notes to the consolidated financial statements - Sacombank

RISK MAnAGEMEnt
IMPROVEMENT OF EFFICIENCY IN COMPREHENSIVE RISK MANAGEMENT
Credit risk management in accordance with
international standards and practices
Facing increasing credit risks, Sacombank applied a
number of synchronous credit risk management solutions
in 2011 in accordance with the regulations of the State
Bank of Vietnam and international standards. The details
are as follows:
n Issued credit risk management policies covering all
matters related to credit granting, including: applicable
conditions, and methods of inspection, supervision,
management and recovery of loan debts in order to
limit the risks for each specific customer.
n Developed an advanced internal credit rating system
in cooperation with the international audit firm,
Ernst & Young, on the basis of the credit rating model
recommended by the advisor, IFC, to Sacombank in
2005. As a result, Sacombank has improved its internal
credit rating system in accordance with the new
regulations on qualitative classification of debts in
the policies issued by the State Bank of Vietnam (SBV)
in 2011. This system also develops criteria for scoring
credit ratings for customers by groups of industries for
which some distinctive credit products of Sacombank
are designed. This is an effective tool for evaluating
borrowers and making lending decisions and it helps
Sacombank assess accurately the risk exposure of each
loan and classify debts in accordance with international
practices, and serves as the basis for improving the
quality of credit management and proper provision
making. In 2012, Sacombank will continue to develop
the Expected Default Frequency of customers, hence
determining the amount of exposure created by
each customer in order to prepare plans to help the
customers and make provision for risks immediately
upon grant of credit.
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ANNUAL REPORT 2011
n Issued regulations relating to the system for
decentralisation of credit grant decisions to ensure that
all matters relevant to credit risks are communicated
and dealt with thoroughly from the headquarters to
branches. The decision-making system was developed
based on the experience, capabilities, knowledge and
ethics of the individuals involved in the process of
credit grant decision-making, and, above all, the risk
appetite of the Bank.
Moreover, Sacombank has built and successfully operated
the Credit Limit Supervision Model, the IFRS-based Risk
Provisioning System, the Risk Factor Supervision Model, and
a technology-based money filtering and anti-laundering
process according to international standards, etc. Thanks to
the above models and systems, the Bank can manage risks
effectively in the context of high increases in bad debts and
overdue debts.
Based on the principle of setting Safety as the top-priority
objective, the risk management activities have been carried
out carefully by Sacombank to create the best foundation
for overcoming challenges, grasping suitable business
opportunities in the market, boosting business performance
and fulfilling its business plan in 2011. Sacombank has also
promoted the role of Committees/Sub-committees in the
prevention and handling of overdue debts at the Head Office
and in the Regions in order to provide timely alerts and
solutions to overdue debt threats, thus succeeding in keeping
the bad debt ratio at only 0.56% and the overdue debt ratio
0.86% of the total lending balance in 2011.
Priority for liquidity and market risk management
In 2011, Sacombank successfully developed and applied a
liquidity risk and interest risk management model
recommended by its advisor, PwC. Based on this model,
Sacombank was able to forecast highly accurately the trends
of cash flows, interest rates, and customers’ past behaviours,
so that it could make proper adjustments to its business
activities in each period.
“At Sacombank, most employees involved in the business activities of the Bank are carefully
selected and trained systematically and scientifically in both professional knowledge and business
ethics in order to provide a workforce that is skilled, honest and responsible.”