At Talkshow Finance Street (The Finance Street) on VTV8, experts assess that a business or a bank operates well and effectively, risk management is always focused and at a low cost of risk. . Therefore, risk management is receiving more and more attention, especially in the context that the market and economy are still under pressure from outside such as the global economy showing signs of slow growth. On the contrary, rising interest rates and political risks in many countries, thereby helping to improve market quality and protect investors.
Editor-in-Chief Mui Khanh Ly: Although Vietnam’s economy is recovering well, there are still pressures from outside such as slowing economies, rising interest rates… According to him, the challenges facing businesses in What is the country facing?
Mr. Nguyen Hung, General Director of Tien Phong Commercial Joint Stock Bank (TPB): In fact, we have just come out of the pandemic and businesses have just started to recover. There are a number of industries that have grown during the pandemic, but quite a few have been affected. Therefore, businesses will have to make a lot of efforts, not to mention the events and fluctuations in the market and the world that affect the activities of the domestic economy as well as that of enterprises.
Mr. Nguyen Hung, General Director of Tien Phong Commercial Joint Stock Bank (TPB)
For example, inflation in the world fluctuated, the dollar appreciated strongly, the FED interest rate increased very high in recent months, and geopolitical issues caused the prices of goods, materials, and fuel to fluctuate. increased, putting certain pressure on domestic inflation, leading to measures by the Government and the State Bank to control inflation in order to achieve the target set by the National Assembly. It is a chain of events that will happen and will have effects, making it more difficult for businesses and banks.
However, we can also hope that the last months of the year will improve because according to the World Bank as well as a number of other reputable organizations, Vietnam’s economy in the second half of 2022 can grow at a high rate. with a rate of about 6.9-7.5%. I think the future will probably be better than it is now.
On the side of banks, who are standing in two roles, both as borrowers and as listed companies, how will risk management be?
Banking is a risky business, so risk management is very important. There are many types of risks for banks. For customers, risks such as borrowers defaulting on loans are credit risk. But the bank also has to face many other risks, such as operational risks to ensure continuous operation, risks to information technology systems, security and insurance issues. confidentiality and market risks are very large.
In the bank’s investment portfolio, not only loans but also many other investment portfolios, fluctuations in interest rates and exchange rates all have a certain influence on the bank’s performance. For example, in the past time, interest rates fluctuated so much, exchange rates changed a lot, if there are no tools, no proper management, it will easily lead to losses. For banks, we lend to hundreds, thousands, and millions of customers.
In addition, banks are increasingly dependent on technology and systems that serve online every day, with tens of thousands and hundreds of thousands of transactions per second, ensuring the safety of the bank’s continuous operation. Banking is very important. I think that banks must pay great attention to risk management and good risk management is the secret to the success of any organization.
Digital transformation brings a lot of benefits. Currently, our bank has up to 95% of transactions done on digital channels, only 5% is done on channels at counters, branches, stores. transaction point. But along with benefits, we will have to face certain risks, especially risks of security, safety, security problems, problems, errors in operation, in programming, it only takes one second to have tens of thousands of customers affected.
Therefore, the bank’s system must always be ready to ensure continuity, what we call the Business Continuity Program.
In the last two years of the pandemic, the continuity program has never been so harsh. But the bank still managed to overcome it and the two years of the pandemic were also two very sublime years for the banking industry in general. To ensure that, we must invest in both a very strong information technology infrastructure, and have plans and scenarios to prevent operational risks.
The banking industry in the world in general and in Vietnam in particular has certain risk management standards that banks are required to follow which are quite complicated and it is not easy to comply. For example, in the Vietnamese market, the State Bank of Vietnam has some regulations according to Basel II standards. Currently, there are only a few banks that meet that standard.
At the bank, we soon realized the importance of risk management, so we have conducted it before and until now have fully complied with Basel III standards, one level higher than the requirements of the State Bank in Vietnam. current time. Such compliance requires banks to prepare a large financial capacity and potential as a buffer when risks occur.
In addition, the bank also has a rating system of independent international organizations, such as S&P, Moody’s, which is a rating agency, evaluating a number of banks.
Even in the banking industry, the State Bank has its own rating system. The State Bank of Vietnam has circulars such as Circular 52, Circular 23 amending the Camels model, assessing all aspects of banks, including the issue of financial potential. governance, risk management, operational efficiency and many other factors.
With such regulations, not only domestically but also internationally, banks must set up a risk management apparatus from the bottom up to the head office to manage all risks above. . We know that risk is always possible. If good governance will be limited and risk costs will be lowest and thus maximize the operational efficiency of the bank.
Great pressure to control inflation
In the face of pressures from the global economy, opening more credit “valves” and opening up capital for businesses are also very interested by businesses and investors, how do you rate this issue? ?
This year, people outside the industry are more interested and aware of credit “room”, because it has several factors. In previous years, in the first quarter, credit only increased by 3-4%, but in the first quarter and second quarter of 2022, the whole market increased by double digits. Like last year, the State Bank in the first quarter only granted banks about 4-5% on average, but no banks or customers reported a lack of credit “room”. Because usually the first quarter is called a low-lying area, there is the Lunar New Year and then January is the month of entertainment, many customers have not worked right away or “abstained” from borrowing money at the beginning of the year. But this year, the growth was too fast, so the room ran out and the State Bank strictly controlled the credit room, on average in the first months of the year,
Thus, there will be about 4% more that the State Bank will allocate at the end of the year, so it will be allocated sooner or later.
Another channel for raising capital of enterprises is corporate bonds, but after a number of problems in the first half of this year, that channel is currently “stagnant” and now all capital is channeled into the credit channel. use. Another factor is rising interest rates, price issues, and cost-push inflation due to rising costs in the economy. This also puts a great pressure on controlling inflation below 4%. Therefore, it is imperative for the State Bank to control credit capital very carefully.
So how important is the risk management of the bank in getting more “room” of credit?
The State Bank has criteria for allocating credit “room” to each bank. Last year, Tien Phong Bank was also the bank with the highest credit room allocation in the industry. The State Bank will be based on firstly the scoring and ranking system of the State Bank, if any bank performs well, the ranking is high, the risk is low, the management is good, etc., according to the set of criteria. Scoring that will be a better rate.
The second is related to the story of banks using credit in accordance with the credit orientation of the State Bank or not.
In addition to issues related to support for the soundness and stability of the credit system in general, banks participating in supporting such programs also have an increased credit room. Normally, banks with good, stable and low-risk operation quality will have a higher credit room allocation ratio and vice versa.
In addition to the efforts of listed businesses and banks, in the current context, how will macro solutions be needed to support businesses to recover strongly after the epidemic as well as to combat the consequences of the pandemic? Challenges from the outside?
We all see that regulators will get better and better at controlling the market and regulations will get tighter and tighter. International standards are gradually being applied to Vietnam. For example, risk management standards according to Basel II, Basel III already exist and even some countries around the world have applied Basel IV, we will have to get to that stage.
In addition, according to the roadmap, the Ministry of Finance also requires most listed companies to comply with IFRS financial reporting standards by 2025. We have done it and to ensure that it is a bank. can soon comply with IFRS standards and also include Basel. The regulations of the legal documents systems of the State Bank and the Government will also be more standard in the future, because at present, international organizations, the World Bank or a number of other organizations They are also supporting the Government and the State Bank in the implementation to gradually bring the Vietnamese market closer to world standards.
Therefore, which units, organizations, and banks that go early will have an advantage and the State Bank is also encouraging banks to comply with international standards early. We, as our name is Pioneer Bank, also strive to be pioneers to comply with international standards on risk management.
And how will investors have to choose banks with good and effective risk management ability?
With a bank, we will look at criteria such as bad debt ratio, low bad debt ratio, which proves that the bank has good risk management. The second is the ratio of the reserve fund for bad debts that the bank has set aside to ensure that if bad debt occurs later, that fund can be used to compensate for bad debts. If that fund is larger than the amount of bad debt, it proves that the bank has made enough provisions and has financial potential.
In addition, there are ratings by international organizations, domestic organizations, or recognized by the State Bank of Vietnam as having complied with risk management and financial reporting standards. by international. These are indicators that an organization, a bank is being well managed. Even our feelings when transacting, whether on physical channels at branches, transaction points to online channels, but seeing everything smooth and good service, it also shows that the unit is also being used. good governance.
Source: CafeF
Source: Vietnam Insider