Credit risk management in viet nam development bank vdb ha nam branch

THE EXECUTIVE MASTER OF BUSINESS ADMINISTRATION Credit risk management in Viet Nam Development Bank (VDB) – Ha Nam Branch Graduate student: Chu Tat Thang Supervisor 1: Assoc Prof., PhD Nguyen Van Dinh Supervisor 2: Assoc Prof., PhD Tien-Tsai Huang Ha Noi, 2017 Lunghwa University of Science and Technology Approval Certificate of Master's Degree Examination Board This is to certify that the Master’s Degree Examinations Board has approved the thesis Credit risk management in Viet Nam Development Bank (VDB) – Ha Nam Branch published by Mr Chu Tat Thang in the Master Program of Graduate School of Department of Business Administration Master’s Degree Examination Board Board Members: Advisor Chair Date 2016/11/… ABSTRACT Thesis Title：Credit risk management in Viet Nam Development Bank (VDB) – Ha Nam Branch Pages: 77 University：Lunghwa University of Science and Technology Graduate School：Department of Business and Management Date：December, 2016 Degree：Master Graduate Student：Chu Tat Thang Advisor 1：Assoc Prof., PhD Nguyen Van Dinh Advisor 2：Assoc Prof., PhD Tien-Tsai Huang Keywords: Banking and Finance, Credit Risk Management, Vietnam Development Bank Ha Nam Branch In a market economy, lending is one of most important activities of a bank However, the bank's credit activities are always exposed to many risks such as: Interest rate risk, foreign exchange risk, liquidity risk, customers' default risk, and so on Utilization is the largest and most complex type of risk When the bank falls into serious financial difficulties, the cause usually arises from the bank's credit activities From this fact, especially the importance of risk management in the process of financial restructuring of the bank is urgent and practical to solve the challenge that banks Vietnamese goods are facing Based on the synthesis of theory on credit risk, credit risk management and credit risk management models in banking business This thesis focuses on in-depth investigation Assessment of credit risk management in Ha Nam Development Bank in recent years, achievements, difficulties and obstacles encountered in credit risk management at Ha Nam Development Bank Since then, the topic has provided practical solutions to further i improve the effectiveness of credit risk management in the context of the economy being restructured Credit risk is an urgent and priority concern Thesis is conducted by scientific research methods: methods of data collection, synthesis, methods of data analysis and comparison In addition, statistical, comparative, comparative and empirical methods as well as financial and monetary researchers are used in this study ii ACKNOWLEDGEMENTS It is hereby to acknowledge that this thesis is carried truthfully by myself All the figures and numbers in this thesis are from reliable sources and are cited according to the standards The conclusions are honestly resulted from the real activities of the examined subject I would like to express my sincere gratitude to the lectures from the International School of Vietnam National University, Hanoi for their enthusiasm and guidance which has brought to me valuable knowledge and experiences I also would like to say a special thanks to Associate Professor, Doctor Nguyen Van Dinh for your care and thoroughly guidance during my time working on this thesis Besides, I want to express the warmest thanks to all the managers and the staff of VDB – Ha Nam Branch who created favourable environment for me to collect data and information to complete this thesis Despite my best effort to the accomplishment of this thesis, the limitation and mistakes are unavoidable Therefore, I am open to receive all the valuable suggestion and advice from the lectures to improve the results of my thesis and make it become more applicable in the my work and practice Chu Tat Thang iii TABLE OF CONTENTS ABSTRACT i ACKNOWLEDGEMENTS iii TABLE OF CONTENTS iii LIST OF TABLE vi LIST OF DIAGRAM vii INTRODUCTION 1.1 Literature review 1.2 Theoritical background 1.2.1 Credit risk 1.2.2 Credit risk management CHAPTER METHODOLOGY 30 2.1 Methodology 30 2.2 Secondary data collection method 30 2.3 Secondary data processing method (data analysis) 30 2.3.1 Aggregate analysis method 31 2.3.2 Comparative and statistical method .31 2.3.3 Methods of evaluating and analysing policy documents 32 2.3.4 Method of gathering information in official channels 32 CHAPTER CREDIT RISK MANAGEMENT AT VDB – HA NAM BRANCH 34 3.1 Overview of Vietnam Development Bank - Ha Nam Branch 34 3.1.1 History and development process 34 3.1.2 Organizational Structure of Vietnam Development Bank - Ha Nam Branch 35 iii 3.1.3 Some key performance indicators of Viet Nam Development Bank – Ha Nam branch 38 3.2 Current situation of credit risk management at the Vietnam Development Bank - Ha Nam branch 40 3.2.1 Credit policy of VDB-Ha Nam Branch 40 3.2.2 Credit procedure 41 3.2.3 Credit risk management process 43 3.3.2 Achievements .58 3.3.3 Problems of risk management .59 3.3.4 Reasons for problems 60 CHAPTER PROPOSED SOLUTIONS TO IMPROVE CREDIT RISK MANAGEMENT AT VIETNAM DEVELOPMENT BANK-HA NAM BRANCH 62 4.1 Credit development orientation at Ha Nam Development Bank 62 4.1.1 General direction 62 4.1.2 Specific direction 62 4.2 Proposed solutions to improve credit risk management at the Vietnam Development Bank Ha Nam branch 64 4.2.1 Improve the quality of credit appraisal and analysis 64 4.2.2 Improvement the management and monitoring of debt 64 4.2.3 Dealing with overdue debts and NPLs 65 4.2.4 Improving the monitoring of loan security assets 66 4.2.5 Enhance the role of internal inspection and control 67 4.2.6 Improvement of the quality of credit staff 67 4.2.7 Improvement of the efficiency of processing credit information systems 68 4.3 Some recommendations to the Vietnam Development Bank 68 4.3.1 Developing credit scoring and internal customer ratings 68 4.3.2 Measures to support debt recovery and debt recovery for affiliates .70 4.3.3 Strengthening the Debt Recovery Facility 71 iv CONCLUSION 72 REFERENCES 73 APPENDIX 74 v LIST OF TABLE Table 1.1 The maximum deduction rates of the collateral 23 Table 2.1 Term loan structure 38 Table 2.2 Business Performance from 2013-2016 39 Table 2.3 Structure of outstanding loans by group of Enterprises customers under VDB Ha Nam on December 31st, 2015 – 2016 47 Table 2.4 Credit risk allowance on December 31st, 2013-2016 at VDB Ha Nam 49 Table 2.5 Detailed breakdown of specific debt groups as of December 31st, 2013-2016 at VDB Ha Nam 50 Table 2.6 Details of general provision for debt groups as of December 31st, 2013-2016 at VDB Ha Nam 51 Table 2.7 Sources of Bad Debts of VDB Ha Nam 52 Table 2.8 Bad debt and bad debt ratio of VDB Ha Nam from 2013 – 2016 53 Table 2.9 Branches with a high non-performing loan ratio as of 31/12/201 54 Table 2.10 Credit classification at Ha Nam Development Bank 2013-2016 57 vi LIST OF DIAGRAM Diagram Credit risk management procedure 16 Diagram Organization chart of Ha Nam Development Bank 36 Diagram Loan providing procedure at VDB 42 vii Executive management: Some are confused by new situations, sometimes even confined to financial thinking, not really modern bankers Professional operation of staff: skills of forecasting, evaluating and analysing information related to customers, production and business projects have not been improved or unrealistic; ability to synthesize analysis, handle non-professional situations; the application of new technology (especially computer skills) is uneven; communication ability (especially English) is low compared to requirements; 3.3.4.2 Reasons from the investors and the government management agencies - The psychological expectation of dependence, even impoverished, capital investment credit development as an allocation from the state budget - Poor production and business efficiency (management, project implementation process), leading to products not competitive in the market The project owner does not accurately predict the evolution of inputs and outputs of the project Some projects are high risk - Thoughts on the equitizing process of state-owned enterprises to deny responsibility for loan repayment for VDB Ha Nam 3.3.4.3 Other objective reasons Law system related to development investment credit is not synchronous: The legal framework for new development investment credit is that the decree is not an Ordinance or Law, therefore, its stability is not high - Government investment loan policy is still inadequate: the State has implemented preferential policies for very high enterprises such as long loan term, lower interest rates than commercial banks, The form of loans, high loans up to 70% of total investment, These are the government incentives for businesses but also a risky burden for banks to develop - Vietnam in the process of international economic integration in the trend of global economic globalization 61 CHAPTER PROPOSED SOLUTIONS TO IMPROVE CREDIT RISK MANAGEMENT AT VIETNAM DEVELOPMENT BANK-HA NAM BRANCH 4.1 Credit development orientation at Ha Nam Development Bank 4.1.1 General direction Debt recovery is considered as a key task while paying particular attention to solving difficulties, raising the production and business capacity of enterprises facing financial difficulties, having overdue debts and suspended interests - Access projects in various fields to diversify portfolio of investment loans At the same time, proactively propose to the local committees to carry out a number of special-purpose projects in the field of social security to borrow capital from VDB Ha Nam - Expanding the subjects of mobilizing capital, diversifying forms of mobilization - Stick to the implementation of hydropower projects to meet capital needs in accordance with progress - Promote pilot lending and export credit but must ensure credit quality - Completely handling projects that have been liquidated - To study and deploy one step on human resources, material resources and expertise for the performance of the provision of small and medium enterprise guaranty in the province according to the direction of the bank - Completing the procedure for submitting to the central government to cancel the debts of the projects of 03 units undergoing bankruptcy procedures: Thai Hoa Company, Con Co Animal Feed Company, Nam Ha business 4.1.2 Specific direction In assessment stage: 62 - Continue to improve the quality of assessment, - Proactively search for projects, consult and guide investors in the investment preparation stage - Advising and proposing the local committees a list of projects subject to elending to make investment in order to renovate urban areas and raise the production and business capacity of enterprises - Review of projects with high economic efficiency, newly borrowed echelon of e-commerce may consider additional loans for e-commerce and pilot capital Risk management: - To speed up the liquidation of assets, handle debts to recover and file debt processing dossiers to the banks for the remaining projects - Pay attention to coordinating, proposing with the Departments, local authorities and the Committees of the Banks, with the Ministry of Debt Settlement - Regular and timely monitoring and coordination with functional agencies in the confirmation of damage caused by natural disasters caused damage to the projects Post-investment support: - Get the list of projects subject to post-investment support and under Decree 106 to approach and instruct clients - Consulting and guiding enterprises to finalize new project dossiers and review the demand for post-investment support to implement the post-investment support according to regulations Information technology application: Maintain and renovate the website operation of the branch, modify and supplement to complete the programs and software to support the management Carry out regular and unscheduled reporting on time and quality assurance Staff training and administrative reform: - Promote the self-study, self-research for staff - Organizing training for newly recruited staffs for quick access to the regulations and professional procedures of the VDB-Hue branch 63 - Organized review of professional skills organized by VDB Internal inspection and supervision: Organized the internal inspection of the activities of VDB-Ha Nam Branch since the beginning of the year, besides, the departments regularly organize self-examination of the specialized areas of the room in order to prevent the damage, correct errors on time 4.2 Proposed solutions to improve credit risk management at the Vietnam Development Bank Ha Nam branch 4.2.1 Improve the quality of credit appraisal and analysis Establishment of an independent asset appraisal department at Ha Nam Development Bank due to inadequate credit risk management model at VDB Ha Nam Establishment is very necessary for credit activities at VDB Ha Nam At present, VDB Ha Nam has no independent asset appraisal department, all asset valuation work done by credit officers This leads to shortcomings that many credit officers not have sufficient expertise in asset appraisal so the quality of appraisal is not high On the other hand, according to the regulations of the Vietnam Development Bank, the value of asset evaluation is decisive to the amount of credit Therefore, credit officers self-assess the property, making the property assessment lack of objectivity Therefore, one of the solutions to curb credit risk now is to set up an independent security appraisal unit at VDB Ha Nam 4.2.2 Improvement the management and monitoring of debt In the process of loan approval, pre-lending inspection is a necessary condition However, after the bank loan is issued, it is also necessary to check the use of the loan, check whether the customer is using the correct item Loan destination Hence, strengthening the management and monitoring of debt is necessary and requiring each credit officer to improve the quality of debt management through the following measures: - The list of projects needs to be systemized by line of business and sources of debt repayment so as to help the bankers to be warned of unusual happenings when there are fluctuations in the economy and natural disasters happening - Credit officers must check the actual status of loan use; At the same time, the 64 establishment, storage and exploitation of data related to loans such as information about customers, projects, loan security assets This data must be made available to every customer from the project appraisal to the process of using the loan and handling the loan On that basis, accurate assessments of the use of loan capital and security assets shall be made to promptly detect the risks and take appropriate measures - Bank staff must regularly monitor, collect and analyse information received about customers, timely assess the signs of risk such as customers have difficulty repaying the loan, the A change in the business environment or market situation that adversely affects a business plan, or signs of a breach of law, may result in plans to prevent risk - Standardization in writing for the project file arrangement, monitoring the operation of the project, reporting on project activities, information on the project 4.2.3 Dealing with overdue debts and NPLs For customers with financial difficulties, business losses, difficulties to overcome, overdue debts cannot determine the source of payment, banks should strictly manage loans and customers as follows: - For loans with collateral: To find clients who are financially able to receive debts of difficult customers in order to continue efficiently exploiting assets to ensure debt repayment The bank reviews the collateral, asset status, and legal records in order to sell the return on assets Co-ordinate with other departments to liquidate and disburse designated loan collateral to recover funds In cases where the assets are not enough to return the capital, the customer must pay the rest through the sale of assets, otherwise the bank can declare bankruptcy For the designated lending case, if the property is not enough to recover the borrowed capital, the bank shall complete the procedures to submit to the competent agencies for handling - For loans without collateral: In this case, it is necessary to strictly control the customers' financial sources, receivables and payment capital sources of works through the annual capital notice in the field of construction Set up, collection period for other fields and require customers with the investor, the buyer committed to pay the transfer 65 to the customer's account at the bank Can advise customers to sell less assets not work effectively, not need to use to repay the loan For projects with objective difficulties and subject to debt settlement according to the government regulations, it is necessary to study the impacts caused by objective conditions and collect relevant documents In accordance with government agencies, the authorities should quantify the losses For projects in difficulty that are unable to recover capital but are not subject to the debt settlement according to the government regulations: To study the government policies so as to request the bankruptcy to recover debts, or supporting business operations to recover debt, 4.2.4 Improving the monitoring of loan security assets At present, the economy experiences a lot of complicated situations, credit activities contain a lot of potential, i.e high risk One of the measures to ensure the safety and mitigation of losses when the risk occurs is to increase secured loans, which is a source of recovery debt after treatment However, the determination of the value of security property needs to be objective, transferable and eligible for legal status It is necessary to regularly monitor security assets, capture information on assets, if there are big fluctuation should consider re-valued assets Regularly gather information on the assets of the same type through the market and the auction center to have a basis for the valuation of security property With the orientation of enhancing asset-backed loans, the actual assets of clients for SOEs are very low compared to outstanding loans at banks Therefore, in order to increase the collateral assets in the loan, customers are required to add collateral, in addition to the assets of the client, the assets of the individual, the chairman of the board of directors, the director The head of the board of directors, the board of directors, the guarantor to borrow capital from the bank, apply measures to pledge the debt claim, guarantee of the corporation Gradually reduce the debt balance if the customer does not meet the condition of security assets in accordance with the bank regulations For the receipt of security assets, the bank should regularly review the validity, legality and marketability of the property Flexible to the extent allowed for business credibility, business efficiency 66 4.2.5 Enhance the role of internal inspection and control Internal inspection and control of credit activities is an extremely important tool, through control activities, to detect, prevent and correct errors in the credit operations right In addition, control activities also detect and prevent the moral hazard posed by creditors In order to enhance the role of control checks to limit credit risk, several measures should be taken: - To set up a control room and at the same time to strengthen the qualified and credit staff to supplement the control room Currently the development bank does not have an internal control department but only performs a credit document check and the person conducting the audit is the chief accountant - During the inspection of credit activities can enhance staff directly from the credit department or credit appraisal and credit management also jointly inspected - Regularly training, improving professional skills, law for the staff of the control room - It is necessary to regulate the responsibility of the controllers, to have incentive and punishment incentives to raise the sense of responsibility in controlling activities - Continuously improve and innovate testing methods, flexible application of inspection measures depending on the time, each object and the purpose of inspection 4.2.6 Improvement of the quality of credit staff - To pay attention to the quality of human resources recruitment and appropriate training and personnel policies, paying special attention to personnel working in the credit department and the credit policy department Credit staff working in the credit bureaus require high professional qualifications, training in the specialized field, as well as knowledge of some other operations of the bank such as: professional capital, international payment operations, guarantee operations and card payment operations On the other hand, they also have to understand the business operations of the business to be able to evaluate the customer in the best way - Pay attention to improve the quality in the appointment and retention of leaders in the credit department 67 - Develop a regulation on compensation and punishment of credit officers: Ha Nam Development Bank should apply the assignment mechanism, quantify responsibilities of credit officers and leaders in the grant Loans with credit quality according to the principle of assigning non-performing loans to each branch together with the development of a specific reward and reward mechanism for staff working in the credit department as well as each unit This policy will have the effect of creating a fair business environment, encouraging the morale of cadres, promptly mobilizing cadres with good records, avoiding average income, credit development Besides, it also has the effect of preventing ethical risks for credit officers, enhancing the sense of responsibility of officials in credit work 4.2.7 Improvement of the efficiency of processing credit information systems In order to effectively operate the information in addition to the efforts of each credit officer, it is necessary to have investment in technical facilities such as working offices to meet the professional and modern banking model Information, communication and computer systems meet the requirements of modern professional banking in data management, payment and connection with international financial and credit institutions Application software, security services effectively serve the requirements of gathering, investigating, synthesizing, analysing information, forecasting risk situations, abnormalities may occur affect the loan, especially, information and analysis results for credit monitoring (customer, loan) during disbursement, debt recovery, and information for credit appraisal, customer analysis, market Therefore, Ha Nam Development Bank needs to improve the quality of information technology system by applying modern software system, seek to buy modern software programs to monitor and control risks This helps to better manage credit, reduce credit officer time in routine tasks such as manual reporting, but instead can produce reports, credit managers take time to perform other essential operations, improving the working efficiency of the credit department 4.3 Some recommendations to the Vietnam Development Bank 4.3.1 Developing credit scoring and internal customer ratings The main purpose of the credit scoring system and internal credit rating is to 68 support loan decision making, debt classification, credit card creation and management Specifically, the performance of credit scoring and internal customer ratings can help VDB achieve the following objectives: - To formulate policies and measures suitable to each type of customers on credit conditions and measures to ensure the credit in order to ensure the quality and safety of the State's investment credit activities - Monitoring and evaluating customers when credit is outstanding; Monitor the development of credit under normal economic conditions, as well as the worst situations for early detection and resolution of problematic debts Measurement of credit risk as well as of the entire credit portfolio also establishes an environment to reduce the risk of credit activity Maintaining and developing a sustainable customer structure, developing a reputable and quality customer network, and developing a marketing strategy aimed at low risk customers - Create a unified, uniform database of customers borrowing investment credit capital of the State in the VDB system to create basis for granting credit (refuse or approve loans) Set up a management information system, providing sufficient information on the structure and quality of credit portfolio The credit scoring system and internal credit rating format and measurement of credit risks are consistently and uniformly focused throughout the lending process and loan management from Head Office to all branches to meet the requirements of safety, efficiency and risk management for the VDB system From there, it helps to make appropriate credit risk management policies, contributing to speeding up the roadmap for modernization, applying international standards in risk management of VDB The above system should be built in accordance with the characteristics of investment credit activities of the State, customers of VDB and development strategy of VDB, operating on the principles of prudence, objectivity and consistency In addition, no analytical approach or system can replace the expertise and professional judgment of the operational staff themselves Therefore, it is necessary to carry out a combination of human resources and technology, in order to have a good basis for implementing the above system, the VDB should implement the following factors: 69 - Having a system of information technology and software to carry out the network connection of all branches in the system - Must have a minimum database system of customers and regularly update the database (legal status, scale, industry, sector, financial criteria, non-financial criteria ) - Have specialized personnel to the job - Build a system based on specific characteristics of customers of VDB Promote from the requirement to ensure the development of credit and development of the State, promote the role of Government as a tool to promote development investment towards industrialization and modernization and to use credit and investment credit capital of The State is effective, ensuring the safety and soundness of credit activities, and it is necessary to develop a credit risk management model in line with the VDB Accordingly, through the Credit scoring and internal rating system to control risk during the project appraisal, credit management, credit portfolio status monitoring including analysis, projection The economic environment and other restrictions are set by the VDB The VDB needs to develop a scoring system and customer ratings with flexible goals that are complemented and developed to ensure a high level of realism and the evaluation and adjustment of the system should be carried out Periodically, the grading results must be stored in full along with the customer's credit file, including for the rejected customer On the basis of summing up the results of grading and internal rating of customers, VDB can apply credit measures, policies and credit portfolio management for each type of customer in order to improve credit quality to ensure the safety of investment capital of the government 4.3.2 Measures to support debt recovery and debt recovery for affiliates - Regularly review the entire debt collection plan of each project, to properly deliver, sufficient allocation of debt recovery plan for the Bank branch - Closely monitoring the situation of overdue debt and interest, it should organize the Missions collection at the banks with many outstanding debt or new arisen that Branch Banks have not taken measures to handle effectively 70 - It is necessary to soon set up regulations and procedures for dealing with the State's development investment credit loans; to formulate sanctions for the repayment of the government development investment credit capital with regard to investors who intentionally occupy the State's capital - To study the pilot application of debt collection through the debt trading company of the Ministry of Finance for a number of projects - It is necessary to build a mechanism to tie the results of debt recovery with the salary fund of each branch 4.3.3 Strengthening the Debt Recovery Facility At present, the Debt Processing Center of the Vietnamese Bank for Democracy (VBSP) is established with the sole function of handling debts of projects in accordance with the regulations of the State Thus, this center only performs the function of dealing with debts that have been at risk In the coming time, it is necessary to strengthen the function of early forecasting of risk signs that may affect the performance of the sector 71 CONCLUSION Along with the economic development of the country, the demand for capital for the economy is increasing, leading to the growth of credit also increased accordingly However, credit growth has led to an increase in credit risk This affects the efficiency of capital use and limits the expansion of credit by banks Therefore, the development of credit must go hand in hand with credit quality Based on the basic research on credit risk management and credit risk management situation at the Vietnam Development Bank, Ha Nam branch, the thesis proposes some solutions to strengthen the management Credit risk at VDB Ha Nam contributes to credit quality assurance In addition to measures to manage credit risk, for successful credit risk management, support from the Government, SBV and related sectors also has implications for the management of credit risk The commercial banks However, this is a rather complex research content, with limited visibility, knowledge and ability so the thesis cannot avoid defects The author wishes to receive the attention, contribute ideas to be able to further improve the research topic 72 REFERENCES Anthony Saunders, "Financial Institutions Management - A Modern Perspective", The McGraw-Hill / Irwin Series in Finance, Insurance, and Real Estate, Hardcover (1999) Banking Academy, 2008, Curriculum for Banking, Statistics Publishing House Edward.W Reed Ph.D, Edward.K Gill Ph.D, Commercial Bank, Statistics Publishing House Hempel G.H., Simonson D.G., Bank Management Text Cases, Jonhwiley & Son, Inc., Australia (1999) Joint Stock Commercial Bank for Foreign Trade of Vietnam (2011), Loan book Joint Stock Commercial Bank for Foreign Trade of Vietnam, 2005 Scientific Seminar on "Enhancing risk management capacity" Law on credit institutions, civil law, government relevant decrees and State Bank decisionss Le Van Te and Tran Huy Hoang, Solutions to complete the work of the Debt Management and Asset Management Company to overcome credit risk in commercial banks in Vietnam, the subject of scientific research Mishkin F.S (1999), Monetary Banks and Financial Markets, Science and Technology Publishing House, Hanoi 10 Nguyen Lien Ha (2008), "The New Basel Convention and Risk Management in Commercial Banks", Economic Analysis 11 Nguyen Van Tien, "Risk Management in Banking Business", Statistical Publishing House (2010) 12 Peter S Rose, Curriculum "Management of Commercial Banks", Finance Publishing House, Hanoi (2004) 13 Phan Thi Thu Ha, Curriculum "Commercial Bank", National Economics University (2007) 14 Thomas P.Fisch, "Dictionary of Banking Term", Barron's Edutional, Inc., N.Y (2000) 15 Vietnam Development Bank, Annual Reports (2012, 2013, 2014, 2015, 2016) 16 Vietnam Development Bank, Prospectus (2012-2016) 17 Altman, “Financial ratios, Discriminant and the Prediction of Corporate Bankruptcy,” Journal of Financial, Sep 1986, , pp.589 ~609 73 APPENDIX Appendix 1: Scoring and rating model for enterprises customers in VDB Customer Identify the core business Identify the size of business Criteria for normal business and potential business Criteria for micro business Financial indicators points ∑{(points of each indicator) x (weight)} = Total financial score Non-Financial indicators points ∑{(points of each indicator) x (weight)} = Total non-financial score Total points Normal, potential business = Financial indicators points x weight of financial group + Non-Financial indicators points x Weight of non-financial group Micro business = Financial indicators points x weight of financial group + Non-Financial indicators points x Weight of non-financial group x Risk factor Credit rating Credit rating adjustment Final credit rating 74 Appendix 2: Credit ranking for enterprises customers Debt group Point Rank Meaning From 94 to 100 AAA Very low risk From 88 to under 94 AA+ Very low risk From 83 to under 88 AA Relatively low risk From 78 to under 83 A+ Relatively low risk From 73 to under 78 A Relatively low risk From 70 to under 73 BBB Low risk From 67 to under 70 BB+ Low risk From 64 to under 67 BB Low risk From 62 to under 64 B+ Low risk From 60 to under 62 B Medium risk From 58 to under 60 CCC Medium risk From 54 to under 58 CC+ Medium risk From 51 to under 54 CC Medium risk From 48 to under 51 C+ High risk From 45 to under 48 C High risk Under 45 D Very high risk Credit policy Group Maximum, timely loans Can apply for credit lines Group Timely provide loan Can be considered for credit lines Group Considered providing loans Limit in credit lines and overdraft not apply Group Lending limit or stop providing more loans in order to reduce outstanding loans Group Do not provide loans and prepare the bad debt handling measures (Source: Summarized from the Decision 418/QD-HDQT-CSTD and Decision 0658 of the credit providing policy for enterprises customers of VDB) 75 ... theory on credit risk, credit risk management and credit risk management models in banking business This thesis focuses on in- depth investigation Assessment of credit risk management in Ha Nam Development. .. gathering information in official channels 32 CHAPTER CREDIT RISK MANAGEMENT AT VDB – HA NAM BRANCH 34 3.1 Overview of Vietnam Development Bank - Ha Nam Branch 34 3.1.1 History and development. .. thesis is the credit risk management procedure in Vietnam Development Bank – Ha Nam Branch Research scope: This thesis focuses on the management of credit risk in VDB – Ha Nam Branch and the