Credit risk management for personal banking at Vietnam Prosperity Joint Stock Commercial Bank– Ben Thanh Branch, 2021

BANKING UNIVERSITY OF HO CHI MINH CITY

CREDIT RISK MANAGEMENT FOR PERSONAL

BANKING AT VIETNAM PROSPERITY JOINT STOCK

COMMERCIAL BANK– BEN THANH BRANCH

GRADUATION THESIS

MAJOR: FINANCE AND BANKING

CODE: 7340201

DOAN HOANG MINH

SUPERVISOR

PH.D. LE THI ANH DAO

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

HO CHI MINH CITY, 2021

BANKING UNIVERSITY OF HO CHI MINH CITY

CREDIT RISK MANAGEMENT FOR PERSONAL

BANKING AT VIETNAM PROSPERITY JOINT STOCK

COMMERCIAL BANK– BEN THANH BRANCH

GRADUATION THESIS

MAJOR: FINANCE AND BANKING

CODE: 7340201

DOAN HOANG MINH

SUPERVISOR

PH.D. LE THI ANH DAO

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

HO CHI MINH CITY, 2021

ABSTRACT

Credit risk has always been a vicinity of concern not only to bankers but to all in the

business world because the risks of a trading partner not fulfilling his obligations in

full on the due date can seriously jeopardize the affairs of the other partner.

At the VPBank, credit risk management is always the top concern of the managers

accompanying credit development. Even though operational profit and credit

development achieved numerous excellent outcomes from 2018 to 2020, overdue

debt is high and continuously increases over time, which is a significant worry for

the Bank.

The objective of this study is to have a clearer picture of VPBank's credit risk

management, thereby making comments on the advantages and disadvantages of

risk management at the Bank along with recommendations for the Bank, VPBank,

the State Bank, and the Government.

In this light, the study undertook based on a combination of credit risk theory, credit

activity analysis, and the current situation of credit risk management at VPBank -

Ben Thanh Branch from 2018 to 2020. As a result, solutions to reduce credit risks

had offered to improve personal credit risk management at the Bank.

DECLARATION OF AUTHENTICITY

This thesis is the author's research work, the research results are honest, in which

there is no previously published content or content made by others except for source

citations in the thesis.

Ho Chi Minh City, September 2021

Doan Hoang Minh

ACKNOWLEDGE

No one walks alone on the journey of life. Apart from my efforts, the success of any

report depends largely on the encouragement and guidelines of many others. This

study bears on the imprint of many people. I take this opportunity to express my

gratitude to the people who have has been instrumental in the completion of this

study.

First and foremost, I would like to convey my heartfelt appreciation to my advisor,

Ph.D. Le Thi Anh Dao, for her unwavering support of my research, as well as her

patience, inspiration, enthusiasm, and immense knowledge. Her advice was

invaluable throughout this study's research and writing. I couldn't have asked for a

better advisor and mentor for my studies.

Besides my advisor, I would like to give special thanks to all teachers at the Faculty

of Finance and Banking - Banking University of Ho Chi Minh City, who have

imparted extensive knowledge as well as hands-on experience for me during my

studies at school, as well as creating conditions for me to develop my strengths.

I also appreciate and sincerely thank the managers and all staff at Vietnam

Prosperity Commercial Joint Stock Bank - Ben Thanh Branch for welcoming me as

an intern and for their assistance and guidance. Thank you for your passionate

assistance in facilitating practical interaction, gaining experience, and providing the

required knowledge.

Last but not least, I would like to thank my family, who always have spiritual

support, and friends who have always been a source of encouragement and support

for me during the study.

TABLE OF CONTENTS

INTRODUCTION.......................................................................................................1

OVERVIEW OF RESEARCH SITUATION, THEORETICAL

BASIS ON CREDIT RISK AND CREDIT RISK MANAGEMENT........................5

1.1. Bank credit activities ........................................................................................5

1.1.1. The concept of bank credit .........................................................................5

1.1.2. Credit classification....................................................................................5

1.1.3. Concept of personal credit..........................................................................7

1.1.4. Features of personal credit .........................................................................7

1.2. Credit risks in banks .........................................................................................8

1.2.1. Concept of credit risks................................................................................8

1.2.2. Classification of personal credit risk..........................................................9

1.2.3. Factors of credit risk...................................................................................9

1.2.4. Credit risk measurement...........................................................................12

1.3. Credit risk management..................................................................................15

1.3.1. Concept of credit risk management..........................................................15

1.3.2. Credit risk management procedure ..........................................................15

CONCLUSION CHAPTER 1 ...............................................................................22

CURRENT SITUATION OF personal CREDIT RISK

MANAGEMENT AT VPBANK - BEN THANH BRANCH..................................23

2.1. Overview of VPBank - Ben Thanh Branch ....................................................23

2.1.1. General introduction about VPBank ........................................................23

2.1.2. General introduction about VPBank Ben Thanh Branch .........................24

2.1.3. Organizational structure, functions, and tasks of VPBank - Ben Thanh

Branch.................................................................................................................25

2.2. Business performance of VPBank - Ben Thanh Branch in the period of 2018 -

2020 .......................................................................................................................26

2.2.1. Overall assessment of VPBank's business results - Ben Thanh Branch ..26

2.2.2. Loan mobilization of VPBank – Ben Thanh Branch ...............................28

2.2.3. Credit activity at VPBank - Ben Thanh Branch.......................................30

2.3. Current situation of credit risk management for personal customers of

VPBank - Ben Thanh Branch ................................Error! Bookmark not defined.

2.3.1. Credit risk management organizational structure at VPBank ..................31

2.3.2. Credit activities of personal customers at VPBank – Ben Thanh Branch32

2.3.3. Overdue debt and risk provision for personal customers at VPBank – Ben

Thanh Branch .....................................................................................................35

2.4. Current situation of credit risk management for personal customers at

VPBank - Ben Thanh Branch ................................................................................38

2.4.1. Credit risk identification...........................................................................38

2.4.2. Credit risk measurement...........................................................................39

2.4.3. Credit risk monitoring and control ...........................................................43

2.4.4. Credit risk financing.................................................................................44

2.5. Assessing the current situation of credit risk management of personal

customers at VPBank - Ben Thanh Branch ...........................................................46

2.5.1. Achievements...........................................................................................46

2.5.2. Limitations................................................................................................47

2.5.3. The cause of the limitations......................................................................48

CONCLUSION OF CHAPTER 2 .........................................................................52

SOLUTIONS TO IMPROVE PERSONAL CREDIT RISK

MANAGEMENT AT VPBANK - BEN THANH BRANCH..................................53

3.1. General orientation on credit development at VPBank..................................53

3.2. Orientation to develop credit activities of personal customers at VPBank -

Ben Thanh Branch .................................................................................................54

3.3. Credit risk management solutions at VPBank - Ben Thanh Branch ..............54

3.3.1. Fully execute and review the credit procedure on a regular basis. ..........54

3.3.2. Enhance exploitation of customer relationship management systems

(CRM).................................................................................................................55

3.3.3. Improve the quality of staff......................................................................56

3.3.4. Strengthen appraisal and assessment for new loans.................................56

3.3.5. Set up risk provisions for bad debts, overdue debts and actively handle

bad debts and overdue debts...............................................................................57