Recomemdations to enhance international payment by lc in sai gon – ha noi joint stock commercial bank, thai ha sub branch

NATIONAL ECONOMICS UNIVERSITY FACULTY OF FOREIGN LANGUAGES ENGLISH FOR BUSINESS DEPARTMENT *** - NGUYEN THI KIEN RECOMEMDATIONS TO ENHANCE INTERNATIONAL PAYMENT BY L/C IN SAI GON – HA NOI JOINT STOCK COMMERCIAL BANK, THAI HA SUB-BRANCH Hanoi, May, 2011 NATIONAL ECONOMICS UNIVERSITY FACULTY OF FOREIGN LANGUAGES ENGLISH FOR BUSINESS DEPARTMENT *** - NGUYEN THI KIEN RECOMEMDATIONS TO ENHANCE INTERNATIONAL PAYMENT BY L/C IN SAI GON - HA NOI JOINT STOCK COMMERCIAL BANK, THAI HA SUB-BRANCH Field : English for Business Studies Code : 701 Supervisor: Nguyen Thi Hong Hanh, M.A Hanoi, May, 2011 Nguyễn Thị Kiên - CQ493845 - Business English 49A i ACKNOWLEDGEMENT After a period of studying theoretical framework and researching real status in SHB Thai Ha sub-branch, I have finished my report: “Recommendations to enhance international payment by L/C in Sai Gon Ha Noi joint stock commercial bank, Thai Ha sub-branch” To fulfill this research, I have received great help and encouragement from many people Foremost, I would like to thank the teachers and supervisors of Faculty of Foreign Languages, National Economics University for highly valuable knowledge imparted to us for the past years It is the important foundation supplying me with sufficient knowledge to carry out this research Next, I would like to express my deep thanks to Ms Nguyen Thi Hong Hanh, my direct supervisor, who gave us precious advice and sound orientation during the course of my internship report Thanks to her whole-hearted instruction, I can implement and finish the research properly My great gratitude goes to all officers in SHB Thai Ha sub-branch, especially my supervisor Bui Thi Lan Ngoc for giving me opportunity to apply my theoretical knowledge on practical banking operations, and helping me with collection of useful documents Last but not least, I am very grateful to my parents and my friends for all invaluable encouragement and support during my lifetime They are always by my side and the motivation for me to never give up and complete my research as best as possible With all my heart, I wish all of them will be healthy, happy and successful in whole life Nguyễn Thị Kiên - CQ493845 - Business English 49A `TABLE ii OF CONTENTS ACKNOWLEGEMENT….……………………………………………………… i TABLE OF CONTENTS …………………………………………… ……… ii LISTS OF ABBREVIATION………………………………………… …….….iv EXECUTIVE SUMMARY…………………………………………………… …v INTRODUCTION……………………………………………………………… vi Introduction of the research topic……………………………………………vi Rationales………………………………………………………………………vi Research Questions……………………………………………………………vii Scope of the research…………………………………………… ………… vii Methodology……………………………………………………………… …vii CHAPTER I: Introduction of SHB and SHB Thai Ha sub-branch……………1 1.1 SHB and Thai Ha sub- branch overview…………………………………1 1.1.1 SHB overview…………….………………………………………1 1.1.2 SHB Thai Ha sub-branch overview…………………………… 1.2 Background of International payment by L/C in Thai Ha sub – branch.2 1.3 Key term definitions………………………………………………… … CHAPTER II: Overview of Letter of Credit…………………………………… 2.1 Definition:………………………………………………………………… 2.2 Types of L/C……………………………………………………………… 2.3 The Process of L/C………………………………………………………….7 2.4 Advantages and Disadvantages to parties……………………………… 2.5 Criteria to evaluate L/C payment of a bank…………………………… 10 2.6 Factors affecting the efficiency of L/C payment in the bank…… ……12 CHAPTER III: Reality and evaluation of international payment by L/C in Thai Ha sub branch 15 3.1 Reality of L/C payment in SHB Thai Ha sub-branch………………….15 3.1.1 The process of L/C transaction…………………………………15 3.1.2 Products of L/C payment in SHB………………………………15 3.1.3 The scale of L/C payment……………………………………….16 iii Nguyễn Thị Kiên - CQ493845 - Business English 49A 3.1.4 Satisfaction of customers……………………………………… 20 3.2 Evaluation of international payment by L/C in Thai Ha sub – branch 20 3.2.1 Achievements……………………………………………….….21 3.2.2 Limitations………………………………………………….….21 3.2.3 Reasons of limitations……………………………… ….…….23 CHAPTER IV: Recommendations to enhance international payment by L/C in Thai Ha sub-branch……………………………………….…………………… 26 4.1 Orientations of Thai Ha sub- branch in 2011…………………… … 26 4.2 Recommendations………………………….…………………………… 27 4.2.1 Improving human resources quality………………….…… 27 4.2.2 Investing and making use of modern technology……………28 4.2.3 Enhancing the quality and diversifying L/Cs products…… 28 4.2.4 Boosting marketing activities………… ……….…….…… 29 4.2.5 Expanding correspondent banks….………………………… 31 4.2.6 Increasing foreign currency sources using in L/C payment…31 CONCLUSION…………………………………………………………………… 33 REFERENCES……………………………………………………………….… 34 Nguyễn Thị Kiên - CQ493845 - Business English 49A LISTS OF ABBREVIATION       ABA: Asian Banker Association SHB: Saigon - Hanoi Joint Stock Commercial Bank L/C: Letter of Credit ICC: International Chamber of Commerce UCP: The Uniform Customs and Practice for Documentary Credits SWIFT: Society for Worldwide Interbank Financial Telecommunications LIST OF TABLES AND CHARTS Table The value of Import & Export L/C in SHB Chart Issuance of a Letter of Credit Payment under Letter of Credit The reality of Import & Export L/C in SHB The total revenue from L/C payment in SHB The proportion of revenue in Thai Ha sub-branch iv Nguyễn Thị Kiên - CQ493845 - Business English 49A v EXECUTIVE SUMMARY For many decades, Letter of Credit (L/C) is used as an effective tool to boost economic exchange and to facilitate a variety of financial transactions, either as a method of payment or as a credit enhancement, within as well as across the borders of countries in the world Not only in Vietnam, but also in Vietnam, Letter of Credit quickly becomes popular in import-export activities This report mainly focuses on the reality and how to improve the effectiveness of L/C payment in SHB Thai Ha sub-branch Apart from Introduction and Conclusion, my report is divided into chapters In the first chapter, the reader is oriented forwards background of SHB and Thai Ha sub-branch as well as the international payment activities of Thai Ha sub-branch The second chapter, providing theoretical framework about Letter of credit including process, criteria of assessment and factors affecting on L/C payment is considered as the premise for next part The next chapter about the findings and analysis collected during my internship is also the centre of this study The author will show readers the reality of L/C payment and give deep assessment on L/C payment’ efficiency of Thai Ha sub-branch Finally, in the last chapter, some recommendations to enhance international payment by L/C in Thai Ha sub-branch will be presented This report is carried out with the aim to find out really effective and practical way to boost L/C payment in Thai Ha sub-branch The author hopes that this research will be useful not only with SHB but also in other banks in Vietnam vi Nguyễn Thị Kiên - CQ493845 - Business English 49A INTRODUCTION Introduction of the research topic Nowadays, trading overseas has opened great opportunities and issued outstanding challenges for not only enterprises but also banks worldwide Therefore, selecting the most appropriate payment method and ensuring accuracy in dealings, can make the difference to enterprise’s success – minimizing the risks to business while maintaining the goodwill of customers The method chosen will depend on the reliability degree between the parties, credit capacity, local export-import regulations and the nature of the goods Among methods of international settlement, L/C is appreciated by its convenience and safety for all parties This method has been a time-tested instrument and has proved its preeminence in international trade Hence, L/C plays a critical role in boosting trading overseas in the economic integration of Vietnam Finding answer for the question: “How to improve L/C payment?” becomes a pressing task in any bank This motivates me to choose “Recommendations to enhance international payment by L/C in Sai Gon Ha Noi joint stock commercial bank, Thai Ha subbranch” as the topic of my research This research will supply reader findings and analysis to have a deep sight on reality of L/C payment and suggest some useful solutions to improve L/C settlement in Thai Ha sub-branch Figures in this report are collected by combining two methods: observing, talking for primary data and gathering based information from books, magazine as well as books for secondary data Rationales For a long time, international trade has become an essential part in the world economics in general and Vietnam in particular Especially when Vietnam joined the World Trade Organization, the door of foreign trade has open for banks and financial organizations of Vietnam Sai Gon–Ha Noi bank (SHB) also has provided many international payment methods: advanced payment, open account, letter of credit to meet the demands of customers However, being a new comer in international payment services, SHB had to face and overcome many difficulties due to limitation of technology, knowledge of staff, and reduction of risks… Nguyễn Thị Kiên - CQ493845 - Business English 49A This study is not only derived from the author’s interest but more important is from the necessity of L/C payment’s improvement in Vietnam Findings and recommendations are given to improve L/C transactions in SHB as well as other banks After observation, collection and assessment, some effective solutions will be presented to improve L/C payment as well as international payment of Vietnam Research Questions During the time of internship in SHB Thai Ha sub – branch, I have observed, collected and analyzed to find the answer for these questions: What’s the reality of L/C transactions of Thai Ha sub –branch? What are the reasons of limitations of SHB in L/C transactions? What should SHB to enhance international payment by L/C? Scope of the research In the scope of the research, I focus on the real status of Thai Ha sub-branch in L/C payment activities and also give some evaluation on achievements and limitations of this activity in the period from 2007 - 2010 In the last part of research I recommend some solutions to boost L/C payment in Thai Ha sub-branch as well as whole SHB in Vietnam Methodology In this research, I collect information and data form sources: primary and secondary Firstly, to gather primary information I have observed daily operations of Thai Ha branch I also talked with some officers and some customers of SHB Thai Ha to collect details about L/C transactions Secondly, secondary information is collected through reports and figures of SHB and Thai Ha sub – branch in particular In addition, I also find lots of information from books, magazines, newspapers and internet Nguyễn Thị Kiên - CQ493845 - Business English 49A CHAPTER I INTRODUCTION OF SHB AND SHB THAI HA SUB – BRANCH 1.1 SHB and Thai Ha sub- branch overview 1.1.1 SHB overview Saigon - Hanoi Joint Stock Commercial Bank (SHB) was established in 1993 with headquarter at Can Tho city Starting from a rural commercial bank, SHB has developed constantly and achieved many valuable awards from high-renown organizations: “Best bank in Vietnam in 2010”, “National famous branch 2010” “Top 20 biggest banks in Vietnam” With proper competitive strategy, modern technology and professional working style, SHB has taken leading position in Vietnam banking and provide customers with superior banking services At present, SHB has more than 100 branches and sub- branches in many big cities and provinces of Vietnam with high growth speed The SHB customers include thousands of small & medium enterprises, households & individuals, stated groups…The main banking operations of SHB are: mobilizing capital, giving short –medium-long terms loan, dealing international payment, discounting commercial documentaries, dealing foreign exchange…In future, SHB aims to become one of the ten best retail banks in Vietnam and a strong financial holdings group to meet the requirement of world economic integration Being successful as today, SHB has overcome many challenges and followed principle in core values The core values: ▪ Customers: SHB pledges to supply various, safe, secure, friendly & prompt products/ services because “The customer’s satisfaction is the SHB’s success” ▪ Shareholders: SHB ensures to grow constantly and maximize return to shareholders ▪ Staff: SHB creates dynamic, professional working environment and bring developing opportunities for every staff