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Banking
PwC provides services to both Vietnamese and foreign banks operating in Vietnam. Our clients include more than 30 banks including leading state-owned banks, joint stock commercial and foreign banks, which we support on a wide range of consulting services. We work with each bank to understand their specific needs, concerns and current level of development in order to tailor of our services.
We provide a range of services, including in particular advice on improving performance and risk management. We help for instance to set up strong decision making support capabilities including Asset Liability Management (ALM) capability, Funds Transfer Pricing (FTP) Framework and reporting model, Basel II planning and implementation, Market risk management framework, Cost allocation and profitability framework, Management reporting and Treasury processes. We also provide consulting services in the areas of corporate / business strategy development, target operating model definition, customer relationship management and credit transformation (i.e. across the credit value chain, from product development to collections).
Our services
Common issues
Post the 2007 global financial crisis, the market has been sent a strong message regarding the importance of the ALM function. In Vietnam, the State Bank of Vietnam (SBV) required banks to set up an ALM framework for the first time in 2010 as part of a broader upgrade of the regulatory framework aimed at building a more resilient banking system.
Key challenges for banks:
- ALCO was established but ALM function is not operational due to lack of ALM team and processes.
- Limited risk measurement methodologies.
- Lack of clarity in relation to the demarcation lines between ALM, Treasury and Risk Management.
How we can help
We support our clients to establish an ALM function in line with best practice and in which the ALM unit is working for ALCO to manage liquidity, interest rates and structural FX risks as well as FTP and other ALCO strategic targets.
To achieve a strong ALM function, we will help you to build up:
- ALM governance structure
- ALM policies and procedures
- Key liquidity risk metrics and key interest rate risk metric
- ALM reporting model
Your benefits
- Compliance with SBV on ALM requirements
- A sound ALM governance structure
- An operational ALCO with strong decision making support
- Liquidity risk and interest rate risk management implementation with a practical ALM Model
- Fully trained ALM Team
Common issues
Funds Transfer Pricing (FTP) is one of the key functions of Asset Liability Management (ALM) and an important mechanism used by the Asset Liability Management Committee (ALCO) for their ongoing task of balance sheet management.
Key challenges for banks:
- FTP is not benchmarked with best practice to ensure an effective basis for performance management and product pricing.
- Performance of Business Units does not adequately reflect their relative position as a Fund provider/user.
- ALM unit does not attribute some elements of costs, benefits and risks to business lines or apply FTP to a sufficiently granular level to effectively incentivise business transaction decision makers.
- A fully functional Funding Centre might not be set up to manage interest rate risk centrally.
How we can help
We can help you to achieve an effective FTP framework which has the following features:
- Effective governance of FTP, including roles and responsibilities of the Funding Centre, ALCO, ALM department, Treasury and Finance
- An FTP curve construction methodology that is both in line with best practice and adapted to the unique Vietnam market conditions, while ensuring that it is fair, simple, logical, easy to understand and transparent
- Effective FTP policy & procedures
- Effective FTP management reporting
Your benefits
- Strengthened market competitiveness by developing strong decision making support capabilities through an improved FTP system
- Enhanced capability to centrally manage liquidity and interest rate risk
- Centralised control over Net Interest Margins and managing cost of funds which is critical to profitability management
- Adequate communication of new FTP framework to improve bank-wide acceptance
Common issues
Regulations in the banking sector have been continuously changing, in particular in relation to risk management requirements. Banks may have initiated certain Basel II related projects for example in relation to credit risk, market risk, operational risk, liquidity risk, however, no comprehensive Basel implementation roadmap has been put in place. Furthermore, tools and models for measuring risks are being developed but may not yet be validated and there are data inconsistencies and quality issues among applications and departments.
How we can help
We will help you to develop a comprehensive Basel II planning covering:
- The First Pillar – Minimum Capital Requirements
- The Second Pillar – Supervisory Review Process (perform ICAAP gap analysis and provide recommendations)
- The Third Pillar – Market Discipline (including disclosure requirements, guiding principles, responsibilities and frequency).
- IT and data management related to risk management
- Basel II implementation roadmap: a detailed target environment and recommendations concerning: Bank wide integrated risk management; Credit risk; Market risk; Operational risk; IT and Data.
Your benefits
- Improved risk management framework in line with Basel II guidelines and best practices
- A road map for Basel II implementation
- Training and knowledge transfer to Risk Management Committee, Basel Committee and Risk management team
Common issues
There are various challenges faced by Vietnamese banks in the implementation of this new regulation:
- Challenge of setting up optimised RWA methodology: How to tailor complex RWA calculation rules appropriately to fit your assets portfolio and data granularity while achieving capital optimisation
- Challenge of meeting qualitative requirements: How to meet qualitative requirements of Circular 41 by improving Risk policies and procedures
- Challenge of enhancing data quality and implementing RWA system
- How to integrate data from multiple systems to achieve the single view of the customer
- How to ensure data quality to avoid forced risk weights
- How to build a robust and reliable RWA system
- Challenge of setting up new capital management framework
- How to integrate RWA into capital planning and management
- How to optimise the asset structure to ensure sustainable growth and achieve capital saving
As such, the next steps for efficient implementation must be planned and managed at an early stage.
How we can help
PwC provides a comprehensive end-to-end RWA service from business consulting to IT solution implementation. Our approach typically begins with an assessment of your current business process, RWA data and source systems and other interdependent initiatives. Based on the result of the assessment, we will put together a tailored and focused plan for the RWA methodology development, data mapping, and system implementation.
Your benefits
- Provide banking good practices and how your peers are implementing regulatory requirements
- Build trust in your RWA numbers
- Provide a sound basis for your capital planning and optimisation
- Provide you with a complete solution once
- Realise the benefits faster
- Get it done fast and met your implementation timeline
- Provide you with practical advice to manage the challenges in implementing RWA
- Work together closely with you to maximise knowledge transfer
- Build up a strong RWA team for future development
Common issues
The fast growth of banks in Vietnam and the increasing complexity of the external and internal operating environment has imposed a need for banks to enhance their risk management frameworks. As part of the overall effort, upgrading market risk management frameworks has become a key priority due to the increasing sophistication of bank’s products and their associated market risks.
Key challenges for banks:
- Unclear roles and responsibilities of Risk Management Committee, Risk Management Department and Internal Audit, all of which take some responsibility for ensuring a robust risk management structure.
- Banks do not have the tools and methodology to measure market risk and lack policies and procedures focusing on risk measurement, limits and reporting.
- Banks face challenges in putting in place rigorous risk management processes that include setting up market risk limits and allocating capital to business lines to ensure internal consistency with the organisation’s risk appetite and risk strategy.
How we can help
We help you to enhance your market risk management frameworks. Our services cover:
- Perform analysis and produce a gap report in relation to market risk management based on best practice
- Develop tools to identify and measure market risk
- Set up market risk limits and risk monitoring procedure
- Set up an organisation structure
- Develop policies & procedures
- Develop reporting templates
- Develop risk appetite and risk strategy
- Organise training courses and workshop for knowledge transfer on market risk management
Your benefits
- Robust processes for market risk identification, assessment, monitoring, control and management
- Establishment of risk limits that are in line with risk appetite and strategy of the individual bank
- Enhanced market risk framework toward risk based performance measurement and management
- Compliance with local and international banking regulations (SBV, Basel and other best practices)
Challenges
Banks, now more than ever, operate in an environment that is intensely competitive and undergoing rapid change. This environment makes it especially important for banks to have strong decision making support capabilities through a strong Cost Allocation framework which enables them to measure performance and profitability across the organisation more accurately and on a more timely basis than before.
Key challenges for banks:
- Inaccurate Business Unit profitability – the cost of doing business is not reflected; multiple data sources used to generate reports; Chart of accounts not structured to support cost allocation and profitability analysis
- There is no accurate and complete cost report at product and customer level, therefore no profitability analysis is available for senior management.
How PwC could help
We can help you to design a Cost Allocation and Profitability Framework which will set up the foundation for effective cost management, profitability analysis and strategic planning. Our cost allocation and profitability framework can be developed in 3 stages:
- First level: Creating P&L transparency at an organisational level
- Second level: Creating insight on product and customer profitability
- Third level: Imbedded in planning and budgeting cycle and IT infrastructure
Your benefits
- Fair and equitable cost allocation bases and profitability framework
- Efficient cost management bank-wide
And management reporting
Common issues
One of common challenges faced by banks is a lack of a connection between its mission/vision and business strategy and its planning & budgeting process and management reporting. Banks often establish their strategic objectives in terms of financial performance without having enough focus on other non-financial dimensions such as customers, learning & growth, risk management, processes.
How PwC could help
We can therefore help banks to develop a KPI framework using our methodology of “Enterprise Management Performance”, including:
- Reviewing mission/vision and business strategy
- Defining strategic objectives and key value drivers
- Developing the strategy map
- Translating the key value drivers into driver based plans & related budgets to focus your business planning on strategy
- Developing target setting
- Translating value drivers into KPI’s at various levels within your organisation to focus your business reporting on strategy
- Defining and develop KPI framework and KPI dictionary
- Developing management dashboard
Your benefits
- A complete performance management framework to support the execution of the bank’s strategy
- Enhance Planning and budgeting and management reporting processes to support delivery of the bank’s strategy
Challenges
Banks increasingly need to strengthen their Treasury operations in order to achieve their targeted profits as well as to manage associated risks effectively.
Key challenges for banks:
- Banks do not have proper segregation of duties for Front, Middle and Back Office functions in accordance with best practice
- Treasury processes are not efficient
- There is no clear segregation between the Banking Book and the Trading Book
- There are no fully developed risk limits for Treasury activities
- Banks do not have advanced Treasury systems and processes to support Treasury operations in terms of risk management
How PwC could help
Our services include:
- Assess current Treasury processes and organisation structure, benchmark current practices against international and regional best practices
- Recommend improvements to current processes and propose a roadmap for implementation initiatives
Your benefits
- Sound Treasury organisation structure, with proper segregation of duties.
- Streamlined Treasury operational processes based on international and regional best practice.
- Enhanced competency in monitoring and managing risks associated with Treasury activities.
Common issues
- Banks face challenges in tailoring their products to attract the most profitable customers
- Banks face challenges putting in place the optimum branch model to support sales and service activities, whilst maintaining branch profitability
- Banks would like to leverage and optimise their distribution channels to better serve customers
- Banks have challenges in managing their portfolio - ensuring rigorous credit processes are in place, governed by a strong risk management framework
- Banks have a prevailing need to refresh their current operations to support new products/ capabilities , as well as to remain relevant in the market place
How PwC could help
We perform reviews of bank’s current credit chain and provide recommendations on improvement areas, as well as on new business / technical capabilities. Our services include:
- Product Development: Assist the bank in product / service offerings development, making sure that they are aligned to bank’s strategy, as well as maximising time to market
- Sales and Origination: Assist banks in sales and channel strategy development
- Credit Risk Management: Assist banks in developing credit evaluation and review processes, as well as to develop a corresponding target operating model to support these new / enhanced processes
- Servicing: Assist banks in service strategy development, as well as customer retention strategy
- Collections and Recovery: Assist in how best to manage collections and recovery functions within the bank
- Assess the implication of new target operating model on the existing organisation
- Assess what are the new people capabilities to support these products / processes and recommend how can the bank measure them
- Assess what are the technical capabilities to support these products / processes, and evaluate if the system today is capable of supporting them (i.e. capacity and scalability)
Your benefits
- Efficient and profitable product and service offerings
- Efficient processes to support new business and technical capabilities
- Strong credit processes to support credit risk management
- Lean and efficient organisation structure
- Structured and transparent performance measurement system
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