Risk management in commercial banks of Vietnam
TABLE OF CONTENTS
Table of contents…………………………………………………………………….iv INTRODUCTION 1
1. NECESSITY OF THE THESIS 1
2. OBJECTIVE OF THE RESEARCH 1
3. KEY RESEARCH AREA 2
4. METHODOLOGY 2
5. CONTRIBUTIONS OF THE THESIS 2
6. THESIS STRUCTURE 2
Chapter 1: Literature review 3
1.1. Commercial Bank and the main risks in the bank operations 3
1.1.1. Commercial Bank and the main risks 3
18.104.22.168. Concept 3
22.214.171.124. Functions 3
126.96.36.199. Main professional competences 4
1.1.2. Main risks in operations 5
1.1.3. Risk measurable indexes 8
1.2. Risk management in operations of Commercial Banks 10
1.2.1. Concept and role of risk management 10
1.2.2. Tools of risk management 11
188.8.131.52. Group tools limited credit risk 11
184.108.40.206. Group tools sponsored risk 16
220.127.116.11. Group tools prevented other risks 17
1.2.3. Factors impact risk management 18
1.3. Experiences in risk management of Foreign Banks 19
1.3.1. Model assessed credit risk 19
1.3.2. Model determined interest rate risk 21
1.3.3. Model reassessed 22
Chapter 2: Methodology, research paradigms, analysis 23
2.1. Status quo risk management in Commercial banks of Vietnam 23
2.2. Status quo risk management of commercial banks 24
2.2.1. Status quo of credit risk 24
2.2.2. Status quo of foreign exchange risk 27
2.3. Risk management policy of commercial banks (period 2005-2010) 29
Chapter 3: Recommendation and conclusion 33
3.1. Improving risk management in Commercial banks of Vietnam 33
3.1.1. Group of risk management solutions 33
3.1.2. Improving the evaluation quality of debts 45
3.1.3. Solution for improving guarantee assets management in credit operations 49
3.2. Group of foreign exchange risk management solutions 55
3.2.1. Opening the mobilizing foreign currency resources and intensify to seek customers had import/export payment demands 55
3.2.2. Combination buy/sell foreign currency spot and forward 57
3.3. Group of interest rate risk management solutions 59
3.3.2. Determine the suitable exchange ratio between fixed and floated interest rate 62
3.4. Group of improving organization system management 62
3.4.1. Signification in arranging organization framework suitable for risk management functions 62
3.4.2. Organizing system professional competences management 62
3.4.3. Strengthen internal control 65
3.5. Some of petitions for State-owned Commercial banks to support for Commercial banks in risk management 67
.1. NECESSITY OF THE THESIS
Risk management was interested in by the managers, especially, bank industry. Besides, risk management standard of Vietnam banks is the beginning period in comparison with the countries had the development financial market in hundreds years. As well as, banks are poor in financial products and services, small scale and business capital sources. Operation scope is also major in domestic market; weakness in financial management ability and unclear, closed the financial system.
.2. OBJECTIVE OF THE RESEARCH
– Research the issues about risks which banks have to face with including discovery, measure and the overcome methods.
– Research the risk expression in professional competences of commercial bank such as: credit operations, capital management, and international bank services in bank
– Research the risk impact level because of the payment over time situation of customers, the change of interest rate, foreign exchange to the direct income in bank. Simultaneously, finding the limited reasons in risk management tools application of bank in particular and commercial bank on general.
.3. KEY RESEARCH AREA
Research risk management in business of commercial bank is the great topic. Thesis only concentrates on major risks and the relation among risks in capital trading of commercial bank to give out the preventive solutions.
Thesis is used methodology of dialectic materialism, logic reason combination materialistic history, methods in raising the issues, interpretation, analysis and giving the conclusion.
Thesis is also used statistic, formula illustration, interpreting the issues means.
.5. CONTRIBUTIONS OF THE THESIS
– Systematize the views about risks, the relationship among risks affect to the operations in commercial banks.
– Analysis to seek the reasons, appreciate the status quo to conduct the preventing risk methods and apply for the commercial banks.
.6. THESIS STRUCTURE
Topic: “Risk management in commercial banks of Vietnam ”
Chapter 1: LITERATURE REVIEW
Chapter 2: METHODOLOGY, RESEARCH PARADIGMS
Chapter 3: RECOMMENDATIONS AND CONCLUSION CONCLUSION
CHAPTER 1 LITERATURE REVIEW
1.1 Commercial bank and the main risks in bank operations Risk management in commercial banks
1.1.1 Commercial Bank and the main risks
India: Commercial Bank is a place to receive the deposit to loan or sponsor and invest.
Vietnam: Commercial Bank is an organization trading in currency major in and frequently to receive deposit from the customers with the responsibility to refund and use that money to loan, carry out discount operation and make payment means.
– Assets rotation function: Banks conduct at the same time two operations. The first one, Banks mobilize capital by issuing deposit certificate.
– Intermediary payment function: On behalf of customers to carry out payment for buying goods or services by issuing and balance cheque, providing e-payment networks, connecting funds and distribution paper-money, coin-money; guarantee and commitment in refund for customers, managing and protecting their assets; issuing or redeeming stocks,…
– Function makes “book value” in economy.
– Intermediary function in conduct the country economic policy
18.104.22.168. Main professional competences
– Debit operations (mobilizing capital): Commercial Bank conducted its operations throughout not only using its capital but also mobilizing capital from the customers.
– Credit operations (business loan) currently, this is still the basic operation of Commercial Bank.
– Intermediary/broker operations (payment, dealer, consultative, protection documentary, valuable assets,…)
Trading principles of Commercial Bank
Firstly, banks ensure the benefit for customers with the providing financial services. Secondly, banks have to conduct the safe methods in trading: maintaining the fixed capital, ability in resisting the market change, selecting customers, limited credit, controlling in perform, diversifying assets to disperse risks.
1.1.2 Main risks in operations Concept of risks – Risk management in commercial banks
Banking operation is one of the economics ones had a lot of risks the most. It is very difficult to define risk accurately for the trading environment as well as all development economic and society periods. However, the banking risks conception like that: “Risk in bank is unexpected events make causes losses and damages to assets, income of bank in operations.”
– Credit risk: risks associated with bank operations due to irrecoverable debt up to due date. Credit risk did not only limit in business loan but also include creditable operations such as: guarantee, trade sponsor, inter-bank loan operations.
– Unusable capital risk: rising from transforming utilization of forward capital and bank capital. Generally, the utilization of forward capital has the long time compared with bank capital sources. Thus, bank has two difficulties: dissatisfy its short-time commitment, the shorter forward capital sources still be used capital in fixed-time.
– Interest rate risk: bank risk in transforming assets including buying primary stocks, loaning (using capital), issuing secondary stocks (mobilizing capital). Forward time and conversion in Debit assets items do not correspond with Credit assets items. This thing makes bank taken interest rate risk. It means that if the sensitive interest rate of bank Debit assets is more than the sensitive interest rate of bank Credit assets, net income of interests will be decrease when interest rate increase. Therefore, bank income will go down. But when interest rate decrease, the situation is vice versa.
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