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( STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING BANKING UNIVERSITY OF HO CHI MINH CITY NGUYEN DA THAO THE EFFICIENCY OF INTERNATIONAL SETTLEMENT OPERATIONS OF VIETCOMBANK 2015 2017 BACHELOR[.]
1 STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING BANKING UNIVERSITY OF HO CHI MINH CITY - NGUYEN DA THAO THE EFFICIENCY OF INTERNATIONAL SETTLEMENT OPERATIONS OF VIETCOMBANK 2015 - 2017 BACHELOR’S THESIS MAJOR: FINANCE - BANKING ID: 734021 HO CHI MINH CITY, 2018 STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING BANKING UNIVERSITY OF HO CHI MINH CITY - NGUYEN DA THAO THE EFFICIENCY OF INTERNATIONAL SETTLEMENT OPERATIONS OF VIETCOMBANK 2015 - 2017 BACHELOR’S THESIS MAJOR: FINANCE - BANKING ID: 734021 SUPERVISOR DR NGUYEN PHUOC KINH KHA HO CHI MINH CITY, 2018 DECLARATION The thesis, which I have submitted, is my own research and, with the exception of quotations (which are clearly marked and referenced), is written in my own words Signature: Date: ABSTRACT The process of internationalization of the world's socio-economic life has been more and more intense, and international trade has more and more conditions for development For a developing country like Vietnam, import-export activities play a very important role in the economic development, thus, the international payment of commercial banks should recieve more attention in banking operations Viet Nam Foreign Bank is the most outstanding bank in Vietnam regarding of international settlement In recent years, Vietnam Foreign Trade Bank has always paid attention to innovation in external relations in order to improve the efficiency and development of international settlement, enhancing the prestige and competitiveness as an international bank regionally and globally Based on the research on the efficiency of international settlement operations at Vietcombank, it can be seen that besides the positive results, there are still some limitations in the development of settlement quality as well as bringing efficiency to this activity Therefore, in order to improve the efficiency of international settlement operations at the Foreign Trade Bank of Vietnam in particular and commercial banks in general, there should be synchronized coordination from many parties, not only the relationship between banks and clients but the strong combination among solutions The implementation should be carried out at the same time to bring about its effect Table of Contents DECLARATION ABSTRACT LIST OF ACRONYMS LIST OF PICTURES INTRODUCTION 10 Rationale 10 Literature Review 12 Research Objectives .12 Data and Methodology 13 Dissertation Outline 13 CHAPTER I 14 THEORETICAL BACKGROUND OF OPERATIONAL EFFICIENCY OF INTERNATIONAL SETTLEMENT 14 1.1 Fundamental theories of international settlement 14 1.1.1 Definition of international payment 14 1.1.2 Characteristics of international payment 14 1.1.3 The role of international payment 15 1.2 The efficiency of international settlement operations in Commercial Bank 17 1.2.1 Definition of the efficiency of international settlement operations 17 1.2.2 Criteria to evaluate the efficiency of international settlement operations in Commercial Banks 19 1.2.3 Quantitive criteria for evaluating the operational efficiency of internationl settlement operations 21 1.2.4 Quanlitative criteria for evaluating the operational efficiency of international settlement operations 23 CHAPTER II 25 ASSESSMENT OF THE EFFICIENCY OF INTERNATIONAL SETTLEMENT OPERATIONS AT VIETCOMBANK 25 2.1 An Overview Of Bank For Foreign Trade Bank Of Vietnam 25 2.1.1 The history and development of Vietcombank 25 2.1.2 The organizational structure 26 2.2 The reality of international settlement operations at Vietcombank 28 2.2.1 Structure of International settlement – Trade Finance Centers and Branches 28 2.2.2 The reality of international settlement operations at Vietcombank 30 2.3 Assessment of the efficiency of international settlement operations at Vietcombank 35 2.3.1 The efficiency of international settlement operations evaluated by quantitative criteria 35 2.3.2 The efficiency of international settlement operations evaluated by qualitative criteria 36 2.4 Advantages and drawbacks 42 2.4.1 Advantages 42 2.4.2 Drawbacks 43 CHAPTER III 47 ENHANCEMENT OF THE EFFICIENCY OF INTERNATIONAL ECONOMIC OPERATIONS IN VIETNAM 47 3.1 3.2 Orientations for development and expansion of business in general and International Settlements in particular in Vietnam 47 3.1.1 General development orientation 47 3.1.2 Orientation to enhance the efficiency of International settlement operations at Vietcombank 48 Recommendations to enhance the efficiency of international settlement operations in Vietnam 49 3.2.1 Recommendations to Vietcombank 49 3.2.2 Collaborative recommendations to clients 60 3.2.3 Recommendations to the government 61 CONCLUSION 63 REFERENCES 64 LIST OF ACRONYMS Acronym Meaning IS International Settlement ICC International Chamber of Commerce L/C Letter of credit T/T Telegraphic Transfer D/P Documents against payment D/A Documents against acceptance UCP Uniform Customs and Practice for Documentary Credits USD United States Dollar VND Vietnam Dong SWIFT Society for Worldwide Interbank Financial Telecommunication VCB Joint Stock Commercial Bank for Foreign Trade of Vietnam BIDV Bank for Investment and Development of Vietnam ACB Asia Commercial Joint Stock Bank MHB Housing Bank of Mekong Delta MB Military Commercial Joint Stock Bank HSBC Hong Kong and Shanghai Banking Corporation LIST OF PICTURES Name Page Figure 2.1: Corporate governance model of Vietcombank 27 Figure 2.2: Management structure of Vietcombank 28 Figure 2.3: Structure of International settlement – Trade Finance Centers and Branches Figure 2.4: Market share of Vietcombank 2015 - 2017 Figure 2.5: International payment – trade finance revenue of Vietcombank 2015 – 2017 (USD billion) Figure 2.6: Export and Import Settlement Revenue of Vietcombank 2015 – 2017 (USD billion) Table 2.7: International settlement revenue and market share of some Commercial Banks in Vietnam 2015 - 2017 (USD billion) Table 2.8: Value of each payment methods of Vietcombank 2015 – 2017 (USD billion) Figure 2.9: Proportion of each payment methods in export settlement value of Vietcombank 2015 – 2017 Figure 2.10: Proportion of each payment methods in import settlement value of Vietcombank 2015 - 2017 Table 2.11: Analysis of the efficiency of international settlement operations of Vietcombank 2015 – 2017 (USD billion) 29 30 31 31 32 33 34 34 35 Table 2.12: International settlement product portfolio of Vietcombank 39 Table 2.13: Vietcombank remittances services 40 Table 2.14: Core banking softwares of Commercial Banks in Vietnam 41 INTRODUCTION Rationale Although operating in any form, a commercial bank usually consists of three main operations: capital mobilization, lending and intermediary International settlement is a part of the bank's intermediation business International settlement operations create momentum for the development of other operations Therefore, how to achieve efficiency in international settlement is a matter of top priorities of banks for the following reasons: Firstly, international development activity facilitates the increase of revenue and profit Vietcombank, playing the role as the leading bank in this type of business in Vietnam, not only does the bank's revenue increase significantly thanks to the fees charged for providing more services to its clients, but also in support of other bank operations This creates advantages for Vietcombank to increase deposit, create favorable conditions for expanding the scale of credit, especially to increase the foreign currency capital due to the temporary management of the idle capital of enterprises with payment via banks Secondly, the operation of international settlement development, facilitating banks to disperse risks Banking is the business that contains the most risky elements Especially in the current context, the more volatile, fraudulent trickery increasingly sophisticated, the more and more risk that Vietcombank incurred: credit risk, risk interest rates, foreign exchange risks, liquidity risk, technology and operational risks, national risk, etc Diversification of business and service types is the most effective way to diversify risk in banking business Revenue from International settlement would support banks when the market fluctuates, helping banks to maintain stability International settlement would help strengthen the bank's competitiveness In the field of import-export capital which contains many risks, it is required that the International settlement should apply from receiving to processing information To meet that requirement, Banks has to innovate ... Orientation to enhance the efficiency of International settlement operations at Vietcombank 48 Recommendations to enhance the efficiency of international settlement operations in... value of Vietcombank 2015 - 2017 Table 2.11: Analysis of the efficiency of international settlement operations of Vietcombank 2015 – 2017 (USD billion) 29 30 31 31 32 33 34 34 35 Table 2.12: International. .. assessment of the efficiency of International settlement operations of Vietcombank Qualitative method in giving theoretical research and proposed solutions to enhance the efficiency of international settlement