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

How significant does the current credit risk management decreases the credit risk of Techcombank? What are the strategies to decrease the credit risk of Techcombank? In order to address this research question, this paper shall measure the credit risk under the previous risk management strategies compared to the credit risk under the current risk management strategies. If the findings indicate that the current credit risk management does not reduce the credit risk of the bank, then the reasons for it shall be analysed. 1.1.3. Statement of Research Hypothesis In this research study the Null hypothesis (H0) will be tested against the alternate hypothesis (H1) in each case.

The null hypothesis (H0) states that Techcombank has established effective controls for reducing credit risk occurrence while the alternate hypothesis (H1) states that Techcombank still does not have established controls for effectively reducing its credit risk. 1.1.4. Scope of the Study The scope of this research is restricted to a study of credit risk and credit risk prevention in Techcombank Vietnam. However, in order to be able to critically review the credit risk situation in Techcombank of Vietnam, the research will rely on literature review from various authors about credit risk, credit risk controls and credit risk prevention. 1.2.

Research Objectives / Hypotheses The specific objectives of the research are as follows: 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 1.2.1. Significance of Study This study will identify the main causes of credit risk for Techcombank before and after the. 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.