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Na t i o na lEc o no mi c sUni v e r s i t y Adv a nc e dEduc a t i onalPr o gr am SUBJ ECT:I NTENRATI ONALFI NANCE Thepo s s i bi l i t yt ode v e l o pa c t i v i t i e so nt he i nt e r na t i o na lmo ne yma r ke to fVi e t na m' sc o mme r c i a l ba nks Le c t ur e r :PGS TSDa ngNg o cDuc Cl a s s :Banki ngCLC60 Gr ou p4: BuiTh iMi n hHo a LeThiKh a nhHu y e n Ng u y e nTr u n gKi e n LeHo n gLi e u LePhu on gLi nh Ng u y e nTh iTh u yLi nh t h HaNo i ,Ap r i l12 20 21 Table of Contents A ABSTRACT .3 B CONTENT .3 I Overview of international money market What is international money market? Benefits when the commercial banks enter IMM II Participation of Vietnam commercial banks in IMM .4 III Opportunities IV Challenges and Recommendations: Challenges Recommendations C CONCLUSION 10 A ABSTRACT: Along with the development of the commercial banking system in Vietnam and the integration of the banking industry into the world financial and monetary market, the money market in Vietnam has been formed and increasingly thriving according to international standards and practices In the process of its formation and development, like all other entities, the money market in Vietnam also has problems related to functions, roles, operating mechanisms, these issues need to be explored and studied specifically to grasp the current situation in order to have solutions for the market to operate more and more perfectly, to meet the development needs of the money market and a modern banking system This is the reason why our group decided to choose topic “ the possibility to develop activities on the international money market of Vietnam’s commercial banks” to research B CONTENT: I Overview of international money market: What is international money market? - The international money market (IMM) is a market where international currency transactions between numerous central banks of countries are carried on - IMM’s major responsibility is to handle the currency trading between the countries Benefits when the commercial banks enter IMM: - Facilitating foreign trade: allowing countries to retain their own currencies while operating international transactions - Balance Supply and Demand about capital: When interest increase, Firms need capital and borrow in IMM - High efficiency of capital mobilizing & using capital: International capital markets like the euro have no capital restrictions This means that there are no required reserves for all organizations to maintain risk Therefore, these markets can lend 100% of the deposits of businesses International trade continues to grow, so international markets continue to appear to prevent the possibility of increasing domestic currency value or market downturn - Extent operation time: transaction sessions The foreign exchange market is a 24-hour market and is electronically connected in a network of global banks participating in this activity Naturally, these are the busiest times of the market because there are lots of high-volume transactions going through at the moment Vietnamese commercial banks participating in the business in the international foreign exchange market must also closely monitor exchange rate movements and participate in the transactions according to the aforementioned periods and trading sessions II Participation of Vietnam commercial banks in IMM: The current situation of foreign exchange trading of Vietnamese commercial banks: Data from financial reports of 24 commercial banks in Vietnam until March of 2019 In the foreign exchange business, the majority of commercial banks increased in profits Vietcombank continuously maintained its leading position in foreign currency trading as well as profit from business activities in the market The next largest group of commercial banks in Vietnam, BIDV, VietinBank, Sacombank, Techcombank, ACB, MBB, Eximbank, and VPBank are also participating in strong competition in the foreign exchange market At VPBank, Forex trading was not a strength for many years before regularly suffering heavy losses: loss of VND 159 billion in 2017, a loss of VND 319 billion in 2016, a loss of VND 290 billion in 2015 But in 2018, VPBank is seeing a drastic change when not only escaping losses but also making a profit of up to 251 billion dongs Forex trading is a risky segment, up and down quite erratically, even at large, experienced banks However, Vietnamese commercial banks will not ignore the business with many prospects and potentials because of the need to spend foreign currency on tourism activities, studying abroad, settling abroad The amount of remittances to Vietnam has also increased rapidly year by year At the same time, Vietnamese commercial banks also have to compete with foreign currency trading on the "black market", mainly gold shops Although Vietnamese commercial banks for many years have launched many promotions to give gifts, give money to customers to make foreign currency transactions with banks, or add many conveniences, such as allowing exchange Foreign currency at ATMs, the people's habit of buying and selling foreign currencies in the free market is still difficult to change Especially with the Yuan transactions of private individuals, individuals in the northern border area III Opportunities Firstly, the formation of new banking business models The opening up and integration in the banking sector in addition to allowing domestic and foreign commercial banks to run business, compete and grow in a level playing field, equality At the same time, create favorable conditions for domestic commercial banks to penetrate the international market and expand business Integration also gives the Vietnamese banking industry opportunities for international exchange and cooperation in the fields of financial and monetary policy making, There by enhancing the position and prestige of Vietnamese commercial banks in international banking and financial transactions Secondly, broaden the reach of foreign markets International economic integration opens up a market opportunity for foreign commercial banks to Vietnamese commercial banks Competition, but also increase the health and safety of the entire system of Vietnamese commercial banks have the opportunity to access capital, technology, experience and management level of the commercial banks in the world By the end of 2019, commercial banks in the country are prepared to catch up quite well this opportunity Commercial banks (such as BIDV, VCB, Vietinbank, MB,…) have pioneered the export of banking, securities and insurance services to foreign markets To be proactive and cautious in approaching and exploring the markets of developed countries such as the United States, Germany and Russia to penetrate ASEAN countries' markets such as Laos, Cambodia and Myanmar; Next is the representative office, branch Up to now, there are more than 30 branches and representative offices of Vietnamese commercial banks in foreign countries Table 1: Locations and investment formats of Vietnamese commercial banks abroad Bank Year Area Vietcombank 1978 Hongkong 1997 Singapore 2019 America 1999 Laos 2008 Hongkong 2009 Campuchi a 2010 Myanmar 2012 Czech Republic BIDV Investment Form Subsidiary (Vinafico-Hongkong Finance Company) Representative Office Representative office (licensed, to go into operation in quarter 3/2019) Representative office Lao Viet Insurance Joint Venture Company (2008) Lao Viet Bank (1999) 100% capital Subsidiary of BIDV International Company Limited in Hong Kong) USD Representative office 100% Capital Bank (Bank for Investment and Development of Cambodia - 2010) Insurance Company Cambodia Vietnam (2009) Cambodia - Vietnam Securities Joint Stock Company (2011) Representative office Brand (2016) Financial investment company Representative office European Financial Joint Stock Company 2015 2015 Taiwan Rusia 2008 Laos Sacombank 2009 Campuchi a MB 2010 2011 SHB 2011 2016 Agribank Vietinbank 2010 Laos Campuchi a Campuchi a Laos Campuchi a (2010) Representative office Representative office Representative office Branch Representative office Branches 100% capital bank (2011) brand brand Representative office 100% capital bank 100% capital bank branch 2010 Germany 2011 Laos Representative office Branches branch 2012 Myanmar Representative office 2015 Laos 100% capital Bank Thirdly, integration will create motivation to promote innovation and enhance transparency, publicity, governance and self-responsibility of the system of Vietnamese commercial banks in accordance with international standards Thereby, improve the operating efficiency in the field of currency and banking Fourthly, the integration will help Vietnamese commercial banks have the opportunity to access and develop a variety of new and modern banking services and utilities, expand their business activities while constantly improving the quality of customer service to compete better Innovation will create a driving force for the development in business activities of Vietnamese commercial banks Network increase Fifthly, integration requires a better regulatory environment to implement international commitments, create an attractive investment climate, and encourage capital inflows through direct and direct investment Indirect foreign indirect investment, creating opportunities for commercial banks to lend and mobilize larger capital At the same time, it opens up opportunities for commercial banks to seek foreign strategic shareholders in order to overcome the limitations on financial capacity, governance and competitiveness to improve service quality, business performance Last but not least, Legal framework creates opportunities for the Vietnam commercial bank expanded trading IV Challenges and Recommendations: Challenges: Quality problems: Creating pressure on Vietnam’s commercial banks to improve service quality, product diversification, investment in modern technology Human resource development: Requires Vietnamese commercial banks to have a human resource that is not only highly specialized in banking but also must understand the international trade law, be fully equipped with knowledge and techniques Reputation of commercial bank: - As Vietnamese become more educated and have higher incomes, they are more likely to look to foreign banks- Better service providers - Local banks only meet about 40-60% of Basel II requirements That shows that technology governance is a great challenge to the pressure of international integration of the commercial banking system in Vietnam Recommendations: Modernize technology, equipment and materials; diversify products and services Human resource solution: training and improving the foreign exchange profession for officials and employees Organize training classes at home and abroad to gain experience in Forex trading in different markets Reputation of Commercial banks: Improve efficiency of operation Perfecting and developing foreign currency trading operations Applying exchange rate forecast to prevent and limit risks: Money trading department can use tools such as: IRP (interest rate parity), PPP (purchasing power parity), IFE (international Fisher effect), interest rate curve, Mismatch, Moving forward international standards: Basel III C CONCLUSION: Above are great opportunities and challenges for Vietnamese commercial banks However with experiences learned over the past time, in particular especially in 2018 and the first months of the year 2019, certainly does foreign business Vietnamese commercial banks' exchange will pay off more sustainable, which contributes to the growth of country's economy The problem posed for Vietnamese commercial banks is to continue to strengthen staff training, perform risk prevention operations according to international foreign exchange trading practices, actively and flexibly buy and sell foreign currencies in the market, and focus on derivative transactions ... Vietnam’s commercial banks? ?? to research B CONTENT: I Overview of international money market: What is international money market? - The international money market (IMM) is a market where international. .. needs of the money market and a modern banking system This is the reason why our group decided to choose topic “ the possibility to develop activities on the international money market of Vietnam’s... maintain risk Therefore, these markets can lend 100% of the deposits of businesses International trade continues to grow, so international markets continue to appear to prevent the possibility of increasing
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