Credit Approval and Risk Management
We have multiple levels of credit approval authority depending on the size of the proposed credit exposure and security offered. The credit limit, which is proposed in the credit application, will serve as a basis to determine appropriate approval levels. Each group of personnel has different authority limits, which are based on loan size and collateral type. As a result, the required level of approval can range from branch-level credit officers for very small loans or loans with low-risk (e.g., cash) collateral up to the CEO level for larger loans with less security or unconventional forms of collateral.
Where loan size and simplicity permit, we have sought to improve the efficacy and efficiency of our credit approval process through use of credit scoring models. The SME Division introduced a scorecard-based credit approval process designed with the assistance of McKinsey & Company in December 2010 and has used it for all loans up to VND5 billion since March 2011. The PFS Division currently uses a scorecard developed in-house with assistance from HSBC for the evaluation of conventional credit applications. In May 2011, we acquired Experian’s application processing and analytics software, which we plan to deploy to further improve the quality and speed of our PFS loan approval process.
Ongoing Portfolio Monitoring
We have developed a framework to identify, monitor and report potential credit risks from disbursed loans and other outstanding credit exposures. Responsibility for ongoing monitoring of an individual loan is allocated to the branch or the appropriate body at the regional or head office depending on a variety of factors, including the size and quality/ classification of the loan. In 2010, we improved our loan portfolio monitoring by implementing an early warning system ("EWS”) that aims to identify performing loans at risk of becoming NPLs.