Details

1. Introduction

Circular 11 (related to asset classification and risk provisioning) was issued, requiring the Cooperative Bank to develop an effective, accurate and timely debt classification and risk warning system to prevent bad debt risks as well as enhance competitiveness in the banking and financial market. The PNNTD&CBS system was developed to address the following three purposes:

• Improve transparency in debt classification, thereby providing timely and accurate warnings of bad debt risks.
• Optimize debt collection efficiency, debt classification, and risk provisioning
• Enhance the responsibility of each individual and management level for the effectiveness of credit operations and control of bad debt risks.

2. Definition

The LCAP – loan classification automation platform is divided to support users with the features of the debt classification and risk warning software: early warning of due debts, proposing debts that need to be grouped according to rules, handling debt exceptions, and risk provisioning lists.

3. Goals/Benefits

a. Debt collection tracking

Alert Credit Officers and managers of the list of overdue debts up to the present time and debts with payment schedules within 10 days from the current date of the system. Help Credit Officers and managers take measures and proactively contact customers to urge and collect debts.

b. Debt classification and risk provisioning

• Alert Credit Officers and managers of the list of debts that need to be transferred to debt groups at the end of the month.
• Allow CBTD to handle exceptions for debts that are expected to be transferred to the debt group proposed by the system at the end of the month (such as keeping the debt group unchanged, adjusting the rate of deduction of collateral for the debt, adjusting the amount of provision for DPRR for the debt, transferring to a higher debt group than the debt group proposed by the system or transferring to a lower debt group than the debt group proposed by the system.)
• Allow management levels to approve/give opinions on credit officer exception handling proposals

c. Use redundancy to handle risks

• Allow Credit Department to propose risk handling for debts for approval by the board of directors.
• Allows credit officers to upload risk handling files corresponding to each debt proposed for risk handling.
• Allow the Head of Credit Department; Branch Credit Council, Branch Director, Head Office Risk Management Department to approve the proposal of the credit officer.
• Synchronize approved debt information allowing risk handling to the CoreBanking system for processing at the end of the period.

4. Main Functions

a. Early warnings

The function of warning about loans due for payment to credit officers, thereby supporting management and debt collection of overdue/due debts.

b. Debt classification

Functions to support debt classification and group transfer operations, including:

• Propose debt groups to be transferred
• Propose Exception Handling and Proposal Approval
• Forecast fluctuations in financial and non-financial indicators
• Automatically transfer debt groups at the end of the month
• Ad hoc transfer of debt groups upon request

c. Risk provision

The function supports automatic risk provisioning at the end of the month or quarter according to the settings.

d. Risk handling

Function to support management and risk handling of debts that are no longer able to be paid

5. Summary

The LCAP loan classification automation platform is not only a powerful financial management tool but also a reliable partner for credit institutions. With early warning, debt grouping and risk provisioning features, the platform helps improve performance, optimize risks and enhance predictability in loan management, bringing great benefits to both institutions and customers.