NATIONAL ECONOMICS UNIVERISTY

School of Advanced Educational Programs

TOPIC 1:
CREDIT RISK MANAGEMENT FOR CORPORATE CUSTOMERS AT
BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM
(BIDV) – HA NOI BRANCH
Student : Bui Minh Anh
Class : Advanced Finance 61
Student’s ID : 11190047
Supervisor : Dr. Dang Anh Tuan
 Main Contents

Theoretical Framework of Credit Risk Management at a

1 Commercial Bank

Current Status of Credit Risk Management for Corporate

2 Customers at BIDV Hanoi

Solutions to Enhance Credit Risk Management for Corporate

3 Customers at BIDV Hanoi and Recommendations for BIDV
 CHAPTER 1:
THEORETICAL FRAMEWORK OF CREDIT RISK MANAGEMENT AT A COMMERCIAL
BANK

The Process of CRM

“Credit risk management is
the process of controlling the 1 2
potential consequences of Credit Risk Credit Risk
credit risk.” Identification Measurement
Brown, K., & Moles, P. (2014).
Credit risk management. K. Brown
& P. Moles, Credit Risk
Management, 16. 4 3

Credit Risk Control Credit Risk Monitoring

1
 CHAPTER 1

Results of Credit Risk Management

Loan Overdue Bad Debt

Bad Debt Ratio
Classification Debt Ratio Settlement

Treatment of Loan Loss Loan

Write-off
Collateral Provision Concentration

2
 CHAPTER 1

Loan Classification

1 Current

2 Especially mentioned Overdue debt

3 Substandard

4 Doubtful Bad debt

5 Loss

3
 1. O r g a n i z a t i o nal st r uct ur e
2. B usi n ess P er fo r m a n ce o f
fo r cr edi t r i sk m a na g em ent
B IDV Ha no i
o f B IDV

CHAPTER 2:
C U R R E N T S TAT U S O F C R E D I T R I S K M A N A G E M E N T F O R C O R P O R AT E C U S TO M E R S AT
J O I N T S TO C K C O M M E R C I A L B A N K F O R I N V E S T M E N T A N D D E V E LO P M E N T O F
VIETNAM – HANOI BRANCH

3 . Len di n g Si t ua t io n fo r 4. Process of Credit Risk

Co rpo ra te Custo m ers a t Management for Lending Corporate
B IDV H a no i Customers at BIDV Hanoi

4
 CHAPTER 2

1 2 3
Board of Directors Risk Management
General Director
(BOD) Committee (RMC)

6 5 4
Deputy General Units under the
Risk Council (RC) Directors, Heads Risk Management
of Divisions Division

1. Organizational Structure for Credit

Risk Management at BIDV

5
 CHAPTER 2
2. Business performance of BIDV Hanoi in 2018-2022

Unit: VND Billion

2018 2019 2020 2021 2022

Total Assets 26,211 32,438 44,825 58,799 50,519

Capital
25,004 33,581 43,413 56,645 47,940
Mobilization
Outstanding
10,617 12,008 13,765 18,227 21,446
Loans

Profit Before Tax 647 720 771 1,043.7 1,326.9

Service Revenue 181 236 257 335.7 462.5

Source: BIDV Hanoi Annual Report 2018-2022 Source: BIDV Hanoi Annual Report 2018-2022

A successful business performance over the last five years

Bad debt situation improved significantly in the previous year
6
 CHAPTER 2
3. Lending Situation to Corporate Customers at BIDV Hanoi

Number of loans to corporate customers 2018-2022

2018 2019 2020 2021 2022

Number of corporate customers that have

172 189 200 210 247
credit relationship with BIDV Hanoi

Number of corporate customers that are

2,768 2,956 3,072 3,067 3,087
active

Number of corporate customers that

belongs to each debt category

Cat. 1 139 151 167 182 202

Cat. 2 2 3
Cat. 3 2 1
Cat. 4
Cat. 5 1 1

Source: Risk Assessment Report of Corporate Customer at BIDV Hanoi

7
 CHAPTER 2
3. Lending Situation to Corporate Customers at BIDV Hanoi

Credit structure by customer size at BIDV Hanoi from 2019 to 2022

Source: Credit Report and Orientation of BIDV Hanoi in 2022

8
 CHAPTER 2
4. Process of CRM for Lending Corporate Customers at BIDV Hanoi

1. Credit Risk Identification

i. Overall evaluation of corporate customers • Historical operations

ii. Financial situation of corporate customers • Legal status and capacity
iii. Credit scoring of corporate customers to grant credit • Organizational model
iv. Determinants of the appropriate form of credit for
• Labor arrangement
lending corporate customers
v. Assessment of credit relationship of corporate • Management and
customers administration of the
vi. Assessment of risk and preventive measures Board of Directors
vii. Assessment of compliance with BIDV's policies and • Business activities and
regulations on credit extension of corporate customers prospects
viii. Credit granting conclusion and credit proposal to • Relationship with banks
corporate customers

9
 CHAPTER 2
4. Process of CRM

2. Credit Risk Measurement

Internal credit rating process for

corporate customers of BIDV Hanoi

10
No. Score Ranking Category CHAPTER 2
1 AAA Category 1
2 AA+ 4. Process of CRM
3 AA
4 AA 2. Credit Risk Measurement
5 A+
6 A
7 A Credit ranking results and debt
categories of corporate customers at
8 BBB BIDV Hanoi
9 BB+
10 BB
11 BB Category 2
12 B
13 D1 Category 3
14 D2 Category 4
15 D3 Category 5
11
 CHAPTER 2
4. Process of CRM for Lending Corporate Customers at BIDV Hanoi

3. Credit Risk Monitoring

Loan loss provision for corporate

customers at BIDV Hanoi in 2018 -
2022

(1) Customers
(2) Related customer groups
(3) Economic sectors/industries
The overall structure of the credit (4) Geographical areas
portfolio is monitored at 7 levels (5) Countries or a group of closely related countries
(6) Credit products
(7) Collateral types

12
 CHAPTER 2
4. Process of CRM for Lending Corporate Customers at BIDV Hanoi

1) The first line protection divisions are responsible for 4. Credit Risk Control
controlling credit risk during operations,
implementing preventive measures to minimize
credit risk, and ensuring compliance with approved
risk limits.

2) The second line protection divisions are accountable BIDV Hanoi also manages
for monitoring, regulating, preventing credit risk, and problematic loans and collateral
proposing measures to mitigate emerging risks in
assets, using an internal reporting
accordance with the risk appetite, risk management
policies, and approved credit risk limits. system, documents, databases, and
information technology.

3) The third-line protection divisions are responsible for

monitoring and evaluating credit risk independently.

13
 Case Study
RISK ASSESSMENT REPORT
1- CUSTOMER INFORMATION 2- CONCLUSION AND RECOMMENDATION
Name/CIF : AN VU IMPORT EXPORT AND TRADE COMPANY LIMITED | Comments on the proposed contents of the Customer Relations Department
9191272 ☐ Agree ☒ Conditionally agree ☐ Disagree
Business : 0315 - Metal Production
Related Customer Group : None For the proposed credit - Short-term credit limit:
Internal Credit Rating Rank: A
Amount of credit grant 110,000,000,000 VND (One hundred and ten billion dong)
For Collateral: Maximum loan amount: 110,000,000,000 VND
Including Maximum amount of guarantee: 110,000,000,000 VND
Maximum amount to open L/C: 110,000,000,000 VND.
- Leverage ratio: 58.17% ≤ 80%
Product Type LOAN
- Unsecured credit limit/Equity: 1.65
times (< 3) Purpose of granting credit GI - Trade in metals and metal ores
Term: 12 Months
Meeting the policy Credit period Expiry date of the credit: 12 months from the date of signing the credit
extension contract
Withdrawal time 12 months from the date of signing the credit extension contract
- Minimum ratio of collateral assets:
VND 33,000 million (> VND 32,223 Principal: Pay at the end of the period according to each specific credit
Term of principal and contract
million) interest payment
Interest: Monthly paid
- Interest rate: According to BIDV's policy from time to time
Not meeting the policy Interest rates, fees
- Fee: According to BIDV's policy from time to time

Ratio of collateral assets after addition of the short-term credit limit: 34.3% => Meeting the policy.
14
 RESULTS

Total revenue for lending corporate customer Bad debt ratio for corporate customers is
increased while loan loss provision decreased controlled at a low level

Income from Structure and quality of

2020 2021 2022 debt from Corporate 2020 2021 2022
Corporate Customers
Customers
Total credit income 157.04 212.59 340.42 Bad Debt Ratio 0.61% 0.74% 0.35%

Earnings from profit 154.57 209.88 338.54 Bad debt balance 88.33 136.89 76.98

Other income from Cat. 2 Debt Ratio 0.18% 0.17% 0.24%

2.47 2.70 1.88
credit
Total loan loss Cat. 2 Debt Balance 25.81 31.05 52.61
29.33 131.74 46.75
provision Mid-term and long-term
7,519.60 9,816.80 11,643.05
Interest Margin 1.83% 2.63% 2.43% debt balance

15
 CHAPTER 2
Achievements
(1) A comprehensive credit risk management
system has been established
(2) Development of the internal credit
information system expedites the CRM
process
(3) Strict regulations on collateral assets and
rigorous enforcement
(4) Staff training has received adequate
attention
Limitations
(1) Absence of a distinct risk management
procedure for corporate customers
(2) Corporate customers are not categorized
according to their industries and sectors
(3) Corporate customers are constantly asked for
additional collateral
(4) Asymmetric information and lack of
transparency
16
 CHAPTER 3

Recommendations for BIDV

(1) Issuing a credit process tailored to corporate customers

(2) Strengthening the credit rating system in accordance with Basel
standards for corporate customers
(3) Issuing updated credit policy to reduce the need to add more
collateral from lending corporate customer
(4) Issuing more credit packages for corporate customer
(5) Researching and developing a credit portfolio risk measurement
model for corporate customers

17
 NATIONAL ECONOMICS UNIVERISTY
School of Advanced Educational Programs

THANK YOU
FOR LISTENING!
Student : Bui Minh Anh
Class : Advanced Finance 61
Student’s ID : 11190047
Supervisor : PhD. Dang Anh Tuan