improving credit limit system in Vietcombank

LIST OF TABLES
ABBREVIATIONS 4
LIST OF TABLES 5
LIST OF CHARTS 7
INRODUCTION 11
Chapter 1 14
THEORETICAL FRAMEWORKS ON CREDIT LIMIT AT COMMERCIAL BANKS 14
1.1Bank Credit 14
1.1.1Definition 14
1.1.2Characteristics of bank credit 15
1.1.3Roles of bank credit 16
1.2Credit limit system in commercial bank 19
1.2.1Definition of credit limit system 19
1.2.2Roles of credit limit system 19
1.2.3Basis for credit limit system 21
1.3Factors effecting credit limit system in banks 34
1.3.1External factors 34
1.3.2Internal factors 36
Chapter 2 38
CREDIT LIMIT SYSTEM AT VIETCOMBANK 38
2.1Overview of Vietcombank and its performance 38
2.1.1Introduction to Vietcombank 38
2.1.2Vietcombank’s major performance indicators 43
2.2Credit activities at Vietcombank 45
2.2.1Overview of credit operation at Vietcombank 45
2.2.2Credit policies in Vietcombank 48
2.2.3Credit activities 50
2.2.4Types of credits 56
2.3Credit limit system at Vietcombank 58
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2.3.1Structure of the system 58
2.3.2Regulations of credit limit system 62
2.3.3Procedure for approving credit limits 62
2.3.4Process of determining the credit limit 63
2.3.5Process for credit coring and rating customer at Vietcombank 70
2.4Assessing credit limit system at Vietcombank 79
2.4.1. Achievements 79
2.4.2. Limitations 81
2.4.3. Causes of limitations 82
Chapter 3 86
PROPOSED SOLUTIONS TO IMPROVE CREDIT LIMIT SYSTEM AT
VIETCOMBANK 86
3.1.Orientation of VCB’s credit activities 86
3.1.1.Orientation 86
3.1.2.Objectivities of VCB’s credit activities to 2012 86
3.2.Solutions to improve credit limit system at VCB 88
3.2.1.Improve structure of VCB 88
3.2.2.Improve credit policies 90
3.2.3.Improve credit scoring and rating 92
3.2.4.Improve information technology systems 93
3.2.5.Strengthen human resources 94
3.3.Recommendations 94
3.3.1.Recommendation to related agencies 94
CONCLUSIONS 97
REFERENCES 98
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LIST OF CHARTS
ABBREVIATIONS 4
LIST OF TABLES 5
LIST OF CHARTS 7
INRODUCTION 11
Chapter 1 14
THEORETICAL FRAMEWORKS ON CREDIT LIMIT AT COMMERCIAL BANKS 14
1.1Bank Credit 14
1.1.1Definition 14
1.1.2Characteristics of bank credit 15
1.1.3Roles of bank credit 16
1.2Credit limit system in commercial bank 19
1.2.1Definition of credit limit system 19
1.2.2Roles of credit limit system 19
1.2.3Basis for credit limit system 21
1.3Factors effecting credit limit system in banks 34
1.3.1External factors 34
1.3.2Internal factors 36
Chapter 2 38
CREDIT LIMIT SYSTEM AT VIETCOMBANK 38
2.1Overview of Vietcombank and its performance 38
2.1.1Introduction to Vietcombank 38
2.1.2Vietcombank’s major performance indicators 43
2.2Credit activities at Vietcombank 45
2.2.1Overview of credit operation at Vietcombank 45
2.2.2Credit policies in Vietcombank 48
2.2.3Credit activities 50
2.2.4Types of credits 56
2.3Credit limit system at Vietcombank 58
2.3.1Structure of the system 58
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2.3.2Regulations of credit limit system 62
2.3.3Procedure for approving credit limits 62
2.3.4Process of determining the credit limit 63
2.3.5Process for credit coring and rating customer at Vietcombank 70
2.4Assessing credit limit system at Vietcombank 79
2.4.1. Achievements 79
2.4.2. Limitations 81
2.4.3. Causes of limitations 82
Chapter 3 86
PROPOSED SOLUTIONS TO IMPROVE CREDIT LIMIT SYSTEM AT
VIETCOMBANK 86
3.1.Orientation of VCB’s credit activities 86
3.1.1.Orientation 86
3.1.2.Objectivities of VCB’s credit activities to 2012 86
3.2.Solutions to improve credit limit system at VCB 88
3.2.1.Improve structure of VCB 88
3.2.2.Improve credit policies 90
3.2.3.Improve credit scoring and rating 92
3.2.4.Improve information technology systems 93
3.2.5.Strengthen human resources 94
3.3.Recommendations 94
3.3.1.Recommendation to related agencies 94
CONCLUSIONS 97
REFERENCES 98
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ABBREVIATIONS 4
LIST OF TABLES 5
LIST OF CHARTS 7
INRODUCTION 11
Chapter 1 14
THEORETICAL FRAMEWORKS ON CREDIT LIMIT AT COMMERCIAL BANKS 14
1.1Bank Credit 14
1.1.1Definition 14
1.1.2Characteristics of bank credit 15
1.1.3Roles of bank credit 16
1.2Credit limit system in commercial bank 19
1.2.1Definition of credit limit system 19
1.2.2Roles of credit limit system 19
1.2.3Basis for credit limit system 21
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1.3Factors effecting credit limit system in banks 34
1.3.1External factors 34
1.3.2Internal factors 36
Chapter 2 38
CREDIT LIMIT SYSTEM AT VIETCOMBANK 38
2.1Overview of Vietcombank and its performance 38
2.1.1Introduction to Vietcombank 38
2.1.2Vietcombank’s major performance indicators 43
2.2Credit activities at Vietcombank 45
2.2.1Overview of credit operation at Vietcombank 45
2.2.2Credit policies in Vietcombank 48
2.2.3Credit activities 50
2.2.4Types of credits 56
2.3Credit limit system at Vietcombank 58
2.3.1Structure of the system 58
2.3.2Regulations of credit limit system 62
2.3.3Procedure for approving credit limits 62
2.3.4Process of determining the credit limit 63
2.3.5Process for credit coring and rating customer at Vietcombank 70
2.4Assessing credit limit system at Vietcombank 79
2.4.1. Achievements 79
2.4.2. Limitations 81
2.4.3. Causes of limitations 82
Chapter 3 86
PROPOSED SOLUTIONS TO IMPROVE CREDIT LIMIT SYSTEM AT
VIETCOMBANK 86
3.1.Orientation of VCB’s credit activities 86
3.1.1.Orientation 86
3.1.2.Objectivities of VCB’s credit activities to 2012 86
3.2.Solutions to improve credit limit system at VCB 88
3.2.1.Improve structure of VCB 88
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3.2.2.Improve credit policies 90
3.2.3.Improve credit scoring and rating 92
3.2.4.Improve information technology systems 93
3.2.5.Strengthen human resources 94
3.3.Recommendations 94
3.3.1.Recommendation to related agencies 94
CONCLUSIONS 97
REFERENCES 98
INRODUCTION
1. Rationale of the research
Expanding credit activities is one of the most important requirements of a fast
growing economy and commercial banks need to maintain and improve their
competitive positions. However, expanding credit means increasing risk in credit
activities of banks. Credit limit system is designed to help commercial banks settle
the conflict between growth target and risk management.
Bank for Foreign Trade of Vietnam is one of the leading commercial banks in
Vietnam with constantly increasing total assets, loans and equity. As other commercial
banks, designing and maintaining a credit limit system is crucial to Vietcombank’s
development,
Although Vietcombank has already implemented its credit limit system and credit
activities clearly and uniformly but a lot remains to be done for the final purpose of the
perfection of this system.
Therefore, the author decided to choose the theme ‘’improving credit limit
system in Vietcombank’’ in order to find out some feasible solutions for the bank.
2. Objectives of Research
This study aims at finding out Vietcombank’s issue, the weaknesses and
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recommends solutions to improve its credit limit system. This objective will be
achieved by performing the following tasks:
- To summarize major aspects of credit limit system in a commercial bank and
the basis to design this system
- To analyze and evaluate current status of credit limit system of Vietcombank
- To propose some solutions to improve credit limit system at Vietcombank
3. Research Methodology: Survey/short interview
The research will cover fact, concepts; techniques and approaches explored
from credit limit
in identifying problems and therefore find out necessary solutions
for
Vietcombank. The research also gives a quantitative and qualitative analysis of
this
application process
To find out disadvantages of credit limit system, I chose one company; use
secondary data such as financial report, introduction of the company, information of
company on website, newspaper…to evaluate all qualitative and quantitative indicators.
I also have short interviews with manager or transaction staff of the company to get
more and confirmed information before giving out final decision.
4. Scope and Limitation
Credit limit system in Vietcombank applied for all kind of customers such
as: financial institutions, enterprises, households and individuals. In this thesis,
the scope of credit limit system in banking only focuses on customers which are
enterprises to analyze then issue recommendations to improve credit limit system
in Vietcombank.
The research refers to theoretical frameworks on Credit scoring and rating
at commercial banks and the actual credit limit system in Vietcombank. After
analysis, the research will show some problems in VCB then give some
recommendations to improve.
The research also refers to actual Vietcombank credit activities and the role
of credit performance to business operation.
Nowadays, changes in banking business are very fast but the policies and
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regulations of officers, State-banks and Vietcombank can not be changed
immediately. So sometimes, these hinder the Vietcombank’s business. Besides, the
innovation of credit products is more flexible and modern so the type of enterprise is
changing and becoming more difficult to measure. Therefore, creditors and managers
need to improve their skills, find more useful methods to measure, score and rate
them accurately.
5. Structure of the thesis
The thesis consists of three main chapters as follows:
Chapter I: Theoretical frameworks on Credit limit at Commercial bank
Chapter II: Credit limit system at Vietcombank
Chapter III: Proposed solutions to improve credit limit system at Vietcombank
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Chapter 1
THEORETICAL FRAMEWORKS ON CREDIT LIMIT AT
COMMERCIAL BANKS
1.1Bank Credit
1.1.1 Definition
Credit relationship is established and existed as objective demands of capital
circulation process to tackle excess or, deficiency of capital that often occurs in the
economy.
A credit is a legal contract where one party receives resource or wealth from
another party and promises to repay him on a future date along with interest. In
simple terms, a credit is an agreement of postponed payments of goods bought or
loan. With the issuance of a credit, a debt is formed. (10)
In other definition, credit is a temporary transfer of value (assets) from the
owner to the user in a certain period of time, Users have to return a larger value on
due date. There are three categories of credit: temporary transfer of value, limit time
and reimbursement.
There are many types of credit such as state credit, business credit, personal
credit and bank credit. In which bank credit is transferring assets (capital) between
banks with other entities in the economy. In this relationship, the bank has role as
borrowers (debtors) and role as the lender (creditor). This is an indirect relationship
where the depositor, through the intermediary role of banks, invests capital on who
need.
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