Credit risk – The impact, measurement and management of risk of commercial banks – A case of Saigon Thuong Tin Commercial Joint Stock Bank in Vietnam

Abstract

Credit risk has been identified as a fundamental challenge for commercial banks, particularly concerning its impact on stability, profitability, and long-term sustainability. In the context of the Vietnamese banking sector, Sacombank was studied to evaluate the impact of credit risk on key financial indicators, including profitability, capital adequacy, and institutional reputation. The objectives of the study were to determine the impact of credit risk on Sacombank's performance and assess the bank's approaches to risk assessment and management. The quantitative method was employed by analyzing historical financial data and non-performing loan (NPL) ratios obtained from Sacombank's financial statements from the period of 2013 - 2023, in order to explain the trend of impact of credit risk on banking operations. Furthermore, the implementation of Sacombank in relation to credit risk assessment methods and credit management procedures to stabilize growth was examined throughout the research. The findings indicated that the implementation of enhanced credit risk measurement and management practices played a crucial role in maintaining operational stability. Specifically, the adoption of risk management activities utilizing technology, including credit scoring models and adherence to the regulatory requirements of the State Bank of Vietnam and international standards, was found to mitigate exposure to high-risk loan portfolios and significantly strengthen Sacombank's resilience against unexpected circumstances.