Chapter2: Capital raising operations

Chapter expected learning outcomes  Review two methods of raising capital in commercial banks  Analyse the methods of raising capital of Vietnam’s commercial banks  Understand the processes, procedures and the advantages and disadvantages of raising capital through deposits and the issuance of valuable papers.  Plan the capital mobilization strategies of commercial banks in Vietnam in a practical context. Off-Balance Sheet Activities  Loan commitments  Obligation of bank to provide a specified loan amount to a particular business upon request  Note issuance facility (NIF)  Banks earn fee income for risk assumed  Standby letters of credit (SLC)  Backs a customer’s obligation to a third party  Banks earn fee income

Chapter2: Capital raising operations Nguyen Thi Hai Hang, Msc Faculty of Finance and Banking University of Economics and Law Chapter expected learning outcomes  Review two methods of raising capital in commercial banks  Analyse the methods of raising capital of Vietnam’s commercial banks  Understand the processes, procedures and the advantages and disadvantages of raising capital through deposits and the issuance of valuable papers  Plan the capital mobilization strategies of commercial banks in Vietnam in a practical context References  Circular 49/2018 / TT-NHNN regulating term deposits, Circular 48/2018 / TT-NHNN regulating savings deposits  Circular 34/2013 / TT-NHNN and 16/2016 / TT- NHNN of the SBV stipulating the issuance of promissory notes, treasury bills, certificates of deposit, domestic bonds of credit institutions and foreign bank branches Balance Sheet of All Commercial Banks in US (items as a percentage of the total, Dec 2008) The balance sheet of Vietnam banks ASSETS Cash on hand, gold, silver and gemstones Value LIABILITIES AND SHAREHOLDERS' EQUITY Amounts due to the Government and the State Banks Balances with the State Banks Balances with and loans to other credit institutions Deposits and borrowings from other credit institutions Trading securities Deposits from customers Derivative financial instruments and other financial assets Funds for finance, entrusted investments and entrusted loans Loans to customers Investment securities Valuable papers issued Capital contributions, long-term investments Fixed assets Other assets Other liabilities Value Off-Balance Sheet Activities  Loan commitments    Obligation of bank to provide a specified loan amount to a particular business upon request Note issuance facility (NIF) Banks earn fee income for risk assumed  Standby letters of credit (SLC)   Backs a customer’s obligation to a third party Banks earn fee income Off-Balance Sheet Activities  Forward contracts   Agreement between a customer and bank to exchange one currency for another on a particular future date at a specified exchange rate Allows customers to hedge their exchangerate risk Off-Balance Sheet Activities  Swap contracts   Two parties agree to periodically exchange interest payments on a specified notional amount of principal Banks serve as intermediaries or dealer and/or guarantor for a fee The balance sheet of Vietnam banks OFF-BALANCE SHEET ITEMS:  Credit guarantees  Foreign exchange commitments  Letters of credit  Other guarantees  Other commitments Fund mobilization of commercial banks The mobilized capital is the capital attracted through the Bank's operations  It is the main source of capital in bank’s activities, which is composed of the following components:  Deposit  Mobilize by issuing valuable papers such as promissory notes, bonds, deposit certificates and other valuable papers 10 Blockading a payment account  A written request issued by a competent regulator  There is some mistake, error in Crediting to the customer’s payment account or a request for refund of money is sent from the remitting payment service supplier;  There is a sign of fraudulence, breach of laws and regulations concerning the payment account  A written notice is serviced by one of the account holders informing that there arises dispute among the holders of the shared payment account 19 End the blockage of payment account  The term of blockage expires  A written request for ending the blockage of payment account is issued by the competent regulator  The payment service supplier has finished handling the mistake, error in remittance  After verification, there is no act of fraudulence or breach of laws in regard of the payment account  A written notice made by all the holders of the shared payment account informing that the dispute of the shared payment account among the holders has been solved 20 ... of raising capital in commercial banks  Analyse the methods of raising capital of Vietnam’s commercial banks  Understand the processes, procedures and the advantages and disadvantages of raising. .. Fund mobilization of commercial banks The mobilized capital is the capital attracted through the Bank''s operations  It is the main source of capital in bank’s activities, which is composed of... procedures and the advantages and disadvantages of raising capital through deposits and the issuance of valuable papers  Plan the capital mobilization strategies of commercial banks in Vietnam