| Abstract | Activities of commercial banks always contain the risks, especially credit risk. The part of
profitability assets from lending activities account for 60-70% of total assets of the commercial
banks. Besides, the ratio of overdue debt, bad debt is also higher than many banks in the region
and around the world. In particular, the most common cause is borrowers who is deliberately
deceptive, do not pay on time, use capital improperly, lack of experiences, weak in business and
management. This risk is possible to reduce if banks make a good prevention such as screen and
choose good clients before lending.
Internal Rating System (IRS) is the tool helping banks do this. Through result of client’s credit
rating, banks can assess basically client's level of risk, screen good customers to give suitable
policy. This is also foundation for banks to take measures to manage credit effectively. So,
building, applying and improving intensively internal credit rating system are necessary for credit
institutions.
Petrovietnam Finance Corporation (PVFC) is a credit institution and the biggest financial
company in Vietnam. Like other credit institutions, credit activity is the most important activity
at PVFC. Interest income always plays an important role in total incomes, credit growth rate
increases over the years. To enhance the quality of credit and manage credit risk, PVFC had built
up an IRS since 2007. But until now, this system reveals some problems and not seems to bring
into play its role in risk control. The value and rate of non-performing loan rate at PVFC is
increasing. Other while, the State Bank of Vietnam requires credit institutions upgrade frequently
their IRS to control credit risk.
So, the research will find the problems of IRS version 2007, analyze deeply the impact and root
causes of the problem and propose solution and recommendations to upgrade the IRS in PVFC. |