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Paris Graduate School of Management Thai Nguyen University INTERNATIONAL EXECUTIVE MASTER OF BUSINESS ADMINISTRATION PROGRAM THESIS TITLE: IMPROVING THE CAPITAL MOBILIZATION EFFICIENCY AT BIDV’S SOUTHERN HANOI AFFILIATE IN THE PERIOD OF 2008 - 2012 Student’s name: NGUYEN VAN HIEU Intake I 2012 TABLE AND CONTENT INTRODUCTION The subject’s importance Research thesis purposes The subject and scope of the research thesis .9 Research thesis approach Structure of the thesis CHAPTER I 11 FUNDAMENTAL THEORETICAL BASIS FOR CAPITAL MOBILIZATION EFFICIENCY OF CBS 11 1.1 CBs’ capital and capital mobilization 11 1.1.1 Capital and the need of capital mobilization 11 1.1.2 Capital of CBs 11 1.1.2.1 The CB concept 11 1.1.2.2 CBs’ features 13 1.1.2.3 Roles of CBs 14 1.1.2.4 The functions of CBs 15 1.1.2.5 Capital of CB definition 15 1.1.2.6 Funds of CBs 17 1.1.3 Capital - mobilization at CBs 22 1.1.3.1 The concept of capital - mobilization 22 1.1.3.2 Objectives and principles of mobilizing capital at CBs 23 1.1.3.3 The forms of capital - mobilization 24 1.1.4 1.2 The role of mobilized capital for business activities of CBs .27 The efficiency of CBs’ capital mobilization .28 1.2.1 The concept of capital mobilization efficiency 28 1.2.2 The need to improve the efficiency of capital mobilization 28 1.2.3 Criteria for evaluating the capital mobilization efficiency 30 1.2.3.1 The qualitative indicators evaluating the efficiency of banks’ capital mobilization 30 1.2.3.2 The quantitative indicators evaluating the efficiency of banks’ capital mobilization 31 1.2.4 Factors influencing the efficiency of capital mobilization 35 1.2.4.1 Objective factors 35 1.2.4.2 Subjective factors 36 Chapter II 41 SITUATION ANALYSIS OF ACTUAL CAPITAL MOBILIZATION EFFICIENCY AT BIDV’S SOUTHERN HANOI AFFILIATE 41 2.1 An overview of the Bank for Investment and Development of Vietnam – Southern Hanoi Affiliate 41 2.1.1 Formation history BIDV’s Southern Hanoi Affiliate 41 2.1.2 Organizational structure and operations of BIDV’s Southern Hanoi Affiliate ……………………………………………………………………42 2.1.3 The operation of the Bank for Investment & Development of Vietnam – South Hanoi Branch 44 2.1.3.1 Mobilization activities 45 2.1.3.2 The use of capital (loans and investments) 48 2.1.3.3 The provision of banking services 51 2.2 The reality of capital mobilization’s effectiveness at the BIDV – South Hanoi Branch 53 2.2.1 The reality of capital mobilization at the BIDV - South Hanoi Branch 54 2.2.1.1 Profit from capital mobilization 54 2.2.1.2 The Return on Revenue (ROR) 55 2.2.1.3 The Return on Cost .56 2.2.1.4 The growth of mobilized capital 57 2.2.1.5 The compatibility between capital mobilized and capital demand 59 2.2.2 The scale and structure of capital mobilization at BIDV South Hanoi Branch 61 2.2.2.1 The form of capital mobilization 61 2.2.2.2 The maturity of mobilized capital 63 2.2.2.3 Issuance of debt instruments 65 2.2.2.4 Other forms of mobilization 65 2.3 Assessment on the effectiveness of capital mobilization in the BIDV South Hanoi branch 66 2.3.1 Assessment on the effectiveness of capital mobilization by criteria and by the results achieved .66 2.3.1.1 The branch always mobilizes capital effectively 67 2.3.1.2 The amount of capital mobilized is large and has good quality 67 2.3.1.3 The capital mobilized structure is initially diverse and consistent with the capital demand 68 2.3.1.4 2.3.2 Mobilized capital adequacy 69 The backlogs in the mobilization activity and the causes .70 2.3.2.1 The backlogs 70 2.3.2.2 The causes of the backlogs 72 CHAPTER III 76 SOLUTIONS FOR IMPROVING THE EFFICIENCY OF CAPITAL MOBILIZATION IN BIDV - SOUTH HANOI BRANCH 76 3.1 The concept of improving the efficiency of capital mobilization at the Bank for Investment & Development of Vietnam - South Hanoi Branch 76 3.1.1 To increase mobilized capital of the lowest cost 76 3.1.2 To mobilize all source of capital in the area at the highest level 77 3.1.3 To enhance the effectiveness of capital mobilization together with the efficiency of capital use 77 3.1.4 To increase the proportion of medium- and long-term capital to meet customer demand for loans 78 3.2 A number of measures to improve the efficiency of capital mobilization in the Bank for Investment & Development of Vietnam - South Hanoi Branch 79 3.2.1 To maintain, improve the policy of mobilizing interest rate flexibly and reasonably to minimize the mobilization cost 79 3.2.2 To continue to diversify capital mobilization forms and build a mobilizing strategy match with capital using 82 3.2.3 develop the mobilization plan and capital structure appropriate to the use of capital 84 3.2.4 To promote Marketing and enhance the position of the bank .84 3.2.5 To innovate and modernize the banking technology 86 3.2.6 To strengthen the deposit by all measures 87 3.2.7 To development services related to capital mobilization in order to attract low-cost capital 88 3.2.8 To continue to improve and enhance the qualifications of employees 89 3.3 Recommendations 91 3.3.1 For the Government 91 3.3.1.1 Create a stable macroeconomic environment 91 3.3.1.2 Promote non-cash payment 91 3.3.1.3 Complete the system of competition law .92 3.3.1.4 Promote the development of the financial market 92 3.3.2 For the Central Bank 93 3.3.2.1 To inhibit inflation, to stabilize the money value 94 3.3.2.2 Together with the government to promote the development of the bank payment 94 3.3.2.3 To continue flexibly operating the interest rate tool, the monetary policies, and the fiscal policies 94 3.3.2.4 To develop open market operations 95 3.3.2.5 To create policies supporting CBs in technology innovation .95 3.3.3 For the Bank for Investment and Development of Vietnam (BIDV) 95 3.3.3.1 To build a reasonable business strategy based on the specific conditions of the branches 96 3.3.3.2 To develop and expand the BIDV network 97 CONCLUSION 1010 REFERENCES 101 WARRANTY 102 ABBREVIATIONS 103 LIST OF TABLE 106 INTRODUCTION The subject’s importance 2011 was a stormy year for the economy of Vietnam in general and for enterprises in particular The efforts made by the Government have helped Vietnamese economy partially overcome difficulties in 2011 However, there are still challenges facing Vietnam economy in the year of 2012 In 2012, Vietnam's economy has still been facing difficulties due to the global economic crisis and the impact of the fall in foreign direct and indirect investments To achieve the target of growing GDP from to 6.5% in 2012, onedigit inflation rate, the state budget deficit below 4.8% and credit growth from 1315%, it is necessary to the Government to monitor flexibly Besides, it can be seen that the State Bank of Vietnam and the Ministry of Finance will tighten their monetary and financial policies Accordingly, the three industries, which are predicted to face a great number of difficulties, include real estate, stock market and commercial banks Effective business performance is vital for any enterprise In order to establish a business and operate its activities, capital is a prerequisite condition to maintain and develop production activities and reflects the financial resources invested in the production process and business The hunger for capital is one of the pressing issues facing enterprises, particularly nowadays, when businesses expect to invest to expand their production and diversify their services to enhance their competitiveness after Vietnam joined World Trade Organization (WTO) Capital determines the competitiveness of every enterprise of which CBs are not the exception Efficient capital mobilizing (or fund-mobilizing) is the prerequisite for banks to survive and grow Like lending, capital - mobilization is a major and typical profession of a commercial bank (CB) In the process of socio-economic development in Vietnam today, capital demand is always among top priority issues before starting a new fiscal year This fact is mentioned since the socio-economic development and the enterprises’ development strongly depend on capital Particularly, CBs - financial institutions in financial markets which business in the field of money and currency, capital plays a more important role comparing with other organizations In the context of harsh competition in the banking sector nowadays, the efficiency of capital mobilization is one of the factors that help banks to improve their competitiveness in the market The main activity of CBs is lending, i.e providing loans and collecting interests Therefore, in order to meet the market capital needs, CBs must raise capital externally In other words, capital mobilization plays a key role for banks that want to survive and develop On the other hand, the development of credit institutions, especially CBs is the prerequisite for the development of the capital market, which facilitates the development of the social economy Those said analyses explain the importance of CBs’ capital mobilization to the current economic development and clarify why CBs’ capital mobilization profession should be studied and explored Given the difficulties that CBs must face in 2012 in addition to the target of controlling the credit growth and quality and limiting bad debts, the capital mobilizing target is placed on top by CBs Banking is a unique industry with its unique products and services since its equity accounts for a small percentage of the working capital Therefore, the more funds CBs can mobilize from economic entities, the easier their activities are Only by mobilizing capital can CBs have funds for lending and further improve their other activities That is the reason why a great number of banks mutually vie with others by increasing their interest rates for their effective capital mobilization The global financial crisis and economic downturn in the mid-2008 have had strong impact on the capital mobilization activities of Vietnamese CBs in general and of BIDV (Bank for Investment and Development of Vietnam) in particular The current international economic integration has created a great deal of challenges for CBs in Vietnam In fact, Vietnamese CBs seriously lack of funds due to their limited competitiveness in mobilizing capital and the low quality of services that not really meet customers’ demands This results in their ineffective business performance The capital issue has always been a top priority for BIDV Southern Hanoi affiliate over the past years Capital mobilization is considered effective when banks’ capitals are abundant and available to meet the needs of withdrawing cash as well as borrowing among inhabitants, enterprises and other organizations With its motto “Considering capital mobilization is an important stage and create space for firm capital growth”, BIDV Southern Hanoi affiliate has attempted to diversify fund mobilization forms through expanding its transaction network as well as improving the quality of banking services subject to the following criteria: "Fast, accurate and convenient for customers." However, capital mobilization is still a "hot" issue for BIDV Southern Hanoi Affiliate The economic fluctuations, the increase or decrease in gold prices and exchange rates have influenced most people’s psychology An illustration is that the increase in gold prices results in the trend in which almost all people tend to withdraw their deposits in banks to purchase gold for short-term and quick earnings Real estate market can also help its dealers earn much money Therefore, with the current low interest rates, it is difficult for banks to attract funds from individuals as well as businesses Accordingly, when banks are short of capital, it is not easy for them to ensure an abundant money supply to individuals and organizations According to the above-mentioned theoretical and practical analyses, I decide to select my MBA thesis subject namely "Improving the capital mobilization efficiency for BIDV’s Southern Hanoi Affiliate" The thesis objectives are raising my own theoretical awareness, knowledge and practical experience and partially contributing to strengthen the capital mobilization efficiency for the Affiliate The purposes and roles of the thesis are to clarify some fundamental issues on capital mobilization and present recommendations to improve its efficiency Research thesis purposes • Explain the basic theories relating to the capital mobilization efficiency for CBs in the market economy • Analyze and evaluate the efficiency of mobilizing capital at BIDV Southern Hanoi Affiliate Hanoi and look into its achievements, shortcomings and reasons • Propose solutions to improve the capital mobilization efficiency at the Bank Affiliate in the context of harsh competition in Vietnam today The subject and scope of the research thesis • Research thesis subject: the efficiency of CBs’ capital mobilization • Research thesis scope: covers the efficiency of BIDV’s Southern Hanoi Affiliate in 2008-2012 stage and proposing relevant solutions and recommendations to improve the capital mobilization efficiency for next periods Research thesis approach This thesis applies the following research methods: - Qualitative analysis, - Quantitative analysis, - Method of collecting information and data: data are collected from: + Report on the operation performance of BIDV’s Southern Hanoi Affiliate in 2008-2012 period, + Relevant documents, newspapers and professional journals - Methods of analysis and synthesis: + Chronological analysis and synthesis (2008-2012) + Subject analysis and synthesis (compared with other CBs) + Analysis and synthesis of subject groups and issue groups - Comparison method Structure of the thesis In addition to the introduction and the conclusion, the thesis content consists of three chapters: The branch has an emulative policy for employees to create an atmosphere of competition in the group, strengthen internal solidarity of mutual learning while promoting creativity, rights, and responsibilities of each staff in the branch Besides, it is necessary to have strict reward and punishment to timely motivate the staffs who are dedicated and have good record in customer services and attracting customers on one side and thoroughly treat staff whose attitudes and behaviors are not appropriate in working time on the other hand In doing so, the branch has created a staff in accordance with standards – obeying the law, having good qualifications, high working efficiency, being dynamic, and bringing the branch many good customers Then the business performance in general and the capital mobilizing activity in particular will certainly be higher Besides, the branch always well the work of organization and staff arrange to match their capacity and qualifications, avoiding lack or surplus and the situation that the job does not suitable for staffs’ qualifications Moreover, the salaries and bonuses policy must be built reasonably based on contribution and the general results, not to distribute averagely, in order to develop a maximize the branch’s available internal resources and step by step make the its performance more efficient In addition to the above solutions, the branch needs to strengthen its control The inside and outside control of the bank must always be taken seriously and properly concerned It should carry out regular check in all aspects of operations to timely correct errors in business processes and to enhance the staffs’ awareness of policies and legal documents, especially the line staff, thereby radically reducing losses and ensuring the absolute safety for the branch’s capital In addition, the branch needs to strictly the activities of welcoming people and dealing with complaints and denunciations, etc It should also take over critical feedback from customers, ensure its prestige, make customers feel respected and close to the bank The branch should expand development cooperation according to the principle of fair competition with other CBs in the region and beyond in order to get 90 mutual benefits, promote strengths for development and investment, co-negotiate and co-sign a syndicated loan for large-scale projects which are beyond the ability of each bank, thereby contributing to the goal of industrialization and modernization of the country The branch should also cooperate and coordinate internally to implement the BIDV’s guidelines and policies to create a unified system 3.3 Recommendations 3.3.1 For the Government The government has a general management role to all of the social and economic activities The government’s management affects all sectors and all industries in the society Therefore, the operation of CBs, including capital mobilization, is also influenced by the government’s activities So to improve the efficiency of capital mobilization of CBs, the government had better: 3.3.1.1 Create a stable macroeconomic environment Any change in the macroeconomic environment affects the capital mobilization activities of CBs These effects can be in two opposite directions: it may facilitate or inhibit the mobilization activity A stable macroeconomic environment with a moderate inflation rate, stimulated investment, steadily increasing average income of the population, stable domestic currency will create favorable conditions for CBs to expand the scale of capital mobilization and provision for economic development On the contrary, the macroeconomic environment is often unstable If the domestic currency loses value, the bank’s mobilization activity will face difficulties with low effectiveness To improve the performance of mobilizing capital for CBs, the government should direct the relevant sectors, especially the Ministry of Finance, to manage flexible monetary and fiscal policies to control inflation rate, stabilize money value, and facilitate the mobilization of CBs 3.3.1.2 Promote non-cash payment One of the socio-economic problems that Vietnam faces today is the habit of using cash Most of the payment transactions in the residential sector are in cash Using cost creates high social costs, unsafety, and potentially causes high inflation 91 Therefore, not only the Central Bank but the government should pay attention to this issue In the near future, to promote non-cash payment, the government should direct the ministries, departments, agencies, and local authorities to launch non-cash payment services such as: wages payment, charges and fees collection via accounts Currently, fraud in non-cash payments is increasing, causing significant damage to the subjects who are related in the payments as well as the CBs So the government should build severe and specific penalties to the fraud On the other hand, the government should soon supplementally issue and improve the rules on payment, card services, checks, etc to be in accordance with international practices If the government implements a set of promoting measures, the non-cash payment in Vietnam will become more effervescent, which enables banks to take advantages of the low-cost mobilization then improve efficiency of mobilization 3.3.1.3 Complete the system of competition law Currently, banks compete mainly through interest rates but not the quality of products and services This partly comes from the discrimination between domestic banks and foreign banks, state-owned CBs and other CBs In this competition, the state-owned CBs always prevail in term of interest rate Facing the requirements of integration, the presence of foreign banks and financial institutions in Vietnam banking market is inevitable The fact is that the Vietnam government cannot no longer protect the domestic banks by discrimination policies The government, therefore, needs to improve competition law systems In this context, it is essential that banks have to think about improving the quality of their products and services, enhancing customer care, etc to differentiate and increase their competitiveness against other banks 3.3.1.4 Promote the development of the financial market Financial market development will create favorable conditions for CBs to improve their efficiency of mobilization So the government should take measures to promote the development of this market 92 To promote the development of the financial market, the government should firstly synchronize the legal system to improve the State’s efficiency in management and supervision Next, the government should develop the number of products on this market This is reflected by the programs of promoting the equitization of state-owned enterprises, etc in conjunction with the listing of shares on the securities market The government manages financial markets towards the modernization and completion of structure and the ability to link with other markets in the region To that, the government also needs to reinforce and develop the money market so that it can operate safely, efficiently, competitively, and highly professionally In addition, the government should coordinate the development of the primary and secondary money market, the local and foreign currency markets, the interbank market and open market operations A nation which has the financial market will facilitate banks in mobilizing capital For example, the larger mobilized volumes in a shorter time may lead to lower mobilization cost This can help CBs improve business performance as well as their effectiveness of mobilization 3.3.2 For the Central Bank State Bank manages and operates the banking system The Central Bank functions as planning, orientating activities for CBs, which are mainly mobilization With several right policies and reasonable operating way, the Central Bank is very important and has positive impact on the ability to mobilize capital, especially the idle capital in the residential sector, of CBs in general and the South Hanoi branch in particular Practical experiences in our country in recent years show that appropriate measures such as: stable value of currency, inflation control, increasingly strong banking system, etc., have positive impact on CBs’ mobilization activity However, in the coming time, in order for CBs to further promote their mobilization of idle capital in the population, macro-regulation policies of the State Bank should continue to be improved and innovated Particularly as follows: 93 3.3.2.1 To inhibit inflation, to stabilize the money value This helps to attract deposits from the population into the banking system to avoid accumulation in the form of gold, foreign currency, or real estate investment This also helps reduce the pressure of mobilizing interest rates for CBs Mobilizing interest rates not increase means that lending interest rates are also stable This creates conditions for economic entities which are in need of capital to access the idle capital in the society So the effectiveness of CBs’ mobilization will be highly appreciated To this, the Central Bank needs to implement flexible monetary policies, operate monetary policies in the direction of coordinating direct tools (line of credit, central bank bills, fixed frame rate, etc.) as well as indirect tools (required reserves, refinancing, open market operations, etc.) 3.3.2.2 Together with the government to promote the development of the bank payment Along with the government, the Central Bank should consolidate the legal system in non-cash payments in order to promote the development of this activity and facilitate CBs to attract large amounts of capital with low costs of capital using in payment, whereby the capital mobilization’s efficiency is also enhanced Besides, the Central Bank should develop the technical infrastructure and payment software and programs among CBs synchronously so that payments between banks can be coordinated in the best and fastest way To this, the Central Bank has to be in charge to link and guide the banks to implement At the same time, the Central Bank should also expand the scope of payment in the payment system in order for CBs to be more active in setting cost to customers 3.3.2.3 To continue flexibly operating the interest rate tool, the monetary policies, and the fiscal policies The Central Bank maintains the official interest rates: basic interest rate, rediscount rate, open market interest rates, etc at reasonable levels based on the respect for the market’s principles Besides, the interest rates must match with the country’s economic goals in each period This creates favorable conditions for CBs 94 to determine reasonable mobilizing and lending interest rates, which helps them to build appropriate mobilization plan more easily 3.3.2.4 To develop open market operations Developing open market operations will help CBs to use capital more efficiently and be more active in venturing the capital The liquidity of the valuable papers that CBs hold is greatly increased through open market operations The CBs, therefore, will be more assured when investing in valuable papers Products on the open market are also a channel of investment for them to improve business performance Therefore, the Central Bank should expand the open market operations through increasing the goods in this market The diversification of products traded on the open market can help banks diversify their portfolio, whereby the efficiency of capital use will be higher The Central Bank also needs to synchronize the equipments and applications of modern science and technology to be suitable for this market’s development requirements Moreover, the Central Bank must enhance information security in computer networks (especially the sensitive information) in order to prevent and minimize business risks 3.3.2.5 To create policies supporting CBs in technology innovation Innovating technology is necessary for CBs to keep up with the development of the world It also played a part in improving the CBs’ efficiency of mobilization Therefore, the Central Bank needs to support CBs financially as well as human resource training for the technology innovation The Banks’ Association – a focal point for training for CBs must further improve the quality of abroad training courses which should go into practice rather than being a perfunctory visit so that they are really useful and effective 3.3.3 For the Bank for Investment and Development of Vietnam (BIDV) In the near future, to create favorable conditions as well as to encourage the mobilization activity of the branch to be more effective, the BIDV should introduce the following strategies: 95 3.3.3.1 To build a reasonable business strategy based on the specific conditions of the branches The BIDV should be based on the market situation and requirements to be the branch specific conditions of financial capacity, local activities, human, etc to determine, build, and perfect a reasonable business development strategy which is right in all the business activities of the bank, and then set out appropriate measures to implement it Identifying, developing, and building measures to implement and adjust business strategy is to specify the strategy into activities which are in accordance with market conditions, the branch’s capability in each period BIDV’s business development strategy has to get a mixed strategy which is unique, consisting of the strategies of each individual business strategy These strategies are composed closely to each other, interacting complementarily in the unity in line with the overall development strategy The bank’s development strategy must be realistic and feasible in the organization and construction If it needs to be adjusted, it must be based on the actual factors involved in the market Moreover, the strategy must be able to predict the future of the market, the development of requirements, and the purpose of the implementation as well as the BIDV’s capacity in general and each base unit’s capacity in particular, thereby ensuring the development of the whole system The strategy of capital mobilizing is considered an important strategy constitutes the bank’s mobilizing strategy So when building and adjusting this strategy, beside the identification of specific and logic targets, the bank has to set strict, effective, and dynamic performance measures which surely can completely meet the above principles, i.e to always stick to the situation of the bank, each branch, market factors, etc On the other hand, mobilizing strategy must be a consolidated entity of strategic components in the systematic relationship with the bank’s development strategies on all aspects under the provisions of the overall development strategy If so, the business operations in general and capital mobilization in particular of the BIDV and its member units can achieve high efficiency 96 3.3.3.2 To develop and expand the BIDV network Along with the development of a rational long-term business strategy on the basis of financial capacity, employees’ qualifications, etc., in the next time the BIDV needs to have measures to promote and develop its branch and unit member network in order to create a logical structure on the whole system In particular, the bank pays special attention to the export processing zones, new key economic zones, populated areas, and rural areas However, promoting the expansion and the development of its branch network, particularly to rural and remote areas makes the management become much harder and more complex than ever But it is not infeasible, so far many banks has proactively expanded their branch network in these areas and initially reap some certain success The BIDV – a bank which is always at the forefront in expanding network and business scope – is a typical of them Another problem that the bank should consider when expanding its network is that it must account for the “cost” of network expansion Because if the network expansion makes the bank’s cost so high that it must set high lending interest rate or cut down the input interest rates to compensate this additional cost, it is not as effective as desired but can become a factor which directly reduces the business effectiveness of the bank Along with the expansion of its branch network, BIDV also needs to reinforce, improve its quality and innovate the operations of its current savings funds and transaction offices Besides, it need to be more active and bold in the business expansion and diversification; perform many types of services such as accepting deposits, lending, and purchasing and selling foreign currencies and gold and silver, etc.; make sure to meet the needs of customers coming to the bank, through which the bank can mobilize a lot of idle capital from customers In summary, hereby are some solutions and recommendations to improve the performance of capital mobilization activity in the Bank for Investment & Development of Vietnam - South Hanoi Branch All the solutions, whether at the micro or macro, have close relationships with each other and must be combined synchronously and consistently to bring real success for capital mobilization of the branch 97 CONCLUSION Integrating with the international economy is both an opportunity and a challenge for businesses in general and the CB system in particular To adapt to the harsh change, Vietnamese CBs generally and BIDV particularly have to make changes in the mechanism of organization and management, reform in all aspects so that their performance gets the best results In addition to maintaining and 98 promoting its advantages, BIDV needs to learn, take over new and modern ideas to improve its competitiveness and advance firmly on the path of integration with the international economy To create a solid step in the market and be stably profitable, CBs must strive in every of their services CBs’ capital mobilization is a quite abundant and diverse For a deeper understanding of this activity, there is a need of a greater study By approaching the capital mobilization activity from the origin, the economic nature and legal characteristics, this topic offers a comprehensive view of each mobilizing operations and solutions to improve the efficiency of capital mobilization in the Bank for Investment and Development of Vietnam - South Hanoi branch The achievements initially confirm the correctness of the direction and administration policy of the government, the Central Bank in the bank’s business lines However, in comparison to other branches of the Bank as well as to other banks, the achievements are still limited So in the future, facing increasingly fierce competitive challenges, the BIDV South Hanoi branch has to take measures to further improve the quality of capital mobilization To this, in addition to the its efforts, the bank also needs the supports from the government and the Central Bank in the creation of a favorable macroeconomic environment for the Bank for Investment and Development of Vietnam to this well On the other hand, there should be a highly co-determination and a revolution in the branch’s operations so that it can overcome all difficulties and bring back success to ensure the target of strong growth in mobilized capital then become one of the best branches of the BIDV Despite my having time to study, the solutions and recommendations given in the thesis may not be complete and specific due to my limited experience and ability However, I hope to be able to contribute a small part in the activity of improving the efficiency of the bank’s mobilization in the coming time I would like to send my sincere thanks to Dr Nguyen Thanh Hieu, the teachers in the department, the Bank for Investment and Development of Vietnam – 99 South Hanoi Branch for their enthusiastic help during the study and completion of this thesis 100 REFERENCES Finance Theory Textbook, Duong Dang Chinh, Hanoi Finance Publisher, 2003 Modern banking operations, David Cox, National Political Publishing House, 1997 Monetary Banking and Financial Markets, Frederic.S.Miishkin, Science and Technology Publishing House, 1995 Business Executive Textbook, Prof Dr Nguyen Thanh Do, Dr Nguyen Ngoc Huyen, Publishing House of the National Economics University Hanoi, 2007 Bank Management, Ho Dieu, Statistical Publishing House CB Operations, Nguyen Thi Mui, Statistical Publishing House, 2004 Financial and Monetary Theory Textbook, Nguyen Huu Tai (chief editor), Statistical Publishing House, 2002 Income Statements in 2008, 2009, 2010, 2011 and the first six months of 2012, the Bank for Investment and Development of Vietnam - South Hanoi Branch CBs, A.P Phan Thi Thu Ha, Publishing House of the National Economics University Hanoi 10 The Law on Credit Institutions, National Assembly of the Socialist Republic of Vietnam, National Political Publishing House, 1998 101 WARRANTY I hereby declare that the contents are presented in this thesis is the result of my research The information and data presented in this project is completely honest The thesis used references, documents, and information which were given on printed publications, magazines, and websites as the list of references AUTHOR NGUYEN VAN HIEU 102 ABBREVIATIONS BIDV : The Bank for Investment and Development of Vietnam CB : Commercial Bank ICOR : Incremental Capital Output Ratio ROR : Return on Revenue VND : Vietnam dong 103 LIST OF TABLE Diagram 2.1: Organization Chart of BIDV’s Southern Hanoi Affiliate 43 Table 2.1: The capital structure of mobilized capital 45 Table 2.2: Structure of the outstanding credit 49 Table 2.3: Profit from capital mobilization 54 Table 2.4: Return on Revenue 56 Table 2.5: Return on Cost 56 Table 2.6: The branch’s volume of mobilized capital 57 Table 2.7: The relationship between capital mobilization and capital usage 59 Table 2.8: Short-term deposits and loans 60 Table 2.9: Medium- and long-term capital mobilization and loans 61 Table 2.10: The structure of the mobilized capital 62 Table 2.11: Results of capital mobilization by maturity 63 Table 2.12 The results of capital mobilization through the issuance of debt instruments 65 104 [...]... enterprises that make profits through interests Their main aim is the pursuit of profit The business type of CBs is unique with the right of using money and non-physical-products and activities being associated with the circulation of currency 13 2 A CB is a business type of higher risk levels than with other forms of business and often has profound effects on other sectors and the whole economy Therefore, in... the form of ownership + Additional equity in the operation: Equity of banks constantly increases over time thanks to the additional capital This additional source can originate from profit or public offerings, financing, etc Characteristics of this form of HDV is not regular, but helps banks have large equity in times of need This kind of equity is not regular However, it helps banks have large equity... their capital regularly + Capital of CBs decides their scope and ability of expanding their business: The scope of banks is mirrored through their total assets (cash, securities, loan size, fixed assets, etc.), if capital is large  high value of assets Scale: if their capital is large, banks can expand their affiliates into a great deal of location Large operation area + Capital of CBs decides their... functions of CBs CBs have the below functions: - Functions of financial intermediaries, - Payment intermediary, and - Money creation 1.1.2.5 Capital of CB definition - Capital of CB definition: Capital is the premise of business in the whole society in general and of each business in particular Every business needs a huge capital to operate and grow CB is a financial intermediary with the basic functions of. .. forms of capital - mobilization, banks can use a significant amount of temporarily idle capital in the process of collection or payment 1.1.4 The role of mobilized capital for business activities of CBs CBs are special enterprises of which the major business is in the monetary field In the context of a changing economy, CBs have gradually shifted to business accounting, take responsibilities of their... technologies Large capitals help CBs improve their product quality and increase their number of clients 1.1.2.6 Funds of CBs General funds of the CBs mainly originate from the follows: - Equity - Mobilized capital - Borrowings - Others Each capital has its nature and specific role in the total capital of CBs and have less impact on the business activities of CBs All of the above-mentioned particulars of capital... operate effectively and profitably, CBs must have a certain amount of working capital Capital of CBs plays an important role not only in business but also in the process of socio-economic development So, what is the capital of CBs? Economists define capital of CBs as follows: Capital of CBs is the monetary value generated or mobilized by CBs, used to lend, invest or implement other business activities As... part of individuals’ idle income which is consigned in banks for the purpose of safe accumulation and earning interest This is the traditional form of mobilizing capital of banks Savings are confirmed on savingsbooks and enjoy relevant interest rate as per regulated by the bank receiving them 24 and are insured as per regulated by laws on savings The purpose of savings is to earn interest and accumulate... activities of banks and other credit institutions, and create favorable conditions for the development of the economy while protect the legitimate interests of relevant organizations and individuals, Article 20 of the Law on the Organization of Vietnam was issued in 1997/10th National Assembly The Article states: "CBs are now established under the provisions of this law and other legal regulations on... a huge amount of capital as prerequisite to set up materials, infrastructure, technologies and businesses On the bank perspective, to be able to conduct business effectively, diversify business models to improve the competitiveness and profitability of banks, banks need a large amount of capital mobilized from domestic sources most of which are households’ savings Moreover, the capital of the socio-economic ... activities being associated with the circulation of currency 13 A CB is a business type of higher risk levels than with other forms of business and often has profound effects on other sectors and the... etc Characteristics of this form of HDV is not regular, but helps banks have large equity in times of need This kind of equity is not regular However, it helps banks have large equity when necessary... private company) The charter capital is the initial capital of a CB According to the decision No 327/QD- NH5 dated 04/10/1997 of the Governor of the CB of Vietnam,"the legal capital of CBs is