The impact of banks and non bank financial institutions on economic growth TABLE OF CONTENTS PREAMBLE 1 CONTENT 1 PART 1 THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1 1 1 Bank. The impact of banks and nonbank financial institutions on economic growth TABLE OF CONTENTS PREAMBLE 1 CONTENT 1 PART 1: THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1 1.1 Bank 1 1.2 Nonbank financial institutions 1 PART 2: THE EFFECTS OF THE BANKS ECONOMIC GROWTH 2 PART 3: THE IMPACT OF FINANCIAL INSTITUTIONS BANKING ON ECONOMIC GROWTH 4 REFERENCE 9 CONCLUDE 9 PREAMBLE In the production process, it can be said that capital for businesses is an exceptionally fundamental need, especially medium and longterm capital sources for investment and production projects and plans. Typically, businesses will look to banks and nonbank financial institutions to apply for loans, monetary establishments are fundamental conditions for development and improvement. Advance reconciliation and improve financial proficiency. CONTENT PART 1: THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1.1 Bank Commercial banks were formed, existed and developed in association with the development of the commodity economy. The development of the commercial banking system has had a huge and important impact on the development of the commodity economy, on the contrary, the commodity economy thrived to its high stage the economy. the market commercial banks are also increasingly being perfected and become indispensable financial institutions 1.2 Nonbank financial institutions Nonbank financial institution means a type of credit institution that can conduct one or several banking activities, except for individual deposits and payment services through customers accounts. . Role • tiCreate tiprofitable tiinvestment tiopportunities tifor tiindividuals. tiThanks tito tinonbank tifinancial tiinstitutions, tiinvestment tiopportunities tifor tiindividuals tiincrease. tiThe tibenefits tiwill tibring tiboth tisides tithanks tito tithe tisize, tithe tidispersion tiof tirisks tiand tidiversification tiof tiportfolios. • tiProviding tidiversified tifinancial tiservices, tienhancing ticompetitive tipressure tiwith ticommercial tibanks, tiimproving tiservice tiquality, ticreating timore tioptions tifor ticustomers. • tiMeeting tiother tineeds tiof tiindividuals, tihouseholds tiand tibusinesses tiin tithe tifinancial tiinvestment tisector. tiNonbank tifinancial tiinstitutions tiare tiplaces tito tihelp tiprotect tiinvestments tiand tidistribute tirisks tito tiinvestors tiin tisociety. PART 2: THE EFFECTS OF THE BANKS ECONOMIC GROWTH Banks are capital suppliers for the economy, are a significant instrument to advance the improvement of creation powers: Money exchanging with the capacity of credit gobetweens, the bank defeating inadequacies of the monetary market Mainly, to clear sit capital in all associations, people, every single financial area ... to shape an advance asset and use them to meet the capital necessities of the economy. It is an effective capital distribution channel for the bank to create conditions for businesses to take advantage of investment opportunities, expand production and business, improve technological processes, thereby improving labor productivity. In order to stand firm in the fierce market competition. With the ability to provide capital, the bank has become one of the starting points for the economic development of a national bait. Banks are the scaffold among organizations and the market: To be able to bring products and services to output markets and seek profits, businesses need capital (important inputs, background of all activities) to carry out production. At the point when value isnt sufficient, organizations should look to different wellsprings of capital. The bank will assist organizations with taking care of their issues with credit capital. The bank will help businesses solve their problems with credit capital. Thus, banks are the bridge to bring businesses to the market, help businesses find input capital, lubricate production and business activities and make payments to create finished products for the market. Banks help businesses and markets closer together in both space and time. Banks tiare titools tifor tithe tistate tito tiregulate tithe timacro tieconomy: tiBanks tiare tidirectly tiaffected tiby timonetary tipolicy tiinstruments ti(open timarket, ticompulsory tireserves, tiinterest tirates,… tion tithe tione tihand). tion tithe tiother tihand, tiindirectly tiparticipate tiin tiregulating timacroeconomics tithrough tirelationships tiwith tieconomic tiorganizations, tiindividuals tion tifinancial tiand ticredit tiactivities. tiThrough tithe tibanks tioperations tiwith tiother tiactors tiin tithe tieconomy, tiall tiinformation tirelated tito timonetary tipolicy tiformulation tiwill tibe tireturned tito tithe tibank, tienabling tithe tibank tito timake tieconomic tipolicy tiformulation. tiappropriate timacro tiin tieach tiperiod tito tiensure tipromoting tieconomic tigrowth tiand tistable tidevelopment. Banks tiare tithe tibridge ticonnecting tithe tinational tifinance tiwith tithe tiinternational tifinance: tiToday, tithe tiindependent tination tiis tideveloping tia tidiversified tiand ticomplex tiinternational tirelationship tiin timany tifields: tieconomics, tipolitics, tidiplomacy. ticulture, tiscience tiand titechnology, ti... tiin tiwhich tieconomic tirelations tiare timost tifocused. tiCompetitive tipressure tiforces tieach ticountry tito tiopen tithe tidoor tifor tiintegration tito tihave tistrong tipotential. tiThe tibanking tisystem tiwith tioperations tisuch tias tiinternational tipayment, tiforeign tiexchange titrading, tiinvestment titrust ti... tiwill tihelp tithe tieconomy tiof tia ticountry tiintegrate tiwith tithe tirest tiof tithe tiworld. tiThe tidomestic tibanking tisystem tihas tiregulated tithe tidomestic tifinance tiin tiline tiwith tithe timovement tiof tithe tiinternational tifinance, tibringing tithe tidomestic tifinance tito ticatch tiup tiwith tithe tiinternational tifinance. PART 3: THE IMPACT OF FINANCIAL INSTITUTIONS BANKING ON ECONOMIC GROWTH One tiof tithe tisubstance tiof tirebuilding tifinancial tiactivities tiof ticredit tiinstitutions tiin tithe tiScheme tion tiRestructuring tithe tisystem tiof ticredit tiinstitutions tifor tithe tiperiod ti20112015 tiwas tiaffirmed tiby tithe tiPrime tiMinister tiunder tiDecision tiNo. ti254 ti tiQD tiTTg, tidated ti01032012, tiis: tiGradually tichanging tithe tibusiness timodel tiof tibanks tiin tithe tidirection tiof tireducing tidependence tion ticredit tiactivities tiand tiincreasing tiincome tifrom tinoncredit tiservices. tiThis tishows tithat tiVietnam tihas tibeen tiaware tiof tithe tirole tiof tinoncredit tiservices tiin tibringing timore tisteady tiand timore tisecure tiincomes tifor tibanks. It tican tibe tiseen tithat tithe tidevelopment tiof tinoncredit tiservices tiplays tia tivery tiimportant tirole, tideciding tithe tiexistence tiof tia tibank tiin tithe tiprocess tiof tiinternational tieconomic tiintegration, tinamely: (i) Contributing to the diversification of banking products and services, thereby attracting and expanding to many types of customers; (ii) Optimal response to the needs of the economy, contributing to consolidating the growth and enhancing the reputation and position of the bank in the economy; (iii) Distributing risks to the bank, bringing stable income for the bank, increasing the banks profit. (iv) Promoting international cooperation and economic integration in the banking sector. With such an important role, banks have made great efforts in strengthening their financial capacity and distribution channels to support the development of noncredit services. Currently, noncredit services have been deployed quite diversely, focusing in 12 main forms as follows: Cash and noncash payment services in the form of collection and letter of credit (L C). ; Buy sell unfamiliar monetary standards; Entrusted; Card; Cash the board; Consulting and data arrangement; Supervisory Bank; Guarantee; Electronic banking; Accountant; Trading subordinate instruments; Securities speculation business ... Development tiof tinoncredit tiservices tiis tialso tithe timost tieffective tiway tito tichange tithe tistructure tiof tia tibanks tibusiness tiresults, tiespecially tiin tithe ticontext tiof tipotentially tirisky ticredit tiservices tiand tiearly tioperations. tiSecurities tiinvestment tiand titrading tifaced timany tidifficulties tias tiat tipresent.
The impact of banks and non-bank financial institutions on economic growth TABLE OF CONTENTS PREAMBLE CONTENT PART 1: THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1.1 Bank .1 1.2 Non-bank financial institutions PART 2: THE EFFECTS OF THE BANK'S ECONOMIC GROWTH PART 3: THE IMPACT OF FINANCIAL INSTITUTIONS BANKING ON ECONOMIC GROWTH REFERENCE CONCLUDE PREAMBLE In the production process, it can be said that capital for businesses is an exceptionally fundamental need, especially medium and long-term capital sources for investment and production projects and plans Typically, businesses will look to banks and non-bank financial institutions to apply for loans, monetary establishments are fundamental conditions for development and improvement Advance reconciliation and improve financial proficiency CONTENT PART 1: THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1.1 Bank Commercial banks were formed, existed and developed in association with the development of the commodity economy The development of the commercial banking system has had a huge and important impact on the development of the commodity economy, on the contrary, the commodity economy thrived to its high stage - the economy the market - commercial banks are also increasingly being perfected and become indispensable financial institutions 1.2 Non-bank financial institutions Non-bank financial institution means a type of credit institution that can conduct one or several banking activities, except for individual deposits and payment services through customers' accounts Role • Create profitable investment opportunities for individuals Thanks to nonti ti ti ti ti ti ti ti ti bank financial institutions, investment opportunities for individuals increase The ti ti ti ti ti ti ti ti benefits will bring both sides thanks to the size, the dispersion of risks and ti ti ti ti ti ti ti ti ti ti ti ti ti ti diversification of portfolios ti ti ti • Providing diversified financial services, enhancing competitive pressure ti ti ti ti ti ti ti with commercial banks, improving service quality, creating more options for ti ti ti ti ti ti ti ti ti ti customers ti • Meeting other needs of individuals, households and businesses in the ti ti ti ti ti ti ti ti ti ti financial investment sector Non-bank financial institutions are places to help ti ti ti ti ti ti ti ti ti ti protect investments and distribute risks to investors in society ti ti ti ti ti ti ti ti ti PART 2: THE EFFECTS OF THE BANK'S ECONOMIC GROWTH Banks are capital suppliers for the economy, are a significant instrument to advance the improvement of creation powers: Money exchanging with the capacity of credit go-betweens, the bank defeating inadequacies of the monetary market Mainly, to clear sit capital in all associations, people, every single financial area to shape an advance asset and use them to meet the capital necessities of the economy It is an effective capital distribution channel for the bank to create conditions for businesses to take advantage of investment opportunities, expand production and business, improve technological processes, thereby improving labor productivity In order to stand firm in the fierce market competition With the ability to provide capital, the bank has become one of the starting points for the economic development of a national bait Banks are the scaffold among organizations and the market: To be able to bring products and services to output markets and seek profits, businesses need capital (important inputs, background of all activities) to carry out production At the point when value isn't sufficient, organizations should look to different wellsprings of capital The bank will assist organizations with taking care of their issues with credit capital The bank will help businesses solve their problems with credit capital Thus, banks are the bridge to bring businesses to the market, help businesses find input capital, lubricate production and business activities and make payments to create finished products for the market Banks help businesses and markets closer together in both space and time Banks are tools for the state to regulate the macro economy: Banks are ti ti ti ti ti ti ti ti ti ti ti ti directly affected by monetary policy instruments (open market, compulsory ti ti ti ti ti ti ti ti ti reserves, interest rates,… on the one hand) on the other hand, indirectly participate ti ti ti ti ti ti ti ti ti ti ti ti ti in regulating macroeconomics through relationships with economic organizations, ti ti ti ti ti ti ti ti individuals on financial and credit activities Through the bank's operations with ti ti ti ti ti ti ti ti ti ti ti other actors in the economy, all information related to monetary policy formulation ti ti ti ti ti ti ti ti ti ti ti ti will be returned to the bank, enabling the bank to make economic policy ti ti ti ti ti ti ti ti ti ti ti ti ti formulation appropriate macro in each period to ensure promoting economic ti ti ti ti ti ti ti ti ti ti growth and stable development ti ti ti ti Banks are the bridge connecting the national finance with the international ti ti ti ti ti ti ti ti ti ti finance: Today, the independent nation is developing a diversified and complex ti ti ti ti ti ti ti ti ti ti ti international relationship in many fields: economics, politics, diplomacy culture, ti ti ti ti ti ti ti ti ti science and technology, in which economic relations are most focused ti ti ti ti ti ti ti ti ti ti ti Competitive pressure forces each country to open the door for integration to have ti ti ti ti ti ti ti ti ti ti ti ti ti strong potential The banking system with operations such as international ti ti ti ti ti ti ti ti ti ti payment, foreign exchange trading, investment trust will help the economy of a ti ti ti ti ti ti ti ti ti ti ti ti ti country integrate with the rest of the world The domestic banking system has ti ti ti ti ti ti ti ti ti ti ti ti ti regulated the domestic finance in line with the movement of the international ti ti ti ti ti ti ti ti ti ti ti ti finance, bringing the domestic finance to catch up with the international finance ti ti ti ti ti ti ti ti ti ti ti ti PART 3: THE IMPACT OF FINANCIAL INSTITUTIONS BANKING ON ECONOMIC GROWTH One of the substance of rebuilding financial activities of credit institutions in ti ti ti ti ti ti ti ti ti ti ti the Scheme on Restructuring the system of credit institutions for the period 2011- ti ti ti ti ti ti ti ti ti ti ti ti ti 2015 was affirmed by the Prime Minister under Decision No 254 / QD- TTg, dated ti ti ti ti ti ti ti ti ti ti ti ti ti ti 01/03/2012, is: "Gradually changing the business model of banks in the direction of ti ti ti ti ti ti ti ti ti ti ti ti ti reducing dependence on credit activities and increasing income from non-credit ti ti ti ti ti ti ti ti ti ti services" This shows that Vietnam has been aware of the role of non-credit ti ti ti ti ti ti ti ti ti ti ti ti ti services in bringing more steady and more secure incomes for banks ti ti ti ti ti ti ti ti ti ti ti It can be seen that the development of non-credit services plays a very ti ti ti ti ti ti ti ti ti ti ti ti important role, deciding the existence of a bank in the process of international ti ti ti ti ti ti ti ti ti ti ti ti ti economic integration, namely: ti ti ti (i) Contributing to the diversification of banking products and services, thereby attracting and expanding to many types of customers; (ii) Optimal response to the needs of the economy, contributing to consolidating the growth and enhancing the reputation and position of the bank in the economy; (iii) Distributing risks to the bank, bringing stable income for the bank, increasing the bank's profit (iv) Promoting international cooperation and economic integration in the banking sector With such an important role, banks have made great efforts in strengthening their financial capacity and distribution channels to support the development of non-credit services Currently, non-credit services have been deployed quite diversely, focusing in 12 main forms as follows: Cash and non-cash payment services in the form of collection and letter of credit (L / C) ; Buy - sell unfamiliar monetary standards; Entrusted; Card; Cash the board; Consulting and data arrangement; Supervisory Bank; Guarantee; Electronic banking; Accountant; Trading subordinate instruments; Securities speculation business Development of non-credit services is also the most effective way to change ti ti ti ti ti ti ti ti ti ti ti the structure of a bank's business results, especially in the context of potentially ti ti ti ti ti ti ti ti ti ti ti ti ti risky credit services and early operations Securities investment and trading faced ti ti ti ti ti ti ti ti ti ti ti many difficulties as at present ti ti ti ti ti To develop non-credit services ti ti ti Although it is contributing increasingly to the profits of banks, but in fact, it ti ti ti ti ti ti ti ti ti ti ti ti ti is not easy to develop the non-credit market in Vietnam Banks are facing with ti ti ti ti ti ti ti ti ti ti ti ti ti ti difficulties and challenges, such as: ti ti ti ti ti (1) Fierce competition between banks in all fields and operations; (2) Banks not have a clear strategy in the development of non-credit services, but are often integrated into the overall development strategy of the bank; (3) The level of technology and high quality human resources are still limited For non-credit services, technology plays an extremely important role Therefore, reality shows that banks still lack high-quality human resources to develop noncredit services with high technology, such as derivative instruments trading, ebanking , Commission (4) Vietnamese people's habit of using cash This is a major obstacle to the development of the card network in particular and the non-credit service in general of banks To overcome these problems, according to our research, the following solutions need to be implemented: Firstly, to raise awareness about the role of non-credit service development Although the role of non-credit services in the development of the bank has been enhanced, it is not enough Bank leaders need to fully understand the role of non-credit service development by building a reasonable proportion of profit in the bank's total profit and regularly controlling this proportion in a decreasing direction dependence on credit service By analyzing the efficiency of each type of service on the sales, profit, and risk perspectives will help banks build a proportion between the two types of non-credit services and credit From that perception, it is necessary to plan a development strategy for noncredit services with a long-term vision It can be seen that the weakness of Vietnamese banks is the lack of a long-term business strategy, so banks have not been able to limit risks arising from the volatility of the macroeconomic environment The strategy should identify a roadmap for the development of noncredit services and must meet the following requirements: - Must be based on the practical conditions of Vietnamese banks, the results of the annual non-credit service business to develop a feasible business strategy; - Must come from customer needs, from research, analysis and assessment of current needs and future demand development trends to formulate appropriate service business strategies; (iii) Must compare with competitors to see strengths, weaknesses, opportunities and challenges from which to set development goals; (iv) Based on the planned strategy, concretizing solutions for each stage of implementation, assigning to each branch based on the characteristics and strengths of the branch to achieve optimal efficiency Secondly, to diversify non-credit products and services on the market in the direction of improving the quality of traditional services and developing new services - For traditional non-credit services: This is the cornerstone that generates the largest income for the bank Therefore, commercial banks need to maintain and improve quality in the direction of: Completing the service delivery process, ensuring openness, transparency, simple procedures, easy access to and attractive customers; Perfecting the savings mobilization mechanism with suitable interest rates to maximize the mobilization of idle capital in the society into the bank - For new non-credit services, it is necessary to improve the marketing capacity of commercial banks, helping businesses and the public to understand, access and use banking services effectively In addition, it is necessary to increase the convenience of banking services, flexibly use risk prevention tools associated with safety in banking business Third, develop banking technology Banks need to develop a long-term technology development strategy, coupled with existing resource development Changing banking technology is quite expensive, so without the right technology development strategy can be a huge waste Technology strategy should go into many aspects, such as: technological level, engineering, ability to innovate, research and develop products and services, application and exploitation of information technology, digital, electronics and telecommunications in business activities (transaction, payment, administration, etc.) of the bank Banking technology development must ensure safety in technology operation ti ti ti ti ti ti ti ti is a top priority, as all data information is stored on the network, an IT incident can ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti result in loss of data , or cause the banking operation to stop affecting customers, ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti at the same time damaging the bank's reputation ti ti ti ti ti ti ti ti In addition, it is necessary to build processes and regulations on the ti ti ti ti ti ti ti ti ti ti ti competence of each functional department and each individual in the operation and ti ti ti ti ti ti ti ti ti ti ti ti use of the bank's information technology system in order to increase the level of ti ti ti ti ti ti ti ti ti ti ti ti ti ti safety and increase security confidentiality in the database system ti ti ti ti ti ti ti ti ti Fourth, improve the quality of human resources ti ti ti ti ti ti In particular, attention should be paid to developing human resources with ti ti ti ti ti ti ti ti ti ti high technical skills Because modern non-credit services use high technologies, it ti ti ti ti ti ti ti ti ti ti ti is required that service providers have a technology knowledge and mastery level ti ti ti ti ti ti ti ti ti ti ti ti Along with that, it is necessary to develop policies to attract talents and keep good ti ti ti ti ti ti ti ti ti ti ti ti ti ti human resources, to stick to and contribute to the development of the bank ti ti ti ti ti ti ti ti ti ti ti ti ti Fifth, limit risks in the development of non-credit services ti ti ti ti ti ti ti ti Risk management and prevention are essential and important when implementing non-credit services This activity greatly affects the reputation and operational capacity of the bank and directly affects customers' decisions to use the service Measures to limit the risk include: Clearly defining employee responsibilities in overseeing the development and maintenance of bank security policies; Performs full live checks to prevent unauthorized physical access behaviors in a computer environment; Relations with third parties must also be closely monitored REFERENCE Banks and Economic Growth: Implications from Japanese History, Yoshiro Miwa, and J Mark Ramseyer, 2002 Banks and economic growth in developing countries: What about Islamic banks?,Saida Daly &Mohamed Frikha |David McMillan, 2016 Banks and Economic Growth: Implications from Japanese History, Yoshiro Miwa, and J Mark Ramseyer Intermediation by Banks and Economic Growth: A Review of Empirical Evidence, Marijana Bađun, 2009 CONCLUDE The system of commercial banks in particular and the non-bank financial system in general is a very necessary condition in economic development We can clearly see their functions and important roles in the economy Therefore, there is a current commercial banking system, with the current technology as an inevitable result of the history and the level of market economic development To fully meet the needs of the economy, our commercial banking system still needs many reforms, changing from human to technical equipment Monetary policy enforcement ensures economic stability macroeconomic economy, controlling inflation, promoting production and consumption, stimulating investment and development To flexibly and effectively use monetary policy tools such as exchange rates, interest rates, and open market operations according to market principles Gradually raise and fully realize the convertibility of the Vietnamese currency To form a transparent, healthy and equal environment for monetary and banking activities to apply information technology popularization, quickly expand forms of non-cash payments and bank payments Diversify forms of capital mobilization, lending, and convenient and open provision of banking services and utilities to all businesses to promptly meet credit capital needs for production, business and life live, focus on agricultural and rural areas 10 ... Optimal response to the needs of the economy, contributing to consolidating the growth and enhancing the reputation and position of the bank in the economy; (iii) Distributing risks to the bank, bringing... association with the development of the commodity economy The development of the commercial banking system has had a huge and important impact on the development of the commodity economy, on the contrary,... capital, the bank has become one of the starting points for the economic development of a national bait Banks are the scaffold among organizations and the market: To be able to bring products and