MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM
BANKING UNIVERSITY HOCHIMINH CITY
*****
TRAN CHI CHINH
USING DERIVATIVES IN CREDIT RISK MANAGEMENT
AT VIETNAMESE COMMERCIAL BANKS
SUMMARY OF DOCTORAL THESIS
Major: Finance - Banking
Code: 9.34.02.01
Scientific instructors: Assoc. Prof., Dr. Nguyen Thi Nhung
HOCHIMINH CITY – 2022
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DISSERTATION SUMMARY
In the context of Vietnamese commercial banks are in the process
of fundamental and comprehensive restructuring of banking business;
In which, for credit risk management, Vietnamese commercial banks
also need to have a comprehensive innovation, especially innovation
based on the standards of Basel II and Basel III. The emergence of
credit derivatives not only provides commercial banks with new tools
to invest, prevent and minimize credit risk, concentrate or diversify
loan portfolios, but also creates a new mechanism for proactive
management of credit risk. In fact, Vietnamese commercial banks
have used credit derivatives in credit risk management since 2006, but
up to now, the use of this tool in credit risk management at
Vietnamese commercial banks is still very limited. The goal of the
dissertation is to analyze the current situation of using credit
derivatives, explore conditions and propose solutions to improve the
conditions for using credit derivatives in credit risk management at
Vietnamese commercial banks. To achieve this research goal, the
Ph.D. student has chosen a qualitative research approach based on the
grounded theory (GT) method. Regarding data, the Ph.D. student uses
a combination of three types of data: secondary data, primary data
through surveys, and primary data through in-depth interviews with
11 experts who are leaders of 11 Vietnamese commercial banks.
Regarding the data analysis procedure, besides the comparative
statistical analysis method, the Ph.D. student also applied the GT-
based data analysis procedure to deploy. In addition to reflecting the
current situation of using credit derivatives in credit risk management
at Vietnamese commercial banks, research results have formed a
model of conditions for using this tool in credit risk management –
including five conditions with 12 observed variables; and at the same
time provide evaluation criteria for the response to each observed
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variable through identification signs. Futhermore, the results of the
study also analyze and evaluate the completion of conditions for using
credit derivatives in credit risk management at Vietnamese
commercial banks; at the same time, propose four groups of solutions
and two recommendations to improve the conditions for using credit
derivatives tools in credit risk management at Vietnamese
commercial banks.
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INTRODUCTION
1. Reasons for choosing the topic
Vietnam is in the process of fundamental and comprehensive
restructuring to develop a system of credit institutions in general and
a system of commercial banks in particular, which is multi-functional
towards modernity, safe and effective operation solid results, greater
competitiveness thanks to the foundation of advanced banking
technology and governance, in line with international practices and
standards. In particular, for credit risk management, Vietnamese
commercial banks must have a fundamental and comprehensive
innovation, especially the innovation that is approached based on the
standards of Basel II and Basel III.
The appearance of credit derivatives not only provides
commercial banks with new tools to invest, hedge against credit risk,
minimize them, concentrate or diversify loan portfolios. The
emergence of credit derivatives also creates a new mechanism for
proactive management of credit risk. To comprehensively innovate
on credit risk management in lending activities; one of the ways that
Vietnamese commercial banks can approach is to apply the risk
model of "originate-to-distribute" proactively through the use of
credit derivatives.
According to the research of the Ph.D. student, although there
have been many studies related to the use of credit derivatives tools
in credit risk management at commercial banks, these studies are
mainly conducted in developed countries - where the credit
derivatives market has formed and developed, and where commercial
banks have achieved high development in credit risk management. In
Vietnam, there have also been several studies on this topic – a study
by Le Ho An Chau (2006), "Talking about some necessary conditions
for developing the credit derivatives market in Vietnam"; Huynh Thi
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Huong Thao and Bui Nguyen Kha (2014) "Study on factors affecting
the application of credit derivatives in Vietnamese commercial
banks"; Tran Chi Chinh (2019) "Using the credit derivatives swap in
credit risk management at Vietnamese commercial banks". However,
these studies have only given some suggestions regarding the
conditions for the formation and development of the credit
derivatives market in Vietnam or have just approached the conditions
for using the credit derivatives market, credit derivatives tools in
credit risk management in some individual aspects. Therefore, the
dissertation chose the thesis topic "Using derivatives in credit risk
management at commercial banks in Vietnam" to analyze the current
situation of using credit derivatives tools, explore the conditions for
using them in credit risk management at commercial banks in
Vietnam – conditions suitable for the economic context like Vietnam.
Thereby assessing the completeness of the conditions, and at the
same time providing solutions and recommendations to improve the
conditions for credit derivatives in credit risk management at
Vietnamese commercial banks.
2. Objectives and research questions
▪ General Research objective
The research objective of the topic is to analyze the current
situation of using the credit derivatives tool, explore the conditions,
and propose solutions and recommendations to improve the
conditions for using the credit derivatives tool in credit risk
management at Vietnamese commercial banks.
▪ Specific objectives and research questions
With the above general research objectives, the specific
objectives and related research questions are established by the
author as follows: