1

Bank has robust credit rating processes in placeRating Procedures1

Information collection and scoring information submission (implemented by customer relationship staffs)

1

Scoring and rating customers (implemented by Risk Management Staffs)2

Reviewing and checking scoring and rating results (implemented by Heads of Risk Management Department)

3

Approving the scoring and rating results (implemented by the competent levels)

4

Completing scoring and rating documents5

Following-up and observing any fluctuation/changes of the scoring and rating results (implemented by Risk Management Department at the Head Office)

6

Recording & Filing documents7

1For corporates, individuals and household customers and financial Institutions

2

Credit Risk Management Policy (CRMP)

• To step by step use the IRB approach of Basel 2 for the best custom of risk management (risk-based

pricing, risk portfolio management , risk adjusted return on capital – RAROC, determining minimum

capital)• To obey the laws and have adaptability with the changes in laws• To obtain the development target and strategy of Vietinbank from time to time. To ensure long-term

strategic targets while quickly reacting to fluctuation of the market• To limit the risk of credit centralization through diversifying loan portfolio and systemizing credit limits

for each portfolio

• To build an appropriate credit risk environment though a clear strategy approved by the Board of

Directors• An uniform risk management culture is implemented in whole Vietinbank system to actively manage

credit risks• To ensure that credit policies are adequate and clear, the credit granting criteria and the mechanism

of authorization classification are specific, reasonable and able to minimize risks. • To maintain a credit risk measurement system• To timely find out credit risk signals and ensure adequate supervision

To achieve credit expansion required for sustaining the profitability of the Bank with an emphasis on quality assets, profitable

CRMPPhilosophy

CRMP

Objectives

CRMP

Principals

To optimize the balance between expected income and credit risk with an emphasis on competition advantages; to ensure

measures, control/insurance of risks

3

Credit Risk Management

• To build up a credit risk management framework including basic principles of risk management; organization structure of risk management division, single credit management mode and loan portfolio, system of credit policies, procedures, system of credit risk measurement; risk management on new products and credit supervision

• To build up a clear risk strategy, bank’s acceptable risk limits for each group of relative customers, based on the centralization level of currency, term, collateral, sector and geography

• To ensure an independence, objectiveness among the customer relationship department, credit appraisal department, and the risk management and supervision. Credit activities must be supervised on regular basis to ensure credit activities are implemented in accordance with the bank’s regulations and within the acceptable risk level

• The system of credit policies, procedures must be adequate and clear in terms of criteria of credit granting, mechanism of

approval authorization decentralization

Credit risk management framework

Clear risk strategy

Credit activities supervised on regular basis

Adequate and clear system of credit

policies, procedures

• Customers’ credit risk is quantified through the bank’s internal credit rating systemInternal credit rating

system

• To build up the early risk warning system to point out and define any risk signals related to probable changes in financial

situation as well as borrowers’ repayment capability

Risk warning system

• To build up an effective, useful credit report and information system to support credit risk management, to regularly

supervise credit limits granted to customers, specially corporate customers who have big loan exposures

Effective credit report and

information system

4

Liquidity Risk Management Process

• Liquidity risk is defined as the risk that the Bank will encounter difficulty in meeting obligations associated with financial liabilities

• To limit this risk, management diversifies its funding sources in addition to its core deposit base, and adopt a flexible policy in managing liquid assets and monitoring future cash flows and liquidity on a daily basis

• The Bank also keeps an account of access to cash flows and the availability of collaterals in case the Bank needs to mobilize more capital

• Alco Planning and Supporting Department analyses and projects flows of cash-in, cash-out in accordance with fund planning and balancing plan, which is approved annually; and provides decisions on available fund management based on movement of the Bank’s capital and its daily utilization

• Based on the regulations of the SBV, the Alco Planning and Supporting Department, in cooperation with the Investment Department, proposes available fund management plan in order to make sure the actual average balance of deposits in VND and foreign currencies at the SBV not less than the required level of compulsory reserve to be maintained

• Investment Department might decide to either sell back valuable papers to the SBV in open market, or to borrow to

replenish working capital’s deficiency to ensure liquidity position of the whole bank

Diversified funding sources

“Emergency” funds

Dedicated Alco Planning and Supporting

Department to managing risks

Open market transactions to ensure liquidity

position is maintained

• Besides, Investment Department also establishes credit limit with other banks for mutual assistance when needed. The management process of capital spare at VietinBank is operated within the INCAS system and the inter-bank settlement program (CITAD). By the centralized settlement scheme at the Head office, VietinBank is always active in the daily liquidity management

Credit lines with other banks

• The Bank is currently setting up software, developing upgrades and finalizing the risk management process to catch up with

the international standardSoftware upgrades

VietinBank has proactively reserved secondary liquidity sources across Government Bonds, Treasury bills, Corporate bonds, Credit Institution bonds etc.

5

Operational Risk Management Procedure

Analyse the process of handling

works

Supervise& Control

Manage potential

market risks

& solution

plan

Definerisks &control

methods

Evaluate Results of the control methods

Report risk

accidence & loss

Key riskindicator

RCSA – Risk & Control Self Assessment

LDC – Loss Data Collection KRI – Key Risk Indicator

• Operational risk is defined as the possibility of damage/loss happened directly or indirecty by the man, an inactive or unadequate procedures/system or the outside factors.

• Vietinbank manages its operational risk through the risk management system of SAS OpriskMonitor with the 3 main tools including LDC (Loss Data Collection); RCSA (Risk and Control Self-Assessment); KRI (Key Risk Indicator).

• The Operational risk management procedure is summarized as follows:

SAS Oprisk Monitor

• Be responsible as an independent risk management section – the second defense coat in the “3 coat model” of the bank’s risk management. The Market and Operational Risk Management Department shall monitor, supervise, analyze, and synthesize risk reports based on risk level to submit to the Risk Management Committee and the Management in accordance with the bank’s regulation from time to time

Be responsible as an independent risk

management section

6

Market Risk Management

• The market risk is defined as risk in the position of the balance sheet and off balance sheet which arises from price fluctuation in the market including: interest rate, foreign exchange, securities, goods

• Vietinbank manages the market risk based on its market risk management procedures and tools to calculate market risk, including definition and supervision/monitoring of respective market risk level

The market risk management procedure includes the following steps:

• Market Risk Management Tools includes the measurement tools (VAR, Stresstesting, Backtesting) and the limits for each tradingbook activities (Position limit, limits for customer relationship officer, limits for partners etc.)

• The ARIMA model is also used to analyse and forecast the macro indicators (CPI, exchange rate, interest rate etc.) for market risk management

Realize and defineMarket risksRealize and determine

market risks

Measure Supervise andcontrol

Prevent andminimize

market risks

1 2 3 4

Internal Reporting System

Specific market risk management procedure

Market Risk Management Tools

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Interest Rate Risk Management Process

• Interest Rate Risk is managed by the Bank through the use of GAP analysis of rate sensitive assets and liabilities and monitored through its prescribed prudential limits

• The Bank forecasts fluctuation of market interest rate and makes appropriate investment decisions

• If a decreasing trend in interest rate is forecasted, the Bank will invest more in long term instruments to gain profitability

• On the contrary, if market interest rate is projected to increase, the Bank will focus on short term investments to minimize interest rate risk

Investments

• Interest rate for fund mobilization is determined under market price principles, in which interest rate is subject to demand, fund mobilization scale and market interest rate movements

Fund mobilization and utilization

• Lending activities: VietinBank determines lending interest rate based on the cost of funds, management expense plus targeted profit margin

• Branches apply the floor lending interest rate regulated by the Head office. Since most of the funds mobilized by the Bank is short term (having maturity within 12 months), VietinBank requires all medium and long term loans to have floating interest (no fixed lending rate)

Lending activities

• Inspection and monitoring by written documents in accordance with internal regulations applied to related activities like credit activities

• Develop scenarios that can happen when market conditions change; proactive in risk management

• Construct interest parameters that are managed within INCAS system and under control of department in-charge

Inspection and monitoring regulations

8

Currency Risk Management Process

• Currency risk is the risk that values of financial instruments fluctuates due to changes in foreign exchange rate

• The Bank’s loans and advances were mainly denominated in VND with the remainder mainly in US dollar (USD)

• Nonetheless, some of the Bank’s other assets are in currencies other than VND and USD

• The Bank has applied limitation system to mange currency positions on a daily basis. Risk prevention strategy is to keep the currency positions in the established limitation

Limitation systems

• Alco Planning and Supporting Department analyses and projects cash-in and cash-out flow and proposes fund planning plan for each type of currency (mainly VND, USD and EUR equivalent) to the Bank’s Board of Management) based on actual cash flows and growth target registered by business units

• It is managed based on daily outstanding balance in accordance with guidance to ensure the safety and effectiveness of the whole system

Alco Planning and Supporting Department

• VietinBank commands all its subsidiaries to take reasonable precautions while expanding lending in USDWell managed subsidiaries

• Restricts lending in importing goods that can be domestically produced and establishes preference for lending to import essential goods such as fuel, petroleum, fertilizer, pesticides etc.

Lending preferences

• Have ensured enough FX funding lines with International financial institutionsFX funding lines