Credit risk management in banking industry : Case study: Joint Stock Commercial Bank for Foreign Trade of Vietnam
Vo, Huong (2015)
Vo, Huong
Tampereen ammattikorkeakoulu
2015
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2015090914440
https://urn.fi/URN:NBN:fi:amk-2015090914440
Tiivistelmä
The commissioner of this thesis is Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank). Vietcombank’s credit portfolio has reached out to a wide range of customer groups with different tailored services to meet each group’s preferences. However, though Vietcombank achieved the sustainable credit growth in recent years, it faces the obstacle to control credit risk reflected in the great level of bad debt. The impact of credit risk upon the bank’s overall performance is significant as it damages the financial results and deteriorates the widely acknowledged reputation in the market.
The thesis firstly aims to provide the meaningful answer for the questioning relationship between a high credit growth and a great level of doubtful loans. The qualitative analysis from internal documents, different literature resources and interview with the credit expert at Vietcombank is used to analyze and evaluate the bank’s credit situation and the handling of bad debt, and to mitigate any abnormal elements that may cause the questioning relationship. Based on that together with the observations of the bank’s internal credit rating model, there are suggestions to build a more complete credit risk management model for group of individuals and group of corporate customers.
The findings of the analysis provided the possible explanations of the expanding credit growth accompanied by an escalating increase in the amount of bad debt. It might reflect the insufficient knowledge of the staffs, the issue of staff’s morality, the loosening management of the top manager, or the need to make changes in the bank’s credit risk management model. There are two models suggested by author with her own academic knowledge for Individual and Corporate model. For Individual model, the combination between collateral asset rating and the credit rating is proposed to score the individual credit more exactly. In Corporate model, the integration of internal credit rating model and the Basel II approach is taken into consideration to enhance the bank’s own method of protection from credit risk and to strengthen the supervisory and regulatory role of the State Bank of Vietnam for an equally competitive banking market.
The thesis serves as the guideline of credit risk management model for possible application. It is also worth mentioning that to successfully operate a working credit risk management model, Vietcombank needs to invest more in its staff quality, information system and an effective business strategy to make use of all the resources.
The thesis firstly aims to provide the meaningful answer for the questioning relationship between a high credit growth and a great level of doubtful loans. The qualitative analysis from internal documents, different literature resources and interview with the credit expert at Vietcombank is used to analyze and evaluate the bank’s credit situation and the handling of bad debt, and to mitigate any abnormal elements that may cause the questioning relationship. Based on that together with the observations of the bank’s internal credit rating model, there are suggestions to build a more complete credit risk management model for group of individuals and group of corporate customers.
The findings of the analysis provided the possible explanations of the expanding credit growth accompanied by an escalating increase in the amount of bad debt. It might reflect the insufficient knowledge of the staffs, the issue of staff’s morality, the loosening management of the top manager, or the need to make changes in the bank’s credit risk management model. There are two models suggested by author with her own academic knowledge for Individual and Corporate model. For Individual model, the combination between collateral asset rating and the credit rating is proposed to score the individual credit more exactly. In Corporate model, the integration of internal credit rating model and the Basel II approach is taken into consideration to enhance the bank’s own method of protection from credit risk and to strengthen the supervisory and regulatory role of the State Bank of Vietnam for an equally competitive banking market.
The thesis serves as the guideline of credit risk management model for possible application. It is also worth mentioning that to successfully operate a working credit risk management model, Vietcombank needs to invest more in its staff quality, information system and an effective business strategy to make use of all the resources.