The Credit Risk Management of Agribank’s Bien Hoa Branch: Masters thesis of Business Administration

MEIHO UNIVERSITY

Graduate Institute of Business and Management

MASTERS THESIS

The Credit Risk Management of

Agribank’s Bien Hoa Branch

In partial fulfillment of the requirements for the degree of

Masters of Business Administration

Advisor: Dr. Ching-Wen Mo

Co-advisor: Dr. Pham Duy Hieu

Graduate Student: Nguyen Hoang Thanh Phi

December, 2010

I

ACKNOWLEDGMENTS

I am very grateful indeed to the Ho Chi Minh city Industrial University’s the

managing boards, and Meiho University, Taiwan. My thanks to Ph.D Ching-Wen Mo in

Meiho University, Taiwan for instructing me during the time of doing my research.

Thanks to Ph.D Pham Duy Hieu to give me valuable experience. Thanks also to the

professors in Meiho University and in Ho Chi Minh city Industrial University.

As ever, I am grateful to all the staff in the Agricultural and Rural Development

Bank in Bien Hoa City. Thanks to all my classmates of EMBA2 class to give me helpful

advice to finish my research.

II

The Credit Risk Management of Agribank’s Bien

Hoa Branch

ABSTRACT

Banks play an important role as the channel of mobilizing and circulating capital

and become financial intermediaries in the market economy. The process of globalization

has strengthened the inter-dependence among the economies in the world. In 2008, the

credit crisis in the USA affected the global economy crisis, the financial fields suffered

sharply from this event as well as banking sector. Nowadays, one of the risks which the

banks need to consider is the credit risks, since the credit system is such important,

complicate but vulnerable.

By combination of theories and practical operation, we have collected the real

data as many banks through questionnaires and then used comparison and analysis

methods to have comments to evaluate and true credit activities and credit risk

management tasks. From the empirical results, we have suggested some realistic solutions

to improve the quality of credit risk management tasks. And the banks may apply these

solutions to control risks as lowest rate as possible. Moreover, we learned from the

research that credit growth is very necessary; however it needs to be linked with safety

and effectiveness. On the other hand, besides the outside causes, the subjective causes are

more important to credit risks. Although banks gained success in the process of managing

credit which there is still limitations and slots left to make room for credit risks to sprout.

Here are some our suggestions developed during the time of investigating the

credit risks management tasks.

- Building an effective credit operational procedure.

- Upgrading the quality of checking tasks inside the banks.

- Managing and supervising credit risks in and after the time of offering loans.

- Setting up and upgrading the IT system inside the banks.

- Improving the quality for the human resources.

- Building an internal credit risks control department.

- Considering all environmental factors in loans regulations.

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We believed that if banks implement these solutions properly, they will avoid most

of credit risks problem at the lowest rate as they can.

Keywords: Financial Intermediaries, Credit Risks, Internal Control

IV

The Credit Risk Management of Agribank’s Bien

Hoa Branch

Contents

ACKNOWLEDGMENTS .........................................................................................................I

ABSTRACT..............................................................................................................................II

Contents .................................................................................................................................. IV

Tables...................................................................................................................................... VI

Figures.................................................................................................................................. VIII

Chapter1 Introduction ............................................................................................................... 1

1.1 Motivation....................................................................................................................... 1

1.2 Research Objective, Research Questions........................................................................ 2

1.2.1 Reasearch objective. ................................................................................................ 2

1.2.2 Research questions................................................................................................... 2

1.3 Research Scale, Objects for Research and Limit Research ............................................ 3

1.4 New Characteristics of the Thesis .................................................................................. 3

Chapter2 Reasoning Basis in Managing Credit Risks .............................................................. 4

2.1 Managing Risk in the Banking Business ........................................................................ 4

2.1.1 Generalizing about risk............................................................................................ 4

2.1.2 Risks and managing risks in the banking business.................................................. 4

2.1.3 Influence of risks to banking operations and social economy. ................................ 8

2.2 Overview of Managing Credit Risks of the Bank........................................................... 8

2.2.1 Credit concept.......................................................................................................... 8

2.2.2 Credit risks............................................................................................................... 9

2.2.3 Credit risk management. ........................................................................................ 14

2.3 Introduction of the Bien hoa Agribank and Rural Development.................................. 19

Chapter3 Research Methodology............................................................................................ 21

3.1 Research Process........................................................................................................... 21

3.2 Research Methods......................................................................................................... 23

3.3 Designing the Questionnaire Structure ......................................................................... 23

3.4 The Accuracy of the Data ............................................................................................. 26

3.5 Validity and Reliability of Research Data .................................................................... 27

Chapter4 Research Results and Analysis................................................................................ 28