town in 2014-2016 31 3.2 Status of credit activity for personal customer of MBBank – Son Tay Town Branch 36 3.2.1 Credit risk management apparatus at MBBank – Son Tay Town Branch 36 3.2.2 Credit policy for personal customer at MBBank – Son Tay Town Branch 38 3.2.3 Credit procedures for personal customer 40 3.2.4 Credit risk management procedures for personal customer at MBBank – Son Tay Town 41 3.3 Evaluation for status of credit risk management for personal customer at MBBank – Son Tay Town Branch 50 3.3.1 Achievements 50 3.3.2 Existing restrictions 50 3.3.3 Reason for restrictions 51 CHAPTER SOLUTIONS FOR IMPROVEMENT OF CREDIT RISK MANAGEMENT AT MBBANK – SON TAY TOWN BRANCH 53 4.1 General orientation of credit development at MBBank – Son Tay Town Branch 53 4.2.Orientation of developing credit activities for personal customer at MBBank – Son Tay Town Branch 54 4.3 Solutions for improving credit risk management at MBBank – Son Tay Town Branch 54 4.3.1 Improvement and enhancement of customer information collection 54 4.3.2 Improvement of the quality of customer appraisal 55 4.3.3 Improvement of credit scoring system 56 4.3.4 Training and effective use of human resource 57 4.3.5 MBBank – Son Tay Town Branch needs to modernize the information technology system 58 4.3.6 Improvement of loan procedure and policy system for personal customer 58 4.3.7 Strengthening of internal inspection and supervision at the branch 59 4.4 Some other recommendations 59 4.4.1 Recommendations to MBBank 59 4.4.2 Recommendations to the State Bank of Vietnam 61 4.4.3 Recommendation to the Government 62 CONCLUSION 64 REFERENCES 65 LIST OF TABLES Table 3.1 Capital mobilization of MBBank – Son Tay Town in 2014 - 2016 31 Table 3.2 Credit activity of MBBank – Son Tay Town Branch 33 Table 3.3 Growth of credit outstanding balance for personal customer in 2014-2016 42 Table 3.4.Outstanding balance by customer objects in 2014-2016 43 Table 3.5 Classification of debt group for personal customer in 2014-2016 44 Table 3.6 Bad debt and overdue debt ratio of MBBank – Son Tay Town Branch in 20142016 45 Table 3.7 Result of personal customer risk rating 46 Table 3.8 Collateral rating result 47 Table 3.9 Personal customer credit rating result 47 Table 3.10 Loan outstanding balance ratio with collateral 48 Table 3.11 Situation of risk provision for personal customer in 2014-2016 49 LIST OF FIGURES Figure 3.1 Organizational structure of MBBank – Son Tay Town Branch 29 Figure 3.2.Capital mobilization by objects 32 Figure 3.3 Capital mobilization by currency type 33 Figure 3.3 Credit outstanding balance by term 35 Figure 3.5 Credit risk management apparatus at MBBank 37 Figure 3.6 Growth of outstanding balance for personal customer 43 INTRODUCTION 1.Rationale Currently, credit activity plays a significant role in the bank’s business of commercial banks It not only brings the main income to the bank's total income, but also contributes significantly to the growth of the economy However, credit activity is also the most risky activity in the bank's business Therefore, the implementation of credit risk management is a crucial factor in order to ensure the safe business, improve the quality and efficiency of business activities and the development of commercial banks In Vietnam, the issue of credit risk and measures to prevent credit risk in business of commercial banks has been mentioned but has not really been paid much attention In recent years, the ratio of bad debt and overdue debt of the bank tends to increase so the problem of credit risk management needs more concerns.In the context of more and more increasing competition and banking -financial market integration, banks are required to have strong reforms to enhance capacity of risk management in each operation Currently, with the development of personal customer market, banks are looking ahead to individual customer as a potential loyal customer Credit activity for personal customer has been bringing high profit to banks However, profit and risk are two sides of a problem, high profit means that banks face up to potential risks from personal customers as well as from banks This may lead to each bank having to develop a personal credit risk management strategy for itself Realizing the importance of credit risk management, Military Commercial Joint Stock Bank (MBBank) in general and MBBank -Son Tay Town Branch in particular have made great efforts in improving the management of credit risk in order to prevent and mitigate risks in credit activities and achieve certain results However, credit risk management at Military Commercial Joint Stock Bank- Son Tay Town Branch still has some limitations From the meaning and importance of this issue, I chose the topic: "Credit risk management for personal banking at Military Bank - Son Tay Town Branch" Objectives -Synthetizing and systematizing the theoretical fundamentals about credit risk management - Analyzing and evaluating the real situation of credit risk management in MBBank Son Tay - Suggesting some solutions to improve the efficiency of credit risk management The research questions must be answered to clarify the above objectives: • What is the basis about credit risk and credit risk management? • How does the credit risk management at MBBank - Son Tay Town Branch work? What are the advantages and disadvantages? • How to improve the credit risk management at MBBank - Son Tay Town Branch? The subject and the scope of the research - The subject of the research is credit risk management for personal banking at MBBank - Son Tay Town Branch - The scope of the research focuses on the credit risk management at MBBank - Son Tay Town Branch from 2014-2016 Research methodology The topic uses a variety of research methods to take advantage of each methodology as well as analyze the data more effectively, including descriptive statistics method, synthetic analysis method, comparative methods, and expert method Moreover, the data collected in the topic is mainly secondary data from various sources, such as financial statements, business operation result statements, documents and policies of MBBank – Son Tay Town Branch, research works, reference books, journals and legal policies of the Government related to credit risk management Structure of the thesis The thesis includes four chapters: Chapter 1: Overview about research situation, theoretical basis about credit risk and credit risk management Chapter 2: Research method Chapter 3: Status of credit risk management at MBBank – Son Tay Town Branch Chapter 4: Solutions for improvement of credit risk management at MBBank – Son Tay Town Branch business, leading to losses;therebyit is impossible to repay bank loans This makes the bank's overdue debt and bad debt grow rapidly - Although the quality of credit officers in general has met the requirements of qualifications and professionalism, the actual restriction is that most of the officers are of very young age and short length of service, so their experience of appraisal and resolution of arising problemsis still limited - Although the training for officers has been paid attention, it remains spontaneous, irregular, and not in-depth, so the efficiency is not high, resulting in some officers having not enough knowledge and experience to be able to make good evaluation and appraisal about customers Therefore, the analysis assessment of of customer is largely formal and procedural - Source of external information is the basis for the bank to analyze and accurately assess the performance of its customers However, in practice, the information collection of bank is based majorly on information provided by customers Therefore, the information received by the bank is incomplete and its accuracy is not high - The specific guiding documents for the customer credibility rating are still incomplete, detailed and many criteria have not been specified yet for assessment Therefore, the assessment still depends on subjective factors of credit officers - The application of information technology in debt classification at credibility is still limited The classification of debt is still entered and manually tracked for each loan but there is no unified software to track and transfer automatically debt group Therefore, the classification of debt at the branch is still inaccurate in terms of data, making it difficult to assess, classify, and manage bad debts as well as overdue debts 52 CHAPTER SOLUTIONS FOR IMPROVEMENT OF CREDIT RISK MANAGEMENT AT MBBANK – SON TAY TOWN BRANCH 4.1 General orientation of credit development at MBBank – Son Tay Town Branch Strengthening the risk management, applying step by step the international practices to the operation of risk management in the bank for sustainable development Raising the standards of professional ethics, highlight the role of inspecting, controlling and internal audit Continuing to expand and promote business areas, which have competitive advantages and high effectiveness; enhancing financial capacity and competitiveness Establishing the policy of attracting, recruiting and treating talents; improving the quality of human resources; building a group of officials who have both professional capabilities and ethics; and ensure the interests of the employees Adopting the specific policy of growing the proportion of services area to avoid over reliance on credit activities The policy is not only in accordance with the conditions of economic development in Son Tay but also brings about many benefits: Diversifying activities in the modern market, attracting customers, providing package services, as well as checking the business activities of customers and their competitiveness One of the strengths of a service-oriented bank is that it can gain more capital from demand deposits, which in turn reduces the average cost of capital and fixes reasonable interest rates In order to promote its services, MBBank has been making researches and started to launch many products for personal customers beside traditional credit activities, such as consulting, investment management, e-banking, asset management To expand these new services, the Bank needs to invest in both modern technology and human resources Focusing on investing in information technology with high flexibility to meet business requirements Thoroughly applying these modern technologies to daily managerial activities Mastering and maximizing the efficiency of Core Banking T24 system The technology should play a role as a basic platform to conduct ordinary business, develop modern banking services and improve the quality of customer service Diversifying the product assortment; developing and improving the quality and competitiveness of the available products; cutting the total costs, lower the product prices Aiming to become a leading provider of financial and banking services for all customers with high quality products and services at competitive prices 53 4.2.Orientation of developing credit activities for personal customer at MBBank – Son Tay Town Branch Business development orientation of lending is part of the general orientation The orientation of lending activities is issued in accordance with specific periods and on the basis of MBBank's general business strategies It is addressed by the specific objectives that conform to the market situation and the actual performance of MBBank The main theme in the Bank's business development orientation is to continue to promote customer development in the target markets through the marketing of existing products Personal loans should be managed in portfolios so that bad trends and potential weaknesses can be soon discovered to help MBBank - Son Tay Town Branch take corrective actions in time For consumer loans: Continuing to develop groups of customers who are residents in urban areas, especially those with medium or high incomes, young and successful; promoting the sale of existing consumer loan products, with special emphasis on card products, home financing and automobile loan instalment For personal investment loans: Continuing to develop groups of customers who are residents in big cities, especially those with high incomes, young and successful; promoting loans for investment in listed securities and shares of equitized enterprises; developing groups of customers who own sole proprietorship business in big cities, especially those with stable operations and long-standing business experiences; promoting lending activities via fast cash advances; expand customer groups whose career sectors are potentially well-developed; allowing for working capital loans by asset or limit, overdraft as well as medium and long term investment loans Current products and new markets: Expanding the market through the expansion of the Bank's network in the key economic regions of the country, focusing on major cities and subregions Improving and expanding existing product lines: Improving the quality of available products, services and the general process of providing services through intense application and exploitation of information technology to simplify procedures hence able to respond quickly to the requirements of the customers 4.3 Solutions for improving credit risk management at MBBank – Son Tay Town Branch 4.3.1 Improvement and enhancement of customer information collection 54 The biggest difficulty for the branch is that the information collection process mostly relates to the appraisal process aspects such as customer identity, asset value assessment, potential of the project, etc Credit information is the start of business activities and leads to the decision whether to invest credit If the credit information system is not complete or inaccurate, the customer analysis will be hindered and incomplete In fact, the credit operations at this branch are passive in updating information from lenders The source of information is mainly based on records, documents and information provided by customers, which is often not detailed, hence makes it quite inaccurate, unscientific, subjective and unreliable Therefore, these kinds of information, which are used to assess and make lending decisions, lack precision and put the bank into a more risky and less profitable situation In addition, customers can face many difficulties and disadvantages when the bank underestimates their financial capacity and business activities From these practices, the measures to complete and upgrade the information system are proposed as follows: - First of all, it is advisable to set up data banks to gather information in separate categories for easy management; each containing information of the same features and characteristics In the following years, it is necessary to set up the information system using strong-enough software program such as IPCAS and set up an information security system to avoid leakage of information - Next, diversifying sources of information Information must be collected from various sources, such as: + The loan profile must have certification of audits of different levels depending on the type of borrowers and at the same time be updated regularly + Besides the information from Credit Information Center (CIC) of the State Bank of Vietnam the bank should hiring experts to help in consulting and evaluating the technical parameters The bank can also collect information from customers’ partners and other banks + Establishing a credit information team as a channel to help the branch deal with information asymmetric, hence reduce the risk + Proactively building an information network relating to the market value of collateral assets such as price fluctuation of real estate, equipment and machinery 4.3.2 Improvement of the quality of customerappraisal Improving the quality of appraisal is one of the key issues that tighten the credit relationship between the branch and its customers Accordingly, the factor that helps the bank enhance the quality of customers and/or loan projects appraisal is the initiative to find 55 customers, which means actively seeking to collect all information related to that customer and/or project When the bank actively proposes to borrowers, it must have prior information about those customers in order to avoid the dispersion of information as well as time limitation required by the customers By actively seeking customers, offering preferential terms, the branch can attract loyal customers from other banks To be a proactive provider, the branch needs to maintain a close relationship with its loyal customers by understanding not only their needs but also their partners’; strengthening the relationship with officials and departments to facilitate the information collection and search for profitable projects; establishing a department responsible for monitoring and archiving information During the assessment process, it is necessary to analyze issues such as: - The bank assesses the legal capacity of customers through the status of the documents The documents are required to be full and valid to ensure the establishment and operation of the business is legal - The bank assesses the customer's financial standing on financial statements, external information and analyses of financial indicators The bank uses the results of the analyses to prepare back-up plans for the problems that may arise during the project implementation - The feasibility of business projects and plans is a key factor for the success of enterprises Therefore, the effectiveness of the loan scheme is the most important issue to evaluate during customer appraisal process During the evaluation of the project, predictions can be at their best but still are just predictions Therefore, the appraisers must pay attention to the quality of credit safety For short-term loans, the branch should check the customers’ ability to pay back quickly This amount must account for at least 30% to 40% of the loan For long-term loans, the ability to pay quickly is considered secondary The main issue to look at is whether the equipment is advanced enough to make highly competitive products Depreciation of assets should be counted and the profits should be enough to pay off the bank before the technology of the equipment enters the stage of being obsolete Since science and technology today is growing rapidly, the life cycle of the equipment is quite short The bank lending terms are not allowed to exceed those limits 4.3.3 Improvement of credit scoring system The credit-scoring system of the bank has been quite detailed and accurate However, customer service employees still find it difficult to apply due to a variety of reasons The main reason is that input data provided by customers is inaccurate The data in the financial 56 statements is hardly possible to control, so the customer service employees not pay much attention to the credit-scoring system because the lending process is mainly based on the appraisal process and the mere observation of themselves Therefore, the credit-scoring system cannot be the only tool for the assessment process, but only a supporting tool for final decision-making Thus, for a branch, there should be an integrated assessment model, including the internal indicators in the recorded documents and external indicators such as working conditions and education background of the employees Collecting accurate information from customers is also a matter of concern, which requires effort from the bank, customer collaboration, and the monitoring and standardization of financial statements 4.3.4 Training and effective use of human resource The human factor plays a crucial role in any activity of a commercial bank Due to limited professional qualifications and legal knowledge, either due to low sense of responsibility or due to lack of professional ethics, some employees have violated professional procedures, mechanisms, policies and laws, resulting in loss of assets of the bank Therefore, if the employees meet the requirements of business operations, the bank will certainly be able to minimize the risk of subjective damage caused This solution addresses specific issues including: Hiring experts risk management as the nucleus in advising bank leaders and in disseminating the knowledge and experience on risk and management to the employees When new regulations or amendments are issued, risk management mechanisms and regulations need to be updated also The Board of Directors should pay attention to the subjective and scientific proposals from the experts In order to build a team of experts and good quality human resources, the bank should consider investing on potential employees by providing them funding for short-term training in other countries, from the leading banks in risk management, or for professional on-site training provided by experienced experts This method can bring about high efficiency and in a short period, the employees’ technical skills and the risk awareness can be enhanced to strengthen the risk management capacity of MBBank - Son Tay Town Branch Actively seeking training opportunities combined with the initiative to open short-term training courses on professional knowledge and professional ethics for employees in the model as mentioned above to improve professional qualifications of employees in all other business areas of the bank 57 Arranging the employees effectively based on their professions and follow the principle of right person - right job Arranging the work in accordance with the ability, qualifications and advantages of each person will avoid the risks in business operations Each employee also needs to be put in a competitive environment and given more incentives or rewarding/penalties depending on the situation They should be clear of their duties, rights and obligations and be motivated regularly to boost their responsibility as well as creativity 4.3.5 MBBank – Son Tay Town Branch needs to modernize the information technology system Continuing to implement the Information Technology Modernization Project; apply the latest technologies to risk analysis and assessment; establish a wide and continuous information network to ensure information accessibility and updating process as well, thus improve the quality of lending decisions as well as meet the need to manage and integrate with local and international banks Equipment including personal computers, servers, intranet-cabling system, and internet optical fiber cables should be fully facilitated at each branch/business unit to support the employees’ work Establishing a more modern internal information management system that ensures all policies, directions, directives and loan experiences/lessons are stored on the system and accessible to everyone through the available search engine Improve the capacity to store and transfer data on the email system and internal chat network of the bank Setting up an electronic loan recording system: All loan application documents must be kept in hard copy and soft copy to avoid file misplacement and must be stored in a consistent methods and rules so that they are easy to find or inquire The electronic information can only be accessible to the ones who are granted the rights 4.3.6 Improvement of loan procedure and policy system for personal customer The policy system and lending proceedings for personal customers of the MBBank Son Tay Town Branch need to be adjusted as short and easily implementing as possible To some antiquated and old-fashioned lending proceedings, not mention the ones that had been revised several times through the Proceedings Amendment and Supplement Rules (for instance, the overdraft product proceedings, the house loans proceedings, the car loans proceedings…), it is essential to promulgate the exclusive new proceedings along with to cancel the attached subproceedings and their modifications These changes engage in a unified implementation of 58 banking rules that can avoid non-compliance due to short of updated documents and probably risks in lending activities In addition, to achieve the goal of continuously developing new products, the guidance system for performing operations for a lending product has been more detailed, consistent, experienced the consistency across the entire system and the ground for evaluating product modifications and product processes in its implementation Periodically, the policy and the lending proceedings department shall take feedbacks from their working units to make appropriate adjustments in lending policies and proceedings in attempt to meet the requirements of customer services 4.3.7 Strengthening of internal inspection and supervision at the branch Internal supervision in credit activities is an important step, contributes into detecting and correcting any errors and derogations In order to enhance the supervision, MBBankshould appoint staff to its Son Tay branch’s supervisory department, especially the capable, extensive experienced ones who had seniority in banking operations With their professional standards, ethics and knowledge of the operation of the local bank, internal management staffs will actively contribute to reducing the bank’s risks Further, strengthening informatics applications in management and administration, particularly financial management, transaction management, and asset management The informatics application enhancement will create an automatic, regular and constant monitoring mechanism The internal supervision unit must submit periodic reports according to timely information schedule to ensure the security of transactions at the bank’s branch Every six months, it is necessary to evaluate the performance of the business process, detecting the unreasonable points to conduct the adjustment completely and timely 4.4 Some other recommendations 4.4.1 Recommendations to MBBank MBBank should further improve its policy mechanism in light of changing circumstances surrounding the borrowing needs of the bank’s customers as well as the changes that may occur with the policies and guidelines issued by the Government and the Administration relating to the financial and banking market Additionally, MBBank should research about the credit process to make timely corrections and enforce specific guidelines on the operational proceedings between relevant departments First of all, it is necessary to perfect the lending proceedings to customers, 59 issuing timely and completely credit granting proceedings as well as credit management corresponding to operating models, lending methods and specific borrowers that are consistent with the development of the banking system Then, continuing to improve the customer scoring and rating system based on the evaluation of the results applied in the past, studying and perfecting the financial indicators system and the non-financial indicators system This is the premise for the development of the internal credit limit system and is the basis for applying the debt classification and risk provisioning method in line with international standards Issuing documents regulating the credit limit management for customers and a group of customers It is important to study and establish a specific model to quantify the level of risk of customers in general and that of each customer as soon as possible Developing a risk assessment and early warning model for the whole system Completing the information technology system because of the following reasons: To meet the demand for statistical data retrieval; To serve the operation of credit risk management in particular and banking business management in general Policy and Credit Management Department is the focal point, actively reviews the documents, regulations and provisions related to credit activities to standardize in the whole system The Department experiences in not only revisions but also block dissemination and recollection into a single validated Credit Handbook throughout the system that will be communicated to all employees The credit manual summarizes only the processes and proceedings of each units and as for the detailed instructions that change in each period, the Bank has to update constantly to keep monitoring on the local network as present in order to facilitate the updating of documents and confidential information Most importantly, attention must be paid to avoiding the situation where the document is issued inconsistently among groups and units To satisfy this requirement, MBBank needs to: - Attach exaggerated importance to the recruitment, training of professional staff at the Policy and Credit Management Department of the Corporate Customer Division, Personal Customer Division, and especially Legal Division (the professional skills of the current staff at the Legal Division are limited due to the fact that most of them are new graduates and lack of having practical experience, settling problems with book-related approach sometimes, thus committing in unsuitable consequences.) Recruiting staffs who are really competent, dedicated to MBBank is a priority - The Policy and Credit Management Department will play a vital role in synthesizing and reviewing the uniformity of the documents issued as well as timely correcting errors 60 When drafting guidelines, the implementation must be clear, avoid the use of multimeaning words, non-key-point drafting text, causing misunderstanding when doing the implementation Making sure the name and phone number of the answering officer is clearly stated during the implementation process, avoid redundant work among staffs in the department, causing difficulties for the branch The staffs must be urgently assigned to answer any questions of the Bank’s branch clearly, moreover, not hesitant to inform the answer across the system to avoid overlapping questions while referring to the branch had asked that question It is more vital in the current stage of banking market, when the economic situation is not stable and the policy of the State Bank changes constantly 4.4.2 Recommendations to the State Bank of Vietnam At present, in developed countries, national public information system are common This system is built on the basis of modern information technology, connected from the local to central, thus, easily to look up information There are different types of information such as that are looked up for free, that are bought or exploited by only certain organizations This system makes it extremely convenient for the banks to exploit customer information, reduce the time and cost of searching Nowadays in Vietnam, the information is scattered in state management agencies without being under regulation on the coordination of information supply between two agencies On the other hand, the information has not been computerized but mainly in the form of paper documents, leading the fact of difficulty when access these sources of information with more difficulties, time wasting, information lost or obsolescence Therefore, commercial banks usually not have sufficient information about their customers' histories It is extremely a huge problem when getting information from government agencies such as the Taxation, Police, so on, except for “back door” or relations, Therefore, the usual case is that the enterprise's financial reports to the tax office are mainly about loss and tax arrears, but the financial reports to the bank witness an opposite viewpoint, even profitable that the State Bank of Vietnam did not know or could not know Therefore, the development of the national information system is very necessary; overall, it serves the management of the State and indirectly helps the State Bank in exploiting information of customers 61 The State Bank of Vietnam should coordinate with relevant ministries and agencies in the process of dealing with bad debts and focus on removing difficulties and obstacles in asset disposal procedures Keep studying, promulgating specific regulations so that commercial banks can apply accurately, and timely insurance tools for credit activities such as loan insurance, options and other derivative financial instruments At the same time, developing the training and guiding the above operations to help commercial banks both diversify their credit products and prevent, disperse risks in credit activities Regularly carrying out inspection and control in various forms in order to promptly detect and prevent negative violations in credit activities and in the long-term, put the bank's credit activities into legal order The inspection program should be elaborated, scientifically and collectively analyzed and formally reviewed, and the contents of the inspection should be improved so that the inspection program can be controlled and express their role in alerting, hindering and preventing risks without affecting the activities of commercial banks Improving the quality of the Credit Information Center (CIC) One of the parts used by the commercial banks is the Credit Information Center (CIC) In addition, one of the requirements to make good risk management is that the complete, up-to-date and accurate information system as well The higher information quality, the lower risk in the credit business of the Credit Institutions As a result, the completion of functioning the Credit Information Center is an essential factor to give notice to all the commercial banks They can be named respectively as including all information of the customers’ loans in the credit form of the Credit Institutions; doing analysis of aggregate information about customers Additionally, attention should be paid to renovating and modernizing equipment and setting up the system so that the collection and provision of credit information is smooth and timely Besides, the State Bank should promote a policy to recruit and train CIC staff not only majoring in information technology like online information exploitation and other supporting tools, but also be able to collect information, analyze, synthesize and provide appropriate judgments, warnings instead of the dry statistics for the reference banks 4.4.3 Recommendation to the Government Lending activities of the commercial banks are closely related to and depend on the economic development of the state, the economic strategies and policies of the State Therefore, one of the important solutions helping commercial banks achieve the goal of safe 62 and effective lending and international standards are the recommendations for the Government In the policy formulation, appropriate balance should be made among goals that meet the requirements of economic development, monetary stability and sustainable development of commercial banks The Government should avoid tightening or over releasing policies Too loose or too sudden direction changes will affect the operation of commercial banks The state must constantly create an equal legal environment to encourage business and production, creating a solid legal framework for economic sectors to assured join their capital investment Nevertheless, the State should also continue to improve and renovate the economic environment as the most comprehensive and fundamental solution in the process of innovation in all areas of business in general and in the field of currency business in particular In promulgating and implementing legal mechanisms and policies, taking initiative in the advance of the socio-economic development, gathering comments on the components of the impact to ensure the correct and effective implementation The promulgation further brings fair and appropriate to real conditions, promoting the development of financial markets, firstly the interbank market, currency markets, and then derivative markets and transferring debt markets They provoke in dispersion, minimizing risks in banking operations Recommendation for loan guarantee policy: - The registration of secured transactions of land use rights and assets on land: a specific guiding document stipulates that competent state agencies certify the ownership of assets on land and register the transaction is required - It is necessary to have separate regulations on mortgaging pledged assets when the State previously allocated capital of prior State Enterprise with no document proving their ownership Recommendation for the mortgage issues: - The Government should orient the law enforcement agencies to speed up the progress of the cases related to mortgaged property, avoid melting, prolonging and enhancing the effectiveness of the judicial departments in order to strictly comply with regulations on coercion and force the violators to execute judgments 63 CONCLUSION Credit activities of commercial banks play a very important role in the economy, which largely meet the credit demand of all economic sectors and areas Bank credit ensures smooth operation of production and circulation of goods, promotes economic growth, and creates more jobs and income for the labour society With the rapid growth of MBBank – Son Tay Town Branch in recent years, especially in the segment of personal customers, the increase of effectiveness from this retail service requires research and provide appropriate policies to capture the market and manage risk properly Any credit crash will have serious consequences in the branch itself and the whole system Therefore, finding solutions to prevent and reduce risks along with the process of development and integration are always considered by the bank administrators Prior to objective fact requirements along with the application of flexible research methods, the thesis fulfilled the research objectives set out: Firstly, generally outlining the basic principles of personal credit risk and credit risk management in personal customer loans at the commercial banks; explore the measures and tools that commercial banks apply to risk management as well as factors affecting the effectiveness of risk management Secondly, studying the status of operations and credit risk management in personal customer loans at the MBBank – Son Tay Town Branch, improve risk management capacity to ensure stable credit growth On that basis, we analyze and evaluate the achievements, causes and limitations of credit risk management in personal customer loans at MBBank –Son Tay Town Branch Thirdly, proposing some basic solutions and feasible recommendations to relevant authorities to strengthen the credit risk management at MBBank – Son Tay Town Branch In addition, due to the complexity of scope of the topic, the rapid macroeconomic changes at the time of doing research, the limited time funds, the author understands that the thesis is inevitably limited The author sincerely apologizes and wishes to receive the comments so that the thesis can be improved 64 REFERENCES Annual statements, procedures, documents and policies issued by Military Commercial Joint Stock Bank Financial statements, business operation result statements in period 2014 – 2016of MBBank – Son Tay Town Branch Ho Dieu (2001), Baking Credit Textbook, Statistics Publisher – Hanoi Nguyen Minh Due (2007), Risk Management Lecture, Hanoi University of Science and Technology Nguyen Minh Kieu (2009), Banking Risk Management, Statistics Publisher – Hanoi Nguyen Van Tien (2009), Banking Monetary - Finance, Statistics Publisher – Hanoi Phan Thi Kim Cuc (2009) Commercial Banking Management, Transport Publisher The State Bank of Vietnam (2005) Decision No 493/2005/QD- NHNN dated 22/04/2005on classification of debts, provision and use of provision for dealing with credit riskin banking operation of credit organizations The State Bank of Vietnam (2007) Decision No 18/2007/QD-NHNN dated 25/04/2007on amending and supplementing some articles of the regulation on classification of debts, provision and use of provision for dealing with credit riskin banking operation of credit organizations issued under Decision No.493/2005/QDNHNN 10 Tran Huy Hoang (2007), Commercial Banking Management, Labor and Social Affairs Publisher 65 ... – Son Tay Town Branch 36 3.2.1 Credit risk management apparatus at MBBank – Son Tay Town Branch 36 3.2.2 Credit policy for personal customer at MBBank – Son Tay Town Branch 38 3.2.3 Credit. .. research is credit risk management for personal banking at MBBank - Son Tay Town Branch - The scope of the research focuses on the credit risk management at MBBank - Son Tay Town Branch from... for personal customer 40 3.2.4 Credit risk management procedures for personal customer at MBBank – Son Tay Town 41 3.3 Evaluation for status of credit risk management for