Tiến Sĩ Quản lý rủi ro tín dụng tại Ngân hàng Nông nghiệp và Phát triển Nông thôn tỉnh Thái Nguyên

Luận án tiến sĩ năm 2013
Đề tài: CREDIT RISK MANAGEMENT IN AGRIBANK – THAI NGUYEN PROVINCE
Quản lý rủi ro tín dụng tại Ngân hàng Nông nghiệp và Phát triển Nông thôn tỉnh Thái Nguyên
Luận án được trình bày bằng tiếng Anh




TABLE OF CONTENTS
TITLE PAGE Page
APPROVAL SHEET . ii
DEDICATION . iii
ACKNOWLEDGMENT iv
ABSTRACT .v
TABLE OF CONTENTS .x
LIST OF TABLES xii
LIST OF FIGURES . xiv
CHAPTER
1 INTRODUCTION 1
Background of the Study .2
Statement of the Problem 3
Hypothesis of the Study 5
Significance of the Study 5
Scope and Delimitation .6
Definition of Terms .6
2 REVIEW OF LITERATURE AND RELATED STUDY 8
Review of Related Literature 8
Review of Related Studies 31
Conceptual Framework .55
3 METHODOLOGY 56
Research Design 56
Population and Sampling 56
Sampling Design and Techniques .57
Research Instruments 58
Data Gathering Procedures .59
Statistical Treatment .60
4 PRESENTATION ANALYSIS AND INTERPRETATION OF DATA 61
5 SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS.91
Findings 91
Conclusions .96
Recommendations .97
BIBLIOGRAPHY 99
APPENDICES A .101
APPENDICES B 102
QUESTIONNAIRE .103
CURRICULUM VITAE 109




ABSTRACT
This study was conducted on the basis of practical reasoning combined with
analysis of the status and operation characteristics of the Bank for Agriculture and
Rural Development, Vietnam to build a strategy for credit risk management
effectiveness, which proposed solutions and recommendations for improvement,
improve credit risk management of the Bank for Agriculture and rural Development
of Vietnam, contributing to the economic restructuring of agriculture and rural
towards industrialization and modernization, promoting our country's economic
integration and development.
The result will the present situation of credit risk in terms of bad debts, undue
debts, overdue debts, debts requiring attention, under qualified debts, doubtful debts
and frozen debts. as perceived by managers and staff of the Agribank, and from that,
the researcher recommended the appropriate solutions to limit credit risk in effective
ways in bank.
The findings of the study shows that with respect to “segment structure which
contain the big risks”, respondents evaluated it with mean of 3.5 corresponding to
level More Risky. The evaluated the item “Credits for industries” with highest mean
of 3.6 corresponding to level More Risky and ranking first of all. They evaluated the
item “Credits for service sector” with lowest mean of 3.2 corresponding to level Risky
and ranking last of all. For overall assessment of both managers and staffs, they
evaluated all items of ‘types of customers, which contain the big risks” with mean of
3.4 corresponding to level More Risky. They evaluated the item “individuals” with
mean of 3.6 corresponding to level More Risky and ranking first of all. They
evaluated the item “Big companies and organizations “ with lowest mean
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corresponding to level Risky and ranking last of all. For overall assessment of two
groups of respondents, they evaluated all items of “not have guarantee properties”
with mean of 3.1 corresponding to level Risky. They evaluated the item “Not have
guarantee properties” highest mean of 3.6 corresponding to level More Risky and
ranking first of all. While, the item “Have guarantee properties’’ was evaluated with
lower mean corresponding to level Less Risky. With respect to “the account
outstanding acc to time”, two groups of respondents evaluated short term credit with
highest mean of 3.5 corresponding to level More Risky and ranking first. While, the
item “medium and long term credit” received lower mean of 3.2 corresponding to
level Risky and ranking last. With respect to overdue debts, both groups of managers
and staffs evaluated all items of “overdue debt” with mean of 3.3 corresponding to
level Risky. They gave highest mean of 4.3 for the item “Both principal and interest
can be recovered partially” corresponding to level Most Risky and ranking first.
While, the item “Both principal and interest can be recovered fully” was evaluated
with lowest mean of 2.4 corresponding to level Less Risky and ranking last of all.
With respect to undue debt, both groups of respondents evaluated “undue debt” with
mean of 3.2 corresponding to level Risky. They evaluated the item “Customers are
traditional borrowers” with highest mean of 3.5 corresponding to level More Risky
and ranking first of all. They evaluated the item “It is easy to collect principle and
interest” with lowest mean of 3.1 corresponding to level Risky and ranking last of all.
With respect to “debt requiring attention”, two groups of respondents evaluated “debt
requiring attention” with mean of 3.6 corresponding to level More Risky. They
assessed the item “The interest rate is suitable for customers” with highest mean of
3.6 corresponding to level More Risky and ranking first. While, the item “The
mechanism for this debt is so clear” received lower mean of 3.5 corresponding to rank
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last. With respect to qualified debt two groups of respondents evaluated “qualified
debt” with mean of 2.9 corresponding to level Risky. They evaluated the item “Able
to pay the interest and principle at maturity” with highest mean of 3.6 corresponding
to level More Risky and ranking first of all. The item “The interest is made free for
customers” was evaluated with lowest mean of 1.7 corresponding to level Least Risky
and ranking last of all. With respect to doubtful debt, all respondents evaluated the
item “The bank controls closely this type of debt” with highest mean of 4.3
corresponding to level Most Risky and ranking first of all. While, they evaluated the
item “Creditors do not carefully appraise the borrowers” with lowest mean of 3.5
corresponding to level More Risky and ranking last of all. With respect to frozen debt,
two groups of respondents evaluated frozen debt with mean of 3.3 corresponding to
level Risky. They evaluated the item “There are a lot of customers classified in frozen
debt group” with highest mean of 3.6 corresponding to level More Risky and ranking
first of all; and evaluated the item “The rate of frozen debt is too high” with lowest
mean of 3.2 corresponding to level Risky and ranking last of all. With respect to “bad
debt”, both groups of respondents evaluated the item “It is difficult to collect both
interest and capital” with highest mean of 3.7 corresponding to level More Risky and
ranking first of all. While, the item “The mortgage is hard to sell” was evaluated with
lowest mean of 3.5 corresponding to level More Risky and ranking last. Considering
all items of “bad debt”, they evaluated them with mean of 3.6 corresponding to level
More Risky. With respect to items of subjective criteria, all respondents evaluated all
items of subjective criteria with mean of 3.6 corresponding to level Frequent. They
evaluated the item “Credit process follows the common regulations of State bank”
with highest mean of 4.3 corresponding to level Always and ranking first. While, the
item “The information quality in banking network and outside is good” was evaluated
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with lowest mean of 2.8 corresponding to level Often and ranking last. With respect to
objective criteria, both groups of respondents evaluated all items of objective criteria
with mean of 3.7 corresponding to level Frequent. They evaluated the item “The
political and legal environment is stable” with highest mean of 4.5 corresponding to
level Always and ranking first of all. While, the item “The economic environment
facilitates for both bank and customer” was evaluated with lowest mean of 3.1
corresponding to level Often and ranking last of all. With respect to the Credit
activities aspects of Agribank Thai Nguyen in term of four aspects, both groups of
respondents evaluated the Credit activities aspects of Agribank Thai Nguyen term of
four aspects with mean of 3.3 corresponding to level Risky. They evaluated the item
“Segment structure contain the big risks” with highest mean of 3.5 corresponding to
level More Risky and ranking first of all. They gave lowest mean for “Based on the
guarantee level, types of guarantee contain the big risks” with mean of 3.1
corresponding to level Risky. With respect to all items of Current status of debts, both
groups of respondents, they evaluated all items with mean of 3.4 corresponding to
level More Risky. They evaluated the item ‘doubtful debt” with mean of 4.0
corresponding to level Risky and ranking first of all. They evaluated the item “under
qualified debt” with lowest mean of 2.9 corresponding to level Risky and ranking last
of all. With respect to two aspects affecting the risk management of credit,
respondents evaluated them with mean of 3.7 corresponding to level More Risky.
Two items were evaluated with a same mean of 3.7.
It is recommended that the research and define the appropriate types of credit
for individuals. The bank should require guarantee properties for credits. The bank
should pay more attention more on long – term and medium credits. Review
procedure and conditions of them to manage and control in order to minimize risks of
credit. Review to define appropriate solutions to collect interest and capital. Review
and find suitable solutions to recovery both principle and interest fully. Research to
find suitable solutions to collect principle and interest. Review to produce clear
mechanism for “debt requiring attention”. Review to decrease cost to improve the
competitive ability of services. Creditors should carefully appraise the borrowers.
Review to define exactly ability of borrowers before credits. Review to establish a
good information network. Carefully manage segment structure; define exactly
targeted customers. The bank should pay attention on both subjective criteria and
objective criteria affecting on risk management of credit.




Chapter 1
INTRODUCTION
The banks system as the lifeblood play very important role of the economy.
Vietnam's banking system in recent years has gained encouraging achievements such
as contributing to stability and control inflation, the effective implementation of
national monetary policies . However, in the economy market, business risk is
unavoidable, especially in the field of risk banking business activities because it has
the potential to cause a chain reaction, spreading and increasingly complex expression
. The collapse of the focal bank to influence the whole of life - economic - political -and social resilience can spread within a country even just settle the whole region and
global.
Before the integration trend, the financial institutions, banks will always have
to deal with competition as well as many different types of risk. In Vietnam, the
starting point of the banks is quite low compared with the average in the region
should focus on developing the right and interest earnings are considered a priority.
This leads to the risk management of banks virtually Vietnam are still being left open
and the construction has not been a satisfactory and professional. That is why, the
ratio of bad debt problems arising from loss of control is becoming unsolved problem
in most of Vietnam's current banking and in the Bank for Agriculture and rural
Development in Vietnam - a financial institution operating mainly in the agricultural
sector and rural areas. Profit brought mainly from bank credit activity (accounting for
90% of total banking income).
2
Therefore, the credit risk management is crucial for the survival and development of
the bank comes up agricultural and rural development in Vietnam.
Background of the Study
Agribank Thai Nguyen province was formed in October 1998 on the basis of
getting the entire facility, workers from several departments of the provincial state
banks and state bank branches in the province districts Thai Nguyen, with workforce
of 760 people, 2.3 billion funding, and debt balances 3.5 billion mainly being overdue
Commercial banks is the industry that is high risk, which is the type of credit
business with the highest risk, especially in the context of the global financial crisis
now and will adversely Bank's activities in general and in particular credit activities.
In fact, on average between 2005 and 2009, the percentage of REO commercial banks
Vietnam has steadily increased from 12% to 30%, but from early 2010 until now, this
index has fallen down dramatically, REO 2010 decreased 40% compared with 2009,
2011 decreased 30% compared to 2010 (Source: annual reports of the Bank and the
author's calculations). Net interest margins are also in a similar situation. Profitability
decreased, while the CAR is very low, meaning that the commercial banks in recent
years has paid a high price does not perform well due to the credit risk management
which is most evident ratio of bad debts rise.
Recently, the credit risk management in commercial banks but has were given
more attention, but generally are not effective, not to be carried out in a basically.
Bank of Agriculture and Rural Development of Vietnam (Agribank) is one of
the first commercial bank in Vietnam, was a prestigious and affirmed its brand
domestically and internationally. Not outside the general trend of development of
Vietnam's banking system since our country transition to a market economy,
Agribank continuous expansion of asset size, capital size, in which the credit scale
3
constantly expanding and this is also the main source of profit for the operation
Agribank.
Currently, the credit rate on the total assets of the Agribank about 80%, while
the credit risk management is still inadequate, the percentage of total outstanding
loans high: from 0.98% in 2005 to 2.24% in 2009, 3.3% in 2010, 6.8% in 2011 and is
expected to increase further in 1012, ROE from 2006 to now tended to decrease
significantly (down 43% ). With Agribank Thai Nguyen, the percentage of total debts
balance in 2006: 1.26%, 2007: 2.58%, 2008: 2.34%, 2009: 1.42%, 2010: 0.98%,
2011: 0.58%. Despite the bad debt ratio of Agribank Thai Nguyen is also lower than
the average bad debt ratio of Agribank Vietnam but also the amount of bad debt
increases in the current economic conditions. If bank does not implement well to
control risk, the efficiency of credit activity will be decrease. The growth of bank is
slow.
With this situation, while credit remains the main activities of the commercial
banks, the activities of credit risk management is vital to the commercial banks as
well as Agribank Vietnam and Thai Nguyen Agribank in particular, and also means
that the stability of the economy.
From the above reasons, researcher has chosen the topic: “Credit Risk
Management in Agribank Thai Nguyen Province" to conduct the study of his
dissertation.
Statement of the Problem
On the basis of practical reasoning combined with analysis of the status and
operation characteristics of the Bank for Agriculture and Rural Development,
Vietnam to propose recomendation for credit risk management, improve credit risk
management of the Bank for Agriculture and rural Development of Vietnam,
4
contributing to the economic restructuring of agriculture and rural towards
industrialization and modernization, promoting our country's economic integration
and development.
Specifically it seeks to answer the following questions:
1. What is the profile of the respondents in terms of:
a) Age
b) Gender
c) Civil status
d) Education
e) Year in service
2. What is the assessment of the managers and staffs of Agribank Thai Nguyen
credit risk management in terms of:
a) Segment structure
b) Types of customers
c) Types of guarantee
d) Account outstanding
3. What is the assessment of the managers and staffs of Agribank Thai Nguyen
on the credit risk management in terms of:
a) Overdue Debt
b) Undue Debt
c) Debt requiring attention
d) Under qualified Debt
e) Doubtful Debt
f) Frozen Debt
g) Bad Debt
5
4. What is the assessment of managers and staff on the factors affecting credit
risk management of Agribank Thai Nguyen in terms of:
a) Subjective creteria
b) Objective creteria
5. What design improvement on the credit risk management of Agribank Thai
Nguyen can be proposed to minimize credit risk?
6. Is there a significant difference in assessment of two groups of respondents on
credit risk management and factors affecting the limitation of credit risks of
the bank?




BIBLIOGRAPHY
Books and Articles
1. Bui Thi Kim Ngan (2005), Improvement of abilities of risk credit management for
trade banks in Viet nam, the article of banking (pp.29-33).
2. Le Van Hung (2007), Credit risk of banks – moral point of view, the article of
banking (No 16, pp. 33 – 35);
3. Phan Thi Thu Ha (2006), “Credit risks of the system of trade banks in Viet Nam”,
the article of banking (No 24, pp. 10-12);
4. Duffee, G. R. and Zhou, C., (2001) Credit Derivatives in Banking: Useful Tools for
Managing Risk? Journal of Monetary Economics, 28, pp. 25-54.
5. Tim Hornal J.C. (2001) Managing Credit Risks, 05th edition, N.J. Philadenphia,
pp. 214.
6. Tim Powel (2005) Credit activities of Commercial Banks, Ranger: Roudledge
Fringe Book.
7. Zikmund W.G (2003) Potential Risks of commercial banks, 6
th
edition, Zurich, the
Dresden Press, pp 112- 114
8. Rose P.S. (2004), Commercial bank management, Finance Publishing,
9. Parliamentary republic socialist Vietnam (1998), Law on State Bank of Vietnam
and Law on Credit Institutions, Legal Publishing House, Hanoi
10. The Bureau of Statistics (2000 -2011), Statistical Yearbook
11. Nguyen Van Tien (2010), Risk Management in Banking, Statistics Publishing
House, Hanoi
12. Timothy W. Koch (The Dryden Press, Hinsdale, Illinois, 1988 (first edition), 1992
(second edition), 1995, third edition and 2000, fourth edition). “ Bank
Management”,. University of South Carolina.
100
13. Anthony Saunders(1999), “Financial Institutions Management – A Modern
Perspective”. The Mcgraw-Hill / Irwin Series in Finance, Insurance, and Real
Estate, Hardcover
14. State bank Viet Nam (1996), Law of Central Bank, Commercial bank and credit
organizations in the world”, References for building two draft laws state bank of
Vietnam and Law on Credit Institutions, Ha Noi
15. Kim Thi Ngoc Diep (2008) Banking Credit, Hanoi: Financial Publishing House.
16. Tran Van Viet (2004) Business in Commercial Banks, Hanoi: Banking Publishing
House.
17. Kim Thi Ngoc Diep (2008) Banking Credit, Hanoi: Financial Publishing House.
18. Tran Van Viet (2004) Business in Commercial Banks, Hanoi: Banking Publishing
House.
States decisions and decrees
1. Decision No. 90/QD-TTg dated on 07 March 1994 of Prime Minister of Vietnam,
Hanoi.
2. Minister Council – Vietnam’s Government (1988) Decision of Establishment,
Decree No. 53/HDBT , Hanoi
3. State Bank of Vietnam (1993) Decision No.67/QD-NH5 , Hanoi
4. State Bank of Vietnam (2005) Decision No. 493/QD- NHNN , Hanoi.
Others:
1. Asner Group (2010) Credit Working in the intergration period, Available at:
http://www.frbsf.org/econrsrch/working/wp99-06.pdf
2. Casner (2010) What is overdue debts? Available at:
http://www.pegint.biz/overdue_debt.htm
101
3. Coleen (2010) Definition of Under Qualified Debt, Available at:
http://en.wikipedia.org/wiki/under_qualified_debt
4. Dictionary online (2010) Definition of Undue debt, Available at:
http://www.dictionary.net/undue_ debt
5. HSBC Report (2011), Credir Risk Management, Available at:
http://www.hsbc.com/ Credit – risk – management
6. Muller, G (2010) Discussion about types of debts? Available at:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aIRZWmor4lek
7. Toumo (2010) What is doubtful debt? Available at:
http://www.fireworkszone.com/business/debt/doubtful_debts.html [March 30,
2010]
8. Young, L. (2010) What is bad debt? Available at:
http://en.wikipedia.org/wiki/Bad_debt
9. Wikipedia Online (2012) Definition of Credit risk, Available at:
http://en.wikipedia.org/wiki/Credit_risk
10. www.agribank.com.vn
11. www.mof.gov.vn

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