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Effectiveness of the Current Credit Risk Management of Techcombank in Vietnam - Dissertation Example

Finance & Accounting
Pages 55 (13805 words)
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This research is being carried out for analysis and review of credit risk faced by banks; determining Techcombank’s credit risk controls measures; proposing standards for measuring the credit risk in a bank such as Techcombank based on scientific footings. …

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Effectiveness of the Current Credit Risk Management of Techcombank in Vietnam

The paper tells that for many banks, loans are the most obvious and the largest source of credit risk. However, there are other sources of credit risk which include bank acceptances, interbank swaps, bonds, equities, options, guarantees among others. In the modern times, as the economy of the world continues to grow and the effect of globalization continues to impact on economic activities, need for financing by investors has also grown, causing an increase in demand for financial services from banks. With the growth of the world’s economy, the number of people using banking services is also increasing as many people are increasingly appreciating use of bank services to undertake their businesses and day-to-day financial operations. As the number of borrowers requiring financial services from Techcombank Vietnam increases, the number of financial services extended to borrowers in form of loans, guarantees, bank acceptances, trade financing and foreign exchange transactions is also increasing. Techcombank Vietnam can fail in two ways. First, a bank can become insolvent by suffering losses on its assets or investment portfolio, resulting in a depletion of its capital. Second, a bank can be a profitable business operation, but fail because it cannot meet the liquidity demands of its depositors. The greater a banks expected deposit variability, the greater the proportion of liquid assets Techcombank should hold. The dilemma facing banks is reconciling the conflicting goals of solvency and liquidity on the one hand and profitability on the other. ...
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