THEORETICAL BASIS OF CREDIT RISK MANAGEMENT IN
Overview of Credit activities at Joint Stock Commercial Bank
Regulations governing the lending activities of credit institutions and foreign bank branches focus on the process of credit extension Lending involves a credit institution providing a specified amount of money to customers for designated purposes, with an agreement on repayment terms that include both principal and interest over a predetermined timeframe.
(Based on Clause 01, Article 02 of Circular 39 of the State Bank of Vietnam)
Bank credit encompasses various forms such as lending, discounting, guarantees, and financial leasing While credit is a broader concept that includes lending, lending remains the most significant and foundational aspect, representing a substantial portion of the activities conducted by commercial banks.
Bank credit refers to a financial transaction involving the transfer of assets, such as money or goods, from a lender to a borrower, which can include individuals, businesses, and other entities The borrower utilizes these assets for a predetermined period and is obligated to repay both the principal and interest to the lender by the agreed-upon due date Similar to other forms of credit, bank credit encompasses three key components.
There is a transfer of the right to use capital from the owner to the user
This transfer is temporary or definite
This transfer is accompanied by costs.ponsible for repaying the principal and interest to the lender when the payment is due
Credit relationship must satisfy 4 characteristics Trust, repayment, timeliness and contains many potential risks
A credit relationship fundamentally relies on trust, as lenders are willing to extend loans only when they believe that borrowers possess both the intention and capability to repay the borrowed amount.
A successful credit relationship hinges on the belief that the borrower will repay the loan, which is often influenced by the perceived value of the loan amount Over time, both the lender and borrower recognize that the borrower will derive greater value from the loan, establishing a foundation for trust and cooperation in the credit relationship.
Reimbursement is a fundamental aspect of credit relationships, setting them apart from other financial interactions Timely repayment of both principal and interest is essential, ensuring that the total return exceeds the original capital This difference represents the cost of temporarily utilizing the funds.
The value of capital for its owner lies in its current use, making it essential for the investment to be appealing enough for the owner to consider relinquishing that use Conversely, the absence of a return indicates a flawed credit relationship.
When calculating the time limit for a loan, it's essential to remember that credit is fundamentally based on trust; the lender expects the borrower to repay the amount at a specified future date The borrower is granted access to the funds only for a limited duration, and once this agreed-upon period concludes, the borrower must return the funds to the lender.
Credit carries various potential risks, primarily due to information asymmetry, which leaves lenders with an incomplete understanding of borrowers An ideal credit relationship occurs when the borrower repays both the principal and interest promptly and in full.
1.1.3 The role of commercial bank credit
Credit is essential for meeting capital needs and fostering economic development through investment To facilitate capital concentration and enhance production, businesses often rely on loans from commercial banks With sufficient capital, enterprises can optimize their operations, leading to improved goods and cash flow Moreover, credit plays a vital role in promoting an economic accounting regime In today's integrated market environment, domestic businesses are well-positioned to access international markets, allowing Vietnamese products to reach global audiences and promoting integration into the international economy.
10 indispensable for the credit tools of commercial banks to create leverage to finance underdeveloped economic sectors and key economic sectors.
Risks credit risk of commercial banks
Risk in commercial banking is both random and measurable, significantly impacting actual profits The disparity between actual and expected profits indicates the level of risk a bank faces Among various risks, credit risk stands out as it is inherent to the core activity of commercial banks—credit extension This type of risk occurs frequently and plays a crucial role in shaping the overall performance of commercial banking operations.
Credit risk refers to the potential financial loss that commercial banks face when borrowers fail to meet their repayment obligations, including late payments, partial payments, or defaults on interest and principal as stipulated in the credit agreement.
Credit risk is fundamentally linked to the principles of bank credit, particularly the principles of timeliness and repayment It encompasses not only lending activities but also various credit-related functions of banks, including guarantees, trade finance, interbank market participation, and securities such as bonds and stocks Despite this broader scope, this thesis focuses primarily on credit risk associated with lending to customers.
The Basel Committee on Banking Supervision defines credit risk as the potential loss of assets that occurs when a counterparty does not meet its financial obligations This includes instances where a bank's debtor fails to pay either the principal or interest on a debt when it is due.
This research defines credit risk as the likelihood of financial loss for commercial banks resulting from a customer's failure or inability to meet their debt repayment obligations, including both principal and interest.
Based on the causes of risk:
Transaction risk, a subset of credit risk, emerges from challenges in transaction processes, loan approvals, and customer assessments This type of risk encompasses selection risk, guarantee risk, and operational risk, highlighting the complexities involved in managing financial transactions effectively.
Selection risk pertains to the challenges involved in credit assessment and analysis when a bank evaluates loan options for making lending decisions Additionally, security risk arises from various security standards, including the terms outlined in the loan contract, the types of collateral assets, the presence of a guarantor, and the loan amount relative to the value of the secured property.
Operational risk is the risk associated with loan management and lending activities, including the use of risk rating systems and techniques for dealing with problem loans
Portfolio risk is the risk that arises due to limitations in the bank's loan portfolio management, which is classified into intrinsic risk and concentration risk
Based on the objectivity and subjectivity of the causes of risk
Objective risk arises from external factors like natural disasters, enemy sabotage, death, disappearance, and unforeseen fluctuations These risks can lead to loan losses even when borrowers adhere strictly to policy regulations.
Subjective risk due to subjective causes of borrowers and lenders because of accidental or intentional loss of loan capital or for other subjective reasons
Based on the customer's debt repayment ability
Failing to repay a loan on time can pose significant risks for borrowers When a credit relationship is formed, both the bank and the customer agree on a specific loan repayment period However, if the borrower does not meet this timeline, the bank may struggle to recover the loan amount, leading to potential financial repercussions for the customer.
Risk of inability to repay The risk that occurs in the event that a borrower becomes insolvent, the bank has to liquidate the enterprise's special assets to collect debt
Credit risk extends beyond traditional lending activities to encompass various credit-related functions, including guarantees, commitments, trade finance approvals, interbank lending, lease-purchase credit, and co-financing.
Based on the time of arising
Lending risk arises when banks inaccurately assess a customer's creditworthiness, resulting in the approval of loans for individuals who may not be capable of repaying them in the future.
Lending risk arises during the credit approval process and is influenced by several factors, including timely disbursement of funds, the failure to regularly update customer information, and inadequate forecasting of potential risks.
Risks after lending: This risk occurs when credit officers do not know the situation of using loan capital, future financial ability of customers
Indirect credit risk arises after a bank disburses a loan and during the customer's utilization of that loan Due to asymmetric information, banks often find themselves in a passive role, possessing limited or inaccurate insights into their customers' challenges and potential defaults, which can lead to negative repercussions and delays in repayment Furthermore, credit risk is characterized by its diverse and complex nature, reflecting a wide array of causes, forms, and consequences that stem from the bank's role as a financial intermediary.
To effectively manage credit risks, it is crucial to identify and address all warning signs related to their causes and consequences, enabling the implementation of suitable preventive measures Credit risk is an inherent aspect of commercial banking, where accepting risks is unavoidable Banks must assess business opportunities through the lens of the risk-benefit relationship to identify prospects that yield rewards proportional to the risks taken A bank can thrive when it maintains a reasonable and manageable level of risk within its financial resources and credit capacity, thus highlighting the inevitability of credit risk in the banking sector.
13 is a problem that banks cannot avoid Banks need to have strict credit risk management measures to minimize its impacts.
Credit risk management in commercial banks
Credit risk management involves the systematic organization and execution of processes related to credit approval, aimed at ensuring the safety of credit while minimizing risks to an acceptable level for the bank This comprehensive administrative task begins with evaluating loan applications and assessing customer profiles, and continues through the signing of credit contracts, disbursement of funds, and ongoing management of loans, including debt collection and handling overdue accounts Effectively managing these activities presents significant challenges.
Credit risk management involves identifying and analyzing risk factors, measuring their levels, and implementing strategies to mitigate and eliminate risks during the credit granting process (Dr Le Thanh Huyen – Financial Magazine, July 2021)
Credit risk management involves organizing, controlling, and implementing processes related to credit granting to ensure safety and minimize risks within acceptable levels for banks This complex administrative task begins with reviewing loan applications and assessing customers, continues through signing credit contracts and disbursing funds, and extends to managing the entire lending process, including debt collection and handling overdue accounts.
Credit risk management involves identifying and analyzing risk factors, measuring risk levels, and implementing strategies to mitigate and eliminate risks associated with credit activities This process is essential for ensuring the safety and effectiveness of the credit granting process.
1.3.2 Objectives of credit risk management
Effective credit risk management is essential for enhancing the efficiency and quality of commercial banks' credit activities, especially in volatile market conditions where risks are constantly rising To achieve this, it is crucial to implement policies and management measures that minimize loan risks while maximizing profitability Continuous monitoring and the scientific application of these strategies will ensure that credit activities remain robust and effective.
Commercial banks should establish uniform and transparent regulations throughout the lending process, ensuring that their credit portfolio accurately reflects its quality It is essential to implement reasonable structural ratios and make adequate provisions to mitigate risks associated with lending Additionally, an effective risk management system must be in place to inspect, control, and promptly address any emerging risks, thereby minimizing the overall risk exposure for the bank.
Like other types of risk, credit risk management must be implemented according to the following principles
Bank managers must embrace the principle of risk acceptance to generate income, recognizing that it is impossible to eliminate all risks Instead, they should manage risks at acceptable levels, as the type and extent of risk permitted play a crucial role in mitigating negative effects during the risk management process.
The principles of risk management dictate that banks must consider a defined set of "allowed risks" within their management processes, ensuring that any risks that cannot be mitigated internally are transferred externally.
Independent management principles for distinct risk categories emphasize that each type of risk operates independently A loss from one risk does not inherently raise the likelihood of other risks occurring Therefore, it is essential to adopt a tailored management strategy for each specific type of risk to effectively mitigate potential impacts.
The principle of aligning acceptable risk with expected returns is crucial in investment decisions Risk acceptance should stem from a careful evaluation of the benefit-risk relationship, ensuring that the level of risk taken corresponds with the anticipated benefits.
The principle of aligning risk levels with financial capacity dictates that any anticipated losses from risks must remain within the bank's reserve capacity.
The principle of time in banking indicates that longer transactions increase risk and diminish risk management capabilities Consequently, when banks must engage in extended operations, they should require a corresponding higher return to compensate for the added risk.
Effective risk management is integral to a bank's overall business strategy, ensuring alignment with its operational goals By adhering to fundamental principles, commercial banks can formulate tailored risk management policies and programs that support their strategic objectives.
1.3.4 Requirements for credit risk management
According to Basel II (Banking Supervision Committee led by the central banks of the 10 developed countries - G10) uses the concept of "Three pillars" of requirements for credit risk management
The first pillar of credit risk management emphasizes the necessity for banks to maintain adequate capital to mitigate risks associated with credit, market, and operational activities The minimum capital adequacy ratio (CAR) remains at 8% of total risky assets, consistent with Basel 1 standards However, Basel 2 introduces significant modifications in calculating capital costs for credit risk, alongside a new approach for operational risk, while market risk experiences only minor adjustments Additionally, Basel 2 employs a multi-level risk weighting system, ranging from 0% to over 150%, which is highly sensitive to credit ratings.
The second pillar: The process of evaluating inspection and supervision activities
The second pillar of the new pact focuses on ensuring that banks implement robust internal processes to evaluate their capital adequacy through comprehensive risk assessments, while also establishing a framework to effectively address the various risks they encounter.
Factors affecting credit risk management
The socio-cultural factors within the macro environment significantly influence all economic actors, thereby affecting banking activities in various ways Given the banking industry's sensitivity to these fluctuations, changes in the macro environment can lead to substantial impacts Consequently, banks operating in such volatile conditions must elevate their management practices, particularly in mitigating and financing credit risks.
A stable economy fosters consistent growth and maintains price stability, which in turn supports low inflation rates This environment enables commercial banks to broaden their operations and mitigates risks associated with currency devaluation Additionally, banking activities are influenced by both direct and indirect regulations stemming from each country's monetary policy, highlighting the significance of regulatory changes in shaping banking operations.
28 in each period, banks need to make adjustments in their governance as well as specific operational activities
Banking activities are integral to the economy, making the effectiveness of legal regulations crucial for bank operations A comprehensive legal framework influences the implementation of policies and the management of credit risks Thus, the legal system serves as a foundational guideline for bank leaders in strategizing their credit risk management practices.
* Competition in the industry environment
In recent years, Vietnam's economic development policy has spurred significant growth in the banking industry, reflected in both improved business results and an increase in the number of financial market participants While this expansion presents promising opportunities for the sector, it also intensifies competition among domestic banks and between local and foreign institutions.
The operational efficiency of banking credit operations and credit risk management relies heavily on the comprehensive collection of customer information However, banks face limitations in personnel and technology that hinder their ability to gather this data accurately Given the diverse nature of customer information, it is essential for banks to utilize professional channels to effectively collect, process, and provide the necessary data to support their management activities.
* Business strategy and organizational model
Effective credit risk management in banks hinges on the approval and implementation of policies by officials at all levels To achieve high effectiveness in this area, it is essential that bank staff possess strong qualifications Senior leaders, in particular, must demonstrate management skills and the ability to organize and decentralize operations effectively.
Effective bank operations require a dynamic ability to synthesize and analyze information, enabling the establishment of development strategies and the organization of policy implementation Bank staff, particularly those managing business activities, must possess strong operational management skills and the capability to identify and assess risks Credit officers play a crucial role in evaluating risks associated with individual customers Upholding professional ethics is essential for bank personnel, as violations can lead to significant operational risks and detrimental consequences for the institution.
* Credit policy and credit process
A commercial bank's credit policy is a strategic framework that governs the extension and restriction of credit to achieve specific objectives This policy is essential for managing risks and ensuring the safety and stability of the bank's credit operations.
Flexibility in credit policy is crucial for banks to adapt to economic conditions During periods of economic growth, banks typically lower interest rates and increase their capital participation in customer investment projects, streamlining the loan approval process Conversely, in challenging economic times, banks may raise interest rates, decrease their capital involvement, and impose stricter loan approval requirements Effectively managing credit policy helps minimize credit risk losses and ensures profitability for the bank.
The credit process involves systematically organizing credit granting in alignment with the bank's capabilities, qualifications, and risk management abilities This structured approach aims to facilitate effective credit risk management, ensuring timely collection of debts and interest by the bank.
The evaluation of a credit granting process should focus on analyzing the issued guidelines and credit manuals that have been applied and assessing the performance of
To enhance credit activities across departments, it is crucial to thoroughly evaluate the processes involved in credit documentation, appraisal, decision-making, disbursement, supervision, and liquidation Key factors for assessment include the detail of the analysis and lending decision processes, the existence of regulations governing lending decisions and credit limits at various management levels and branches, and the guidelines for guarantees associated with different credit types Additionally, it is essential to examine the regulations on monitoring procedures for administered loans and the protocols for handling exceptions.
The success of a bank is heavily influenced by its ability to establish and enforce a stringent and sensible credit policy and process Any flaws in these areas can result in significant financial losses and complicate the bank's governance Effective credit risk management is therefore essential and is defined by the bank's credit policy and procedures.
The quality of human resources is a crucial factor for banks, significantly influencing their business operations and management A bank's success hinges on having a skilled and ethical human resource team, as even the best credit policies and technology investments cannot compensate for a lack of qualified personnel Two key aspects of human resource quality in credit risk management are the ethical standards and professional competence of credit officers Ethical behavior is essential, as it directly impacts the bank's reputation and the trust customers place in its services Customers prioritize both service quality and the integrity of the staff, particularly regarding sensitive information like account details Ultimately, maintaining high ethical standards among credit officers is vital for granting loans to qualified customers and mitigating credit risk.
To mitigate financial incapacitation and prevent loan defaults that lead to capital losses, banks must rigorously screen credit officers during recruitment, prioritizing candidates with finance and banking expertise from reputable universities Essential skills for credit officers include proficiency in foreign languages, informatics, social literacy, and communication, which are vital for fostering customer relationships and effectively marketing bank products Additionally, ongoing professional development through short-term training with experts is crucial for enhancing knowledge and experience in credit management Implementing robust remuneration policies, including salaries and bonuses, can further motivate credit officers to work responsibly and efficiently Ultimately, effective credit risk management in commercial banks hinges on the quality of human resources involved in these activities.
Credit information refers to the data gathered by banks regarding a borrower's character, financial status, and repayment capability, derived from both primary and secondary sources This information plays a crucial role in influencing the bank's credit decisions and mitigating credit risk To be effective, credit information must be comprehensive, timely, and cost-efficient, impacting human resources, management structures, and information technology systems within the bank.
Quantitative research process
According to Nguyen Dinh Tho (2008), sampling efficiency is evaluated based on two key criteria: Statistical Efficiency and Economic Efficiency A sample is deemed statistically more efficient if it has a smaller standard error at the same size Meanwhile, the economic efficiency of a sample is assessed by the cost of data collection relative to the desired accuracy level Considering these factors, we opted for the convenience sampling method, which focuses on subjects that are easily accessible to the researcher.
Determining the appropriate sample size for a study is influenced by various factors, including the chosen processing methods such as regression, exploratory factor analysis (EFA), and structural equation modeling (SEM) While larger sample sizes generally enhance the reliability of results, they can also be costly and time-consuming to obtain Consequently, researchers often utilize empirical formulas tailored to each analytical method to establish the necessary sample size Additionally, it is common in scientific research to employ multiple processing techniques within a single study.
Research on factors affecting credit risk management using a scale of 27 observed variables The minimum number of questionnaires for this research analysis is: 27 x 5
= 135 questionnaires (Hoang Trong, Chu Nguyen Mong Ngoc, 2008) However, in order to collect more objective reviews and opinions, the survey group had more than
135 tables The survey subjects were ministries and credit officers at transaction offices and branches
The investigation process involves gathering secondary information by researching and selecting documents from various sources, including research articles, books, journals, scientific newspapers, and websites Additionally, the research incorporates insights from expert interviews and collects primary data through direct surveys using questionnaires.
A survey was conducted among credit officers at the MBbank Dong Anh branch, distributing 220 research questionnaires Out of these, 203 questionnaires were successfully completed, resulting in a recovery rate of 90.90% However, some questionnaires were deemed unsatisfactory due to key issues and blank responses.
1.5.2.1 Check the reliability of the scale using Cronbach's Alpha reliability coefficient
The reliability of a scale is assessed using internal consistency methods, specifically the Cronbach Alpha coefficient and the Corrected Item-Total Correlation A scale is deemed acceptable for further analysis if it meets two criteria: a Corrected Item-Total Correlation greater than 0.3 and a Cronbach's Alpha coefficient of 0.6 or higher (Hoang Trong, Chu Nguyen Mong Ngoc, 2008).
Analyze the model's fit through R to consider adding more variables to the model and see which variables explain the change in the dependent variable In which, the coefficient
In statistical analysis, R indicates whether the independent variable has a positive or negative correlation with the dependent variable, highlighting the need for additional variables in the model R-squared (R²) reflects the model's accuracy, while Adjusted R-squared accounts for the percentage of variation in the dependent variable explained by the independent variable, providing a more precise understanding of the model's explanatory power.
The regression analysis model illustrates the relationship between independent and dependent variables, enabling predictions about the influence of the independent variable on the dependent variable In this study, the Enter method is employed to include variables simultaneously, resulting in a standard regression equation.
International experience on credit risk management of commercial banks and
1.6.1 Credit risk management at Bangkok Bank of Thailand
Bangkok Bank, a prominent institution in the Thai banking sector, boasts a rich history and has successfully navigated the challenges posed by the 1997-1998 financial crisis Positioned within a transforming financial market, the bank employs a centralized risk management model that emphasizes stringent supervision and control.
Bangkok Bank, situated in a developing financial market and utilizing an outdated technology platform, employs a qualitative risk measurement model facilitated by expert analysts for customer evaluations In its efforts to enhance credit risk management and ensure the bank's safety and sustainability, Bangkok Bank has established a centralized risk management organization This model distinctly separates the application-receiving and processing department from the appraisal department, allowing for more efficient operations Additionally, the bank categorizes its customers into three groups: consumer, business, and individual customers.
Bangkokbank is gradually implementing a dual credit risk control model that enhances credit management through both internal systems and external agencies This model integrates the internal credit control mechanisms of commercial banks and central banks with oversight from private companies like the Information Bureau All banks are required to report borrower information and monthly loan repayment histories to the relevant authorities, ensuring transparency, accuracy, and public access to this data.
1.6.2 Credit risk management at Citibank of America
To manage credit risk, Citibank has taken the following measures Firstly, Citibank has clearly defined the functions of the departments in the organizational structure related to the credit process
Citibank's Management, as the highest decision-making authority, oversees capital allocation and directs bank operations, particularly in credit activities This body is tasked with determining the bank's risk levels, establishing strategic goals, and implementing overarching regulations Additionally, Management is responsible for reviewing credit decisions made by officers if there are concerns about potential material damage or impacts on the bank's reputation.
The Credit Policy Planning Board is tasked with ensuring comprehensive credit risk management and engaging in indirect investment planning while forecasting potential credit losses It establishes legal and regulatory-compliant credit policies and standards, regularly reviewing and revising them to mitigate unusual risks The committee evaluates the qualifications of staff for credit granting rights and prepares reports on indirect investments, emphasizing the assessment of risk information quality and the management of cases that exceed allowable credit limits.
Credit line administrators play a crucial role in managing and enhancing business plans, as well as reviewing and approving credit applications They are tasked with ensuring the quality of credit decisions, which is essential for maintaining financial stability and fostering business growth.
36 responsible for developing business strategies, reviewing and approving loans for credit programs, managing indirect investments and checking quality, and correcting deficiencies as needed
The Business Risk Assessment Committee, composed of members with a minimum of 10 years of experience in credit operations, plays a crucial role in evaluating the business situations of various units and providing risk insights for indirect investments This committee conducts independent assessments of credit operations, policies, practices, and procedures in credit administration, while also coordinating activities with supervisors and independent auditors Additionally, Citibank emphasizes a thorough creditworthiness assessment of borrowers, adhering to the traditional "Five Cs of Credit" framework, which includes critical factors that determine a borrower's ability to repay.
- Character of management Management capacity of the borrower;
- Financial capacity of the venture Financial capacity of the borrower; - Collateral security Mortgage to secure the loan;
- Condition of the industry The sector in which the borrower operates;
Citibank differentiates between the authority to grant credit and the authority to approve it The right to grant credit is vested in credit officers who are empowered based on their qualifications, professional skills, experience, and training, rather than their job title within the bank This approach emphasizes the importance of expertise and staff development in the credit decision-making process.
At Citibank, credit approvals involve a collaborative decision-making process by three credit officers, ensuring a thorough evaluation of individual credit programs and transactions The bank employs a centralized risk management model, with activities concentrated at the Head Office and organized into three key departments: Operations, Risk Management, and Debt Management.
1.6.3 Credit risk management at ANZ Bank in Australia
Determining risk measurement due to the construction of an integrated, centralized data system, ANZ can apply the internal credit measurement model and the
ANZ Bank employs the RAROC model for internal credit measurement, aligning with the Basel II framework A critical aspect of this model is the assessment of the probability of default, which plays a vital role in evaluating borrower reliability during the customer rating process Additionally, ANZ's credit rating system references Standard & Poor's ratings and complies with Basel II regulations Furthermore, the bank utilizes the KAROC model to calculate loan efficiency, enhancing its credit assessment capabilities.
ANZ's karoc legislation mandates that loans are approved solely based on their value to shareholders A loan will be rejected if its Risk-Adjusted Return on Capital (RAROC) is lower than the Return on Equity (ROE); conversely, it will be approved if the RAROC exceeds the ROE This approach reflects ANZ's commitment to a centralized risk management model, ensuring that risk is assessed systematically and effectively.
Firstly, all decisions on ANZ's risk management strategy are concentrated in the Board of Directors
Secondly, in order to ensure a strict and clear credit decision, the structure of risk management at ANZ is divided into three divisions Business and Customer Relations, Risk Management
ANZ Bank's debt management strategy involves the Risk Management Committee making final decisions on large loans, ensuring rigorous oversight of credit operations by shareholders and the market This approach enhances transparency regarding ANZ's financial information The bank prioritizes a robust internal credit control system, which includes an alert system for unusual credit signs, regular "crisis testing" during economic instability to refine risk-taking strategies, and effective internal audits with unexpected inspection methods to ensure compliance throughout the organization.
1.6.4 Credit risk management at Vietcombank – Vinh Phuc Branch
Some solutions to handle risks at Vietcombank Vietnam -Vinh Phuc branch have been implemented in the past time:
* For bad debts that have arisen:
Vietcombank Vietnam's Vinh Phuc branch has formed specialized committees and teams dedicated to the collection of bad debts They conduct monthly meetings to assess each team's performance and strategize for future implementation plans.
To effectively manage bad debts, it is essential to create a tailored roadmap that addresses both short-term and long-term debt issues This involves classifying customer debts in line with regulatory standards and ensuring that adequate provisions are made for potential risks, adhering to the principles of accurate and comprehensive financial assessment.
Regularly review and complete loan documents, including security agreements and other necessary paperwork, to ensure compliance with legal requirements before submission to relevant authorities Additionally, assess the security assets of the enterprise and update collateral as needed to strengthen the loan application process.
- Analyze the cause of bad debt of each debt, then evaluate the specific classification of each debt to come up with specific solutions: