Table of Contents
1. Introduction ¬¬¬¬¬¬¬¬¬¬____________________________________________________ 4 Risk management & Vietcombank
2. Credit Risk _____________________________________________________ 6 3. Market Risk ____________________________________________________ 9 3.1. Liquidity Risk ___________________________________________ 9 3.2 Interest Rate Risk ________________________________________ 10 3.3. Foreign Exchange Rate Risk _______________________________ 11 3.4. Relationship between liquidity, interest rate
and foreign exchange rate and the economy in Vietnam ___________ 12 4. Other issues
4.1 Operational Risk ________________________________________ 13 4.2 Political Risk ___________________________________________ 13 4.3 Environmental Risk ______________________________________ 13 5. Conclusion ____________________________________________________ 14 6. References ____________________________________________________ 15
1.1. Introduction to risk management
R.S. Raghavan consider risk as what “associated with uncertainty and reflected by way of charge on the fundamental/basic i.e. in the case of business it is the Capital, which is the cushion that protect liability holders of an institution.” The term “risk” in this essay refers to financial risk in banking business. Risk is the potentially that both the expected and unexpected events may have an adverse impact on the bank’s capital or earnings. Risk is the greatest where the probability of occurrence or non-occurrence is equal. It can be said that the nature of a commercial bank’s activities today is risk acceptance and risk management. Moreover, banks are always forced to face with risk at any economic stage. Specially, risk has a huge effect on not only banks themselves but also the economy. Unfortunately, risk is an inherent objective factor which cannot be eliminated. We are just able use some methods or tools to limit its appearance and lighten the damage caused by it. Thus, accurate recognition and assessment of risk issues of banks in the right way is really crucial. All of banks have to manage risks because they want their organizations to survive, they want to have an efficient and uninterrupted operation, ability of identifying and achieving acceptable level of risk, earning stability of the banks, continued and sustained growth. In this assignment, risk management is going to be applied to Vietcombank and discussed in detail through mainly two categories: credit risk management and market risk management. Besides, other issues of risk management such as operational risk, regulatory risk, environmental risk, Basel’s new capital accord and Capital Adequacy Ratio are also referred in brief.
1.2. Introduction to Vietcombank (VCB)
Vietcombank is short for Joint stock commercial Bank for Foreign Trade of Vietnam. Established on April 1st, 1963 as a State-owned Commercial Bank with paid-up capital up to 3,955 billion Vietnamese Dongs, Vietcombank is the largest total asset joint stock commercial bank, the oldest commercial bank for external affairs in Vietnam and one of the third largest banks in Vietnam beside Agribank and BIDV as well. In addition, Vietcombank is interbank forex payment center for over 100 domestic banks and foreign banks’ branches operating in Vietnam, the first commercial bank in Viet Nam to deal foreign currencies, always takes the largest market share in the interbank forex market, the full member of: Vietnam Bankers Association, Asia Bankers Association, SWIFT, and Visa, MasterCard. Currently, Vietcombank also possessed 58 branches, 1 stock exchange floor, 87 exchange offices and 2 subsidiaries within Vietnam with 6,500 employees. With great endeavors and efforts, despite difficulties in business environment, Vietcombank still maintained a high and stable growth speed for years. Its credit activities...