Improving the effectiveness of foreign currency trading activity at quang trung branch, bank for investment and development of vietnam (bidv

NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM šœ - BACHELOR’S THESIS IN FINANCE IMPROVING THE EFFECTIVENESS OF FOREIGN CURRENCY TRADING ACTIVITY AT QUANG TRUNG BRANCH, BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM (BIDV) STUDENT NAME : NGUYEN DANG HUNG CLASS : ADVANCED FINANCE INTAKE : 50 INTERNSHIP GUIDE : PHAM PHUONG THAO INSTRUCTOR : PH.D DANG NGOC DUC ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế Hanoi, 2012 ACKNOWLEDGEMENT Sincere acknowledgements to my instructor Ph.D Dang Ngoc Duc for his enlightening advice and guidance Heartfelt thanks to Ms Pham Phuong Thao-deputy manager of Planning department of Quang Trung branch, Bank for Investment and Development of Vietnam (BIDV) and staff of the branch for their enthusiastic support and help Last but not least, I would like to thank my family for continuous and unconditional encouragement and all my classmates from Advanced Finance Program Intake 50 for their assistance that help me accomplish this research I am sure there exist faults in this paper All suggestions and discussions are warmly welcomed ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế ABSTRACT Today, in the trend of opening, integrated economy, business operation of the banks has reached out across the regional and international scope Commercial banks now have the tendency to expand their business into many new modern banking operations in the market Along with traditional operations, foreign exchange business has been considered as a potential activity-diversifying source of income, generating profit and contributing to the growth of the banks In its integration of global economy, the Vietnam foreign exchange market has been establishing and improving to meet the development of the country Even though in its infancy, the Vietnam foreign exchange market have been doing very well every hour, every day, and attracted the attention of many investors The products and services on the foreign exchange market have also been gradually establishing and improving in both quantity and quality to meet the diverse needs of investors This paper, choosing Quang Trung branch, Bank for Investment and Development of Vietnam (BIDV) as the sample, investigates its effectiveness in trading foreign currency The author first goes through the theoretical foundation of the foreign currency trading activity and effectiveness of foreign currency trading activity of commercial banks in general, then, presents a group of criteria reflecting the effectiveness as well as pointing out significant factors affecting this activity Through the detailed analysis of foreign currency trading business at Quang Trung branch, this thesis reveals some achievements and existing limitations In the end, the writer proposes some feasible solutions for the branch and recommendations to the Government and the State Bank of Vietnam in order to enhance effectiveness of foreign ề Đ currency trading of commercial banks án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế TABLE OF CONTENTS ACKNOWLEDGEMENT ABSTRACT TABLE OF CONTENTS ABBREVIATION LIST OF TABLES LIST OF FIGURES 3 CHAPTER I: INTRODUCTION 1.1 Rationale 1.2 Research questions: 1.3 Research objectives 1.4 Research methodology 1.5 Research scope 1.6 Structure 2 CHAPTER II: THEORY OF FOREIGN CURRENCY TRADING ACTIVITY AND EFFECTIVENESS OF FOREIGN CURRENCY TRADING ACTIVITY OF COMMERCIAL BANKS 2.2 Overview of foreign currency trading activity of commercial banks 2.2.1 Definition 2.2.2 Fundamental activities of banks in foreign currency trading 2.2.3 Characteristics of foreign currency trading activity 2.2.4 Types of transactions in foreign currency trading activity 2.3 Effectiveness of foreign currency trading activity in commercial banks 2.3.1 Definition 14 14 2.3.2 Criteria reflecting the effectiveness of foreign currency trading activity of commercial banks 15 The level of customers’ satisfaction 16 2.3.2.2 Total trading volume 16 ề Đ 2.3.2.1 án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 2.3.2.3 Profitability of foreign currency trading 2.3.2.4 The liquidity of currencies 2.3.2.5 A completion of forex products 17 17 18 2.3.3 Factors affecting the effectiveness of foreign currencies trading activity of commercial banks 18 2.3.3.1 Internal factors (Subjective factors) 18 2.3.3.2 External factors (Objective factors) 21 CHAPTER III: FOREIGN CURRENCY TRADING ACTIVITIES AT QUANG TRUNG BRANCH – CURRENT SITUATIONS AND SOLUTIONS 26 3.1 Overview of Quang Trung branch, BIDV 26 3.1.1 Establishment and development process 26 3.1.2 Scope of business activities 27 3.1.2.1 Mobilizing capital 27 3.1.2.2 Credit activities 28 3.1.2.3 Offering banking services 3.1.2.4 Other activities 3.1.3 Organizational structure 3.1.4 32 Business performance of Quang Trung branch in the period 2007-2011 3.1.4.1 Capital mobilization 32 3.1.4.2 Credit activities 3.1.4.3 Profitability 37 29 29 30 35 3.2 Current situation of foreign exchange trading activity at Quang Trung branch 40 3.2.1 Legal framework regulating foreign currency trading activity of Quang Trung branch …………………………………………………………………………………… 40 3.2.2 Current situation of foreign currency trading 42 3.2.3 Assessment the effectiveness of foreign currency trading activity at Quang Trung branch… 50 ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế CHAPTER IV: RECOMMENDATIONS TO IMPROVE EFFECTIVENESS OF FOREIGN CURRENCY TRADING ACTIVITY AT QUANG TRUNG BRANCH 55 4.1 Orientation to improve the foreign currency trading activity 55 4.2 Recommendation for the Government 56 4.2.1 Create a favorable environment for the development of foreign exchange market…… 57 4.2.2 Improve the international balance of payment 4.3 Recommendation for SBV 57 59 4.3.1 Implement a flexible foreign exchange rate policy 59 4.3.2 Increase the national foreign reserve 60 4.3.3 Revive the foreign exchange proprietary 60 4.3.4 62 Supplement and complete the regulations on the punishments of violations 4.4 Solutions for Quang Trung branch 62 4.4.1 Strongly develop the human factor 62 4.4.1.1 Plan recruitment and selecting process 4.4.1.2 Have employee retention program 63 4.4.1.3 Training and developing employees 63 4.4.2 Build a sound and effective customer strategy 4.4.3 Develop the derivative products 4.4.4 Diversify currencies in foreign exchange activities 66 CHAPTER V: CONCLUSION REFERENCES 69 APPENDICES 70 63 64 65 68 ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế ABBREVIATION Dept Department BIDV Bank for Investment and Development of Vietnam SBV State Bank of Vietnam Forex Foreign exchange WTO World Trade Organization ADB Asian Development Bank ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế LIST OF TABLES Table 1.1: Growth in mobilizing capital 34 Table 1.2: Bad debt ratio 37 Table 1.3: Structure of outstanding loans 38 Table 1.4: Business performance .38 Table 1.5: Trading volume and structure 44 Table 1.6: Structure of buying foreign currency by types of customers 46 Table 1.7: Structure of selling foreign currency by types of customers 46 Table 1.8: Operational result of foreign currency trading activity 51 ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế LIST OF FIGURES Figure 1.1: Organizational structure 32 Figure 1.2: Growth in total outstanding loans 36 Figure 1.3: Growth in pre-tax profit 39 Figure 1.4: Provisions for credit losses of selected banks in 2011 40 Figure 1.5: Structure of buying activities by types of operations .41 Figure 1.6: Structure of selling activities by types of operations .50 ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 58 payment experienced a huge deficit with the deficit reached $8.8 billion Fortunately, this bad condition was significantly improved in 2010 and there was only $3.07 billion trade deficit Entering 2011, Government issued the Resolution No.11/NQ-CP dated February 24,2011 on key solutions with the purpose of controlling inflation, stabilizing macroeconomy, and ensuring social welfare Regarding Resolution 11, one point that worth mentioning is the solutions to boost production and business, encourage export, and reduce trade deficit, which is fully mentioned in the Article Accordingly, agricultural production and export need to be fostered, trade deficit needs to be put under strict control Specifically, the Ministry of Industry and Trade will be responsible for coordinating with other ministries, agencies, and localities to develop plan for regulating export and import, strive to lower trade deficit to less than 16% of the country’ total export turnover; develop process and rules to control import of good, materials, equipment for projects funded by the State budget; actively apply proper measures to control import of consumers’ goods and reduce trade deficit Thanks to this timely and sound leadership of the Government, there was a positive signal implying the profound rehabilitation of the economy Particularly, the overall balance of payment at the end of the year turned over $5 billion surplus However, recognizing the importance of balance of payment to the foreign exchange market in general and the development of foreign currency trading activity in particular, in the following year, the Government still needs to concentrate on improving the balance of payment Specifically: _ Continue to reduce trade deficit and importation of consumer’s goods by requiring banks not to sell foreign currency for this payment requirements, and not lend foreign currency for the purpose of importing consumer’s goods; cut or reduce import quota with the items which can be produced in the future _ Promote measures to encourage foreign investment, constantly enhance ề Đ investment environment, better the legal system, improve the infrastructure, diversify the án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 59 investment channel to attract a large amount of foreign currency into the commercial banking system and improve the international balance of payment 4.3.Recommendation for SBV 4.3.1 Implement a flexible foreign exchange rate policy Obviously, the foreign exchange rate policy of a nation will play a key role in shaping the foreign exchange market and contributing to its growth A flexible and lithe foreign exchange regime will create room for the establishment of foreign exchange market and promote its development In contrast, a rigid and conservative one will act as the challenge and obstacle hindering the growth of this market Currently, Vietnam is applying a managed float exchange rate regime in which exchange rate fluctuate from day to day, but central banks will normally attempt to influence their countries’ exchange rates and stabilize the currency Such regime is necessary for a developing and lacking of stable factors economy like Vietnam especially in cases of extreme appreciation or depreciation, it can significantly eliminate the enormous shocks for the entire economic system Moreover, over time, the exchange rate regime must also gradually improves towards more flexible since Vietnam’s diversification of commercial trading activity, we not focus too large volume of trade in some countries but increasingly use many other strong currency (besides USD) for payment and transactions However, an exchange rate regime which is considered as flexible must trustfully reflect the demand and supply on the market, closely follow the variation and fluctuation on foreign exchange market and must have two directions- up and down in accordance with the market signal 4.3.2 Increase the national foreign reserve The foreign exchange reserves are the total official public sector foreign assets are readily available to and controlled by the authorities for meeting a defined range of objectives for a country or union (IMF) In Vietnam, the State foreign exchange reserves ề Đ are under the State ownership and are indicated in the sheet of currency balance of the án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 60 State Bank Typically, official foreign exchange reserves are held in support of the following fundamental objectives:  Supporting and complementing the monetary and exchange rate policy;  Ensuring the capability to be ready to make payment and meet foreign exchange demands when necessary;  Maintaining foreign currency liquidity to limit external vulnerability during times of crisis or when access to borrowing is curtailed;  Preserving a reserve for national disaster or emergencies According to the report of ADB, the foreign exchange reserves in Vietnam have soared in 2011 due to the positively purchase of foreign currency by the State Bank Specifically, by the end of 2011, the total foreign currency reserves amounted to 17 billion U.S Although the situation is strongly improved, however, according to the ADB, this is just equivalent to the demand for foreign currency for about 1.5 months of import and Vietnam is the country having the lowest level of foreign exchange reserve in the Southeast Asia region Thus, the urgent issue of the SBV now is to increase the national foreign exchange reserve, which allowing it to be the last buyer on the interbank and have the capacity to intervene when there is great variation in the exchange rate as well as on the foreign exchange market 4.3.3 Revive the foreign exchange proprietary The ordinance on foreign exchange (2005) now affirms the right to own foreign currency of economic organizations and individuals Accordingly, in respect to economic organizations having foreign currency earned from the export of goods or services are obliged to open a foreign currency account at an authorized credit institution in Vietnam and must transfer the entire amount of foreign currency to that account (Article 7, chapter II) Economic organizations have the right to keep the foreign currency on the account, ề Đ and privately decide whether to sell or not that foreign currency for the credit institution án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 61 The regulation is similar for the subject are individuals Foreign currency of residents being Vietnamese individuals, which is collected from amounts of one-way money transfer, shall be used for the purpose of storing, carrying with them, depositing into the foreign currency account opened at authorized credit institutions or selling to authorized credit institution; for the case of Vietnamese citizen, they shall be entitled to deposit foreign currency savings at the authorized credit institutions (Article 8, chapter II) From these regulations, it can be seen that economic organizations and individuals proactively use their foreign currency for their own intent The ability of credit institutions in buying foreign currency merely depends on the purpose of them-whether they decide to sell or not For this reason, foreign currency deposits of economic organizations and individuals at banks always remained very high, leading to a common dilemma in 2011 that banks have abundant fund to make loans but lack of foreign currency to sell when there were customers’ demand This somehow creates imbalance in the demand and supply of foreign currency, put pressure on the exchange rate and affect the effectiveness and performance of foreign currency trading activity in banking system In order to tackle these shortcomings, the Ordinance on foreign exchange (2005) needs to be amended and supplemented relating to the ownership of foreign currency in the direction of allowing credit institutions the right and activeness in buying the foreign currency of economic organizations and individuals but also responsible for ensuring adequate supply of foreign currency for these objects when they have reasonable demands 4.3.4 Supplement and complete the regulations on the punishments of violations The dealing with violations is defined in the Article 43, Ordinance on foreign exchange (2005) Specifically Organizations, individuals committing any violation act to ề Đ the provisions of this Ordinance shall, depending on the nature, seriousness of the án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 62 violation, be subject to the discipline, administrative punishment or prosecuted for criminal liability; and shall be subject to the compensation in accordance with provisions of applicable laws for any damage caused However, it is clear that these regulations are too general, lack specific punitive methods and clear division of responsibilities of the State agency involved, thus the sanctions are not serious and lacking of deterrent effect Therefore, there must be clearly specified degree of violation and correspondent punitive scheme so that it can become a base and foundation for handling the problem when organizations and individual not conform to legal provisions 4.4.Solutions for Quang Trung branch Based on the branch’ current situation of, available resources, general orientations for the business and for the foreign currency trading activity specifically, the writer would like to suggest some solutions to improve the effectiveness of the foreign currency trading activity at Quang Trung branch 4.4.1.Strongly develop the human factor In all businesses, people are the most important and valuable resource, play as the key deciding the success or failure of them Since foreign exchange business is a complex area requiring much intellectuality, knowledge and technicality, investment in human resource must be put great emphasized and properly concerned To have a strong, highly qualified staff that are able to meet the requirement of the work and adapt to the volatility in the market, Quang Trung branch has to carefully consider about the human management process Specifically: 4.4.1.1 Plan recruitment and selecting process The recruitment and hiring process is the first step towards creating the competitive strength and the strategic advantage for the branch At the first glance, the ề Đ recruitment should be set focusing on the work experience, qualifications and the án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 63 expertise in the field of foreign exchange activity of the candidates This on the one hand helps the bank save the significant amount of time and money for training, and create the competence and competitive advantage in term of human resource on the other hand Apart from having a thorough grasp of knowledge and operation, selected candidates also needs necessary standards such as agility, initiative and creativity, in analyzing and tackling situations 4.4.1.2 Have employee retention program Once the branch has got the best people, the next step is to focus on employee retention First, the branch must develop an appropriate salary policy for their staff A wages and salaries policy that is competitive with other employers in the marketplace will be motivational, fair and equitable to attract the best qualified people available to achieve the branch’ missions and encourage the retention and productivity of qualified personnel However, well-paid salary is not always the most important ensuring the satisfaction and productivity of employees One of the most effective employee retention tips is to build a strong employee recognition program Employee recognition ideas like rewards or preferential compensation for employees who have excellent result in performing their tasks can really become a motivator to motivate and stimulate them to achieve a higher level of performance 4.4.1.3 Training and developing employees There is one vital key to ensure business competitiveness and business profitability: staff training Competent employees don’t remain competent forever Skills deteriorate and can become obsolete Therefore, training staff personnel and keeping their skills up to date is essential to the success of business of Quang Trung branch For this reason, it is the branch’ commission to promote training and advancing the foreign exchange ề Đ qualifications of their employees The branch also can organize training course at home án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 64 and abroad for their staff to be able accrue experience about foreign exchange business on different market Moreover, it has been observed that good regular trainings are able to reduce staff turnover, increase productivity and improve the quality of work These trainings result to greater staff satisfaction through enhanced confidence, personal development and career enhancement 4.4.2.Build a sound and effective customer strategy Attracting customers is another vital factor leading success of foreign currency trading activity at the branch Between one type of customers who wish to purchase foreign currency and the other type having the needs to sell, the later one is particular important since it serves as the input for the business activities of the bank In order to develop a comprehensive and effective customer strategy, Quang Trung branch should consider the following suggestions: + Proactive in searching for customers: the target customers of the branch is enterprises engaged in export and import area, and even the individuals with remittance from overseas because in the period of year end, there is a big flow of remittances dumping into Vietnam Moreover, besides familiar and longtime customers, the branch also has to actively seek new and potential customers For the enlargement of the customer base become effective, it is necessary to widen the branch’ network Though, Quang Trung branch now has recently open a new affiliated-branch in Ba Dinh street, it is still oriented to expand branch network in areas with strong economic growth, high investment efficiency, and especially the import-export and foreign-invested regions + Have rational price policy: in a fiercely competitive business environment today, pricing policy must be applied and implemented in a flexible and suitable way on the basis of balancing the capital, costs, profits, and market shares Therefore, the branch should have an affordable pricing policy for each customer segment In order to executive ề Đ this, it needs to classify and categorize its customer’s base With customer groups having án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 65 long-term relationship, greater trading volume and prestige with the branch, they can enjoy preferential interest rates, or taking transactions with price incentives + Take more attention to customers who are individuals: Looking at the structure of total foreign currency trading, it is very easy to figure out the inequality between the contributions of organizations and individuals to the total trading activities Since the potential from this channel is still very huge and has ample opportunities to develop in the future, the branch should have more methods to attract idle resources from population + Promote the diversification of products and services, shorter the tine and simplify the procedure of transaction to create favorable conditions for customers, save time and meet increasingly diverse demands of customers 4.4.3 Develop the derivative products Derivative transactions not only are the tools helping the bank eliminate its exposure to foreign exchange risk but also bring more profits for the banks when they provide those products to customers However, the conditions for the development of derivative products are pretty demanding There must be a knowledgeable and skilled staff who have the professional and qualifications in forex market together with modern equipments that can update quickly to the rapidly changing movement in the market In addition, the knowledge and awareness of customers are another force driving the success of these products since without customer, there are no objects for them to serve and develop From the above explanations, personally I think Quang Trung branch need to take some following actions: + Regarding customers, in order to change the habit and awareness of this object, the branch should organize specialized seminars about the derivative products to introduce and market these products to customers Moreover, the branch’s tellers who directly trade with customers also have responsibility in instructing and guiding them ề Đ about the products and services offered by the branch án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 66 + With respect to human resource, the branch should give its priority to training and cultivating its staff that take charge of foreign exchange activities especially those who participate in derivative products + Regarding technology: besides available devices and equipments as fax, telex, telephone, SWIFT network, Quang Trung branch also needs to be equipped with more modern and innovative technologies especially the processing and managing risks in forex market software However, the innovation in technologies is so expensive and takes times to implement Therefore, it needs to have a strategic development plan in the long run to build a comprehensive computing system 4.4.4.Diversify currencies in foreign exchange activities In Vietnam today, USD is still dominated to other currencies when it remains the currency of the importing enterprises in paying their international contracts, and of commercial banks in mobilizing capital and making foreign currency loans And Quang Trung branch is not exceptional At present, the branch almost trades with the USD when USD occupied for more than 90% of total transactions However, in the globally integrated commerce, the primarily use of the dollars is no longer relevant Diversification of foreign currency portfolio not only to meet the specific need or customers for that currency, but also to contribute to the share and distribution of risk of fluctuation in the value of different currencies Generally speaking, the foreign exchange risk of a group of currencies is often smaller than the risk of a single currency This comes from the fact that the changes in exchange rate among currencies have reverse relationship, so the loss from maintaining an open position of one currency can be compensated by the profit attained from keeping an open position of another currency Consequently, the bank can get profits while avoiding foreign exchange risk through diversifying its currencies trading by maintaining positive and negative net exposure position in different currencies Hence, currencies diversification is an option the branch really should take into account ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 67 CHAPTER V: CONCLUSION After years from the day of establishment, up to now Quang Trung branch has received the belief of patrons and became one of the most trustworthy places for customers to come and carry out transactions with the bank Beside traditional activities as capital mobilization or credit activities, the branch also has developed many new banking operations especially the foreign exchange activities Although in the period 2007-2011, macro-economic indicators of the world and Vietnam such as inflation, interest rate, exchange rate, etc continued to fluctuate and had adverse influence on the whole economy in general and on the bank’s operation in particular, foreign exchange activities at Quang Trung branch still progressed and had achieved favorable results Some outstanding outcomes need to be highlighted here are the expansion in structure, total foreign currency trading and the increase in total profitsfar exceeding the targeted plan and was higher and higher than those of previous year However, due to both internal and external causes, foreign currency trading of the branch still had some limitations The two most remarkable restrictions that worth mentioning are inequalities in structure of demand and supply source as well as the structure of transactions, and lack of diversity in currencies Then, based on the assessment and analysis made in the report, the writer has made some recommendations which should be considered only as reference with the hope that Quang Trung branch will improve its performance of foreign currency trading activities and grow up more and more in the near future ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 68 REFERENCES English: Nguyễn Văn Tiến (Fourth edition), Cẩm nang thị trường ngoại hối giao dịch kinh doanh ngoại hối Peter S.Rose/Sylvia C.Hudgins (Eighth edition), Bank Management and Financial services, MacGraw-Hill Ỉrwin Saunders/Cornett (Fourth edition), Financial Markets and Institutions, MacGraw-Hill Ỉrwin Journals: Lucio Sarno, 2009, “The microstructure of the foreign exchange market” JA Frankel, 2005, “Introduction to the foreign exchange market” J Canales-Kriljenko, May 2004, “Structural factors affecting exchange rate volatility” Websites: http://www.sbv.gov.vn/wps/portal/vn http://vneconomy.vn/ http://www.exchangerates.net.au/ http://financentrevn.com/ http://finance.laws.com/ ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 69 APPENDICES STATE BANK OF VIETNAM No 20/2011/TT-NHNN SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom – Happiness Hanoi, August 29, 2011   CIRCULAR PROVIDING FOR THE PURCHASE, SALE OF FOREIGN CURRENCIES IN CASH BETWEEN INDIVIDUALS AND AUTHORIZED CREDIT INSTITUTIONS - Pursuant to the Law on the State Bank of Vietnam No 46/2010/QH12 dated 16 June 2010; - Pursuant to the Law on Credit Institutions No 47/2010/QH12 dated 16 June 2010; - Pursuant to Ordinance on Foreign Exchange No 28/2005/PL-UBTVQH dated 13 December 2005; - Pursuant to the Decree No 160/2006/ND-CP dated 28 December 2006 of the Government providing in details on the implementation of the Ordinance on Foreign Exchange; - Pursuant to the Decree No 96/2008/ND-CP dated 26/8/2008 of the Government providing for the functions, duties, authorities and organizational structure of the State Bank of Vietnam;  Article Subjects of application Individuals who are Vietnamese citizen shall be authorized to buy foreign currency in cash at authorized credit institutions to satisfy spending demand of their own as well as of children sharing passport with their parent, including: food expense, pocket money, travel expense in foreign country related to one of following purposes: ề Đ a Study, medical treatment in abroad; án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 70 b Going on business, travelling, visiting overseas For other legal purposes as stipulated in Paragraph 2, Article of the Decree No 160/2006/ND-CP dated 28 December 2006 of the Government providing in details for the implementation of the Ordinance on Foreign Exchange, an individual may buy foreign currency in cash at an authorized credit institution depending on its ability to balance source of foreign currency in cash Individuals being foreigners who have legal income source in Vietnamese Dong shall be entitled to buy foreign currency in cash at authorized credit institutions in line with current provisions on foreign exchange control Individuals selling foreign currency in cash to authorized credit institutions and foreign currency exchange agents of such authorized credit institutions in accordance with current provisions on foreign exchange control Đ SOCIALIST REPUBLIC OF VIET NAM ề STANDING COMMITTEE OF án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 71 NATIONAL ASSEMBLY No 28/2005/PL-UBTVQH11 Independence - Freedom – Happiness Hanoi, 13 December 2005 ORDINANCE ON FOREIGN EXCHANGE   - Pursuant to the Constitution of the Socialist Republic of Vietnam issued in 1992, which was amended, supplemented in accordance with the Resolution No.51/2001/QH10 dated 25 December 2001 of the National Assembly, legislature X, the 10thsession; -Pursuant to the Resolution No 42/2005/QH11 dated 14 June 2005 of the National Assembly, legislature XI, the 7th session on the adjustment of the Program on the construction of laws, ordinances issued in 2005; This Ordinance provides for foreign exchange activity.  Chapter II CURRENT TRANSACTIONS Article 7. Payment and money transfer relating to export, import of goods, services 1.   Residents shall be entitled to purchase foreign currency from authorized credit institutions to pay for the import of goods, services 2.   Residents must transfer their entire foreign currency earned from the export of goods, services to the foreign currency account which is opened at an authorized credit institution in Vietnam; in case where they have a demand for maintaining their foreign currency abroad, they must be permitted by the State Bank of Vietnam 3.   All transactions of payment and money transfer relating to the export, import of goods, services shall be carried out through an authorized credit institution Article Unilateral money transfer ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế 72 1.   Foreign currency of residents being Vietnamese organizations, which is collected from amounts of one-way money transfer, shall be transferred to the foreign currency account opened at the authorized credit institutions or sold to the authorized credit institutions 2.   Foreign currency of residents being Vietnamese individuals, which is collected from amounts of one-way money transfer, shall be used for the purpose of storing, carrying with them, depositing into the foreign currency account opened at authorized credit institutions or selling to authorized credit institutions; for the case of Vietnamese citizen, they shall be entitled to deposit foreign currency savings at the authorized credit institutions 3.   Residents shall be entitled to purchase, transfer and carry foreign currency abroad to serve legal demands 4.   Non-residents, residents who are foreigners with foreign currencies on account shall be entitled to remit them abroad; in case where they have legal income source in Vietnamese dong, they shall be entitled to purchase foreign currency for oversea remittance Article 43 Dealing with violation Organizations, individuals committing any violation act to the provisions of this Ordinance, depending on the nature, seriousness of the violation, shall be subject to the discipline, administrative punishment or prosecuted for criminal liability; and shall be subject to the compensation in accordance with provisions of applicable laws for any damage caused ề Đ án nh Ki tế Supervisor: PhD Dang Ngoc Duc ốc qu Nguyen Dang Hung – Advance Finance 50 tế