ANALYSIS OF RISKS THAT CAUSE BAD DEBTS IN INDOVINABANK MY DINH BRANCH PERIOD 2007-2012

Abstract

Bad debts in the banks create many financial problems in the banking operations, which affect both the bank staff and their customers related to lending activity. This research was carried out to attempt to study the risks that cause the bad debts in Viet Nam banks, using the Indovina bank My Dinh branch in Ha Noi, Viet Nam as case study. This research will use quantitative method; secondary data of Indovina bank My Dinh branch will be used as the main data in this research. The researcher will use multiple regression model to analyze the data and using F test, T test to analyze the relationship between bad debt and the factors that affect bad debt in Indovina bank According to Indovina bank data, the research revealed that there are 3 main risks that cause the bad debts in the bank : credit risk, market risk and operational risk. The researcher found out all of these 3 risks (independent variables) have correlation with bad debt in Indovina bank ( dependent variable); credit risk and market risk have statistically significant influence towards bad debts while operational risk is not. Credit risk is also the dominant risk that affect bad debts in Indovina bank. It was concluded that Indovina bank should hire people with not only good knowledge about banking and management skills, especially in calculating risk of loans but also have experience in banking business in supervising loans so the bank can avoid cases of loan diversion and ensure prompt repayment. It was concluded that customers are advised to always provide adequate and truthful data along with adequate collateral security when applying for bank loans.