MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS OF HO CHI MINH CITY --- HUYNH THI HUONG THAO RESEARCHING THE IMPACTS OF INTERNATIONAL BANKING SERVICES TO OPERATIONAL EFFIC
Trang 1MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS OF HO CHI MINH CITY
-
HUYNH THI HUONG THAO
RESEARCHING THE IMPACTS OF INTERNATIONAL BANKING SERVICES
TO OPERATIONAL EFFICIENCY OF
VIETNAM COMMERCIAL BANKS
Major: Finance and Banking Code: 62340201
SUMMARY OF ECONOMIC DOCTORAL THESIS
Ho Chi Minh City - 2016
Trang 2The work was completed at:
University of Economics of Ho Chi Minh City
The scientific instructors:
Assoc Prof Dr Tran Huy Hoang
the University of Economics of Ho Chi Minh City
at hour day month 2016
The thesis can be studied at:
- Synthesis Scientific Library in Ho Chi Minh City
- Library of University of Economics of Ho Chi Minh City
Trang 3INTRODUCTION
PUBLISHED SCIENTIFIC WORKS
1 Huynh Thi Huong Thao, 2015 Development orientation of international banking services of Vietnam commercial banks Financial & Monetary Review, No 431, p 20-23
2 Huynh Thi Huong Thao, 2016 Measurement of operational efficiency of Vietnam commercial banks Banking Science & Training Review, No 168, p 43-48
3 Huynh Thi Huong Thao, 2016 Researching the impacts of international banking services to the operational efficiency of Vietnam commercial banks Banking technology Review No
123, p 44-53
Trang 4INTRODUCTION
1 Reason for study of the thesis
Competitive pressure has helped Vietnam banking system has made positive changes in scale of operation, quality of services, financial capacity In efforts to maintain market shares, stable and profitable growth, Vietnam commercial banks (VCB) has given many new products and services gradually to diversify their profitable operations Despite international banking services (IBS) was the development focus of VCB but must have long-term development strategies to adapt to the fierce competition Therefore, the study of the impacts of IBSs to operational efficiency (OE) of VCB in recent years as well as providing solutions to improve OE and develop IBS is needed
2 The aim of the thesis’ research
The impact study of IBS to OE of banks has important implications, especially for administrators so that banks will have the analysis and evaluation required in the strategic decisions for themselves So the research has the following objectives:
- Study IBS indicators of VCB nowadays
- Study of the impact of the IBS to OE of VCB
3 Object and scope of the research
The thesis chosen object of study is the impacts of IBS to OE
of VCB Research’s data taken from annual reports or financial statements were audited from 38 banks include state commercial banks and joint stock commercial banks in period 2008-2014
4 Research methodology
The study used qualitative and quantitative methods The qualitative method were conducted through interviewing directly
Trang 5with experts, bank managers Quantitative methods to study the thesis includes: method of non-parametric analysis through DEA model; regression models with pooled ordinary least squares - Pooled OLS, fixed effect model – FEM, random effect model - REM,
feasible generalized least squares - FGLS
5 Structure of the subject
In addition to the introduction, conclusion, appendices, references, structure of the thesis consists of 5 chapters
6 Practical significance of the thesis
Scientific contributions:
+ The thesis has codified the general theoretical issues of IBS and OE, the importance of IBS, the relationship between IBS and OE of banks in the context of international integration and fierce competition in the banking and financial banking sector
+ The thesis has identified the IBS indicators impact to OE
of VCB, thereby determining the model of the impacts of IBS to OE, this is a new point and no duplication of the thesis
+ This is the first study to apply quantitative methods through a systematic way approach with DEA, Pooled OLS regression method, FEM, REM, FGLS and necessary tests such as: F test, Hausman test, Pagan Lagrangian Breusch test, Modified Wald test, Wooldridge test to study the impacts of IBS to OE of VCB that
no previous research done
Practical contributions:
+ The thesis has quantified OE of VCB period 2008-2014, this research’s results is a scientific reference help administrators assess the plans’ completion level and growth of OE of banks The thesis has analyzed the IBS’s positive factors, negative factors that
Trang 6influence OE of banks, which propose solutions to promote positive factors, control negative factors, improve OE constantly and develop highly diversity of products and services of banks especially IBS
+ In addition, this research is the scientific basis for the Government and the State bank to identify factors affecting OE of VCB which can make policies timely and reasonable in order to establish a solid banking system, ensure a healthy and effective banking business
Trang 7CHAPTER 1: OVERVIEW OF THEORY AND EXPERIMENTAL STUDY ON INTERNATIONAL BANKING SERVICES AND OPERATIONAL EFFICIENCY OF COMMERCIAL BANKS
1.1 International banking services of banks
1.1.1 The concept of international banking services
According to the Foreign Exchange Ordinance in 2005 and Foreign Exchange Ordinance amended in 2013, on the territory of Vietnam, foreign exchange transactions in limited use except for cases permitted including resident and non resident Decree No 24/2012/ND-CP dated 03/04/2012 of the Government on management of gold trading activities and Circular No 16/2012/TT-NHNN dated 25/05/2012 guiding some articles of Decree 24/2012/ND-CP was issued to move policy "mobilization and lending in gold" to relations "buy, sell gold", so the scope of the thesis of foreign exchange transactions of banks are in foreign currency On the basis of inheriting the concept of IBS and legal documents in Vietnam, concepts of IBS used in this thesis is the banking services related to foreign currency provided by banks
1.1.2 The role of international banking services
In conditions of an open economy, the liberalization of trade and finance, the demand of IBS will develop increasingly towards combining harmoniously between the interests of customers with the
benefit of banks and bring benefits to the economy
1.1.3 The international banking services of banks
IBS includes the following services: foreign exchange services, international payment services, foreign currency lending services, international card services, correspondent banking services
Trang 81.2 Operational efficiency of commercial banks
1.2.1 The concept of operational efficiency of commercial banks
Efficiency in economy is consided the level of success that the production units or banks achieved in the distribution of inputs
to optimize outputs, reflecting the level of use of resources (human, financial and material resources, capital) to achieve defined goals (Nguyen Khac Minh, 2004)
1.2.2 The methods of evaluating the operational efficiency of commercial banks
The present studies in the world analyzes about OE usually use two main methods are: financial indicators and marginal efficiency
1.2.2.1 The method of using financial indicators
To evaluate OE by financial indicators of commercial banks, the two indicators most often used as ROA and ROE Besides two profitable indicators of business, OE of banks is also reflected
by indicators on the marginal income ratio
1.2.2.2 Marginal efficiency analysis method
The research using DEA method, DEA’s results includes: technical efficiency (TE) or whole TE, pure technical efficiency (PTE) and scale efficiency (SE)
1.3 The relationship between international banking services and
OE of banks
IBS can not stand individually that can only grow well in horizontal and vertical linkages with other services of banks, together with support and the rise of mutual control In terms of the nature and history of the development, IBS is always a useful part, tied to domestic banking services and created the entire business
Trang 9operations of a bank IBS is an integral part of the banks' business activities and the development of IBS will impact on OE of banks certainly and effectively Therefore, the study of the impact of IBS
to OE is truly meaningful and essential
1.4 The studies of IBS and OE in Vietnam and abroad, gaps in research in Vietnam
1.4.1 The studies published in Vietnam
With the in-depth studies on IBS in Vietnam, the authors only just at the described statistical or inductive, deductive method without qualitative research and quantitative research to study specially about OE and IBS
Overall, through the studies of OE of banks could judge by the financial indicators such as ROA, ROE or using non-parametric methods as DEA OLS regression model or Topit often used for studies analyzes the factors affecting banks' OE There have been a number of separate studies on the impact of a banking service or specific indicators of banks, such as bad debt, non-credit services, income diversified levels for banks’ OE but which IBS’ research does not have a domestic research use quantitative methods to examine the impact of IBS to OE
1.4.2 The quantitative studies published in other countries
Through surveys of researchs in the world, the author found that the most researchs used DEA methods to estimate OE when applying analytical methods of marginal efficiency, Pooled OLS regression method, FEM, REM also used to analyze the factors affecting OE in the studies This demonstrates the superiority of the DEA and regression methods in assessing the overall picture of the banks’ OE in each country
Trang 101.4.3 Some problems existed in studies
The study is based on previous studies and has some new features based on the following grounds:
(1) Economic integration to create conditions for the banking system and the development of banking services as Claessens (2009), Sufian (2011)
(2) Diversification of banking services both domestic banking services and IBS will help banks maximize profits (Chiorazzo et al, 2008; Gurbuz et al, 2013; Vo Xuan Vinh et al,
2015 and Nguyen Thi Canh et al, 2015)
(3) The fact that there are many studies on the impact of banking services to OE but still do not have any projects in Vietnam and around the world gives a quantitative model of the impact of IBS to OE of commercial banks
Thus, this thesis will be the difference compared with the previous studies on the content of research and the research model when using Pooled OLS regression model, FEM, REM, FGLS to assess the impacts of IBS to OE period 2008-2014 Thereby, this is the perfect basis for a rational policy framework of the operating management of banks in Vietnam during the integration period
Trang 11CHAPTER 2: REALITY OF OPERATIONAL EFFICIENCY AND INTERNATIONAL BANKING SERVICES 0F VIETNAM COMMERCIAL BANKS
2.1 Business operation of Vietnam commercial banks
2.1.1 Business network of Vietnam commercial banks
By the end of 2014, commercial banking system in Vietnam includes: 05 state-owned banks including Agribank, BIDV, Vietcombank, Vietinbank, MHB (BIDV, Vietcombank, Vietinbank, BIDV has been equitized but still have over 51% of state capital should put in kind of state-owned commercial banks);
33 joint stock commercial banks; 54 foreign banks and foreign bank branches; 04 joint venture banks
2.1.2 Financial capability
As of 31/12/2014, the size of the chartered capital of the VCB is modest, so the financial capacity of the domestic banks is still a matter for concern
2.1.3 Technological capacity
Many banks have adopted the world's leading technology, but also many banks still apply the technology level is low, which makes it difficult for banks to coordinate services that requires a high link, such as connectivity between bank card use, foreign currency trading, factoring agent Thus, VCB have a large investment in the banking technology sector, however, are not equal level (Nguyen Thi Kim Thanh, 2010)
2.1.4 Human resources
Currently, the staff of most VCB have been trained systematicly, university graduated rate is over 70% This is a good sign and is one of the favorable conditions for VCB improve
Trang 12competitiveness (To Ngoc Hung, 2010)
2.1.5 Some of the main business activities of VCB
2.1.5.1 Deposit mobilizing services
Total deposits of whole banking system increased steadily,
by the end of 2014, total deposits reached 4.507 trillion The increasing or decreasing deposits of credit institutions (CI) is due to meet the needs of the social capital, CI should be adjusted to suit the demand for loans or governed by the policies, regulations to mobilize funds from the central bank in each period
2.1.5.2 Credit services
Total outstanding loans of whole banking system has increased steadily over the years The highest non-performing loan ratio in the period 2008-2014 is 4,08% in 2012, then dropped to 3,61% in 2013 and 3,25% in 2014
2.1.5.3 Payment services
With the successful implementation of investment projects to modernize technology, particularly technology serves for billing, payment service quality of banks improved significantly Sales of domestic payments and international payments reached a high growth rate
2.2 Operational efficiency of VCB
2.2.1 The scale of assets, equity and earnings of VCB
The assets size of commercial banks has steadily increased over the years shows that VCB were improving financial strength constantly to increase their competitiveness In Vietnam today, the number of banks is quite large, but the size of each bank's total assets
is not high when compared with banks in the developed countries in the region
Trang 13In 2008, non-interest income reached average value 542 billion In 2009, the central bank's efforts to deal with the impact of the global economic crisis, Vietnam's economy has been gradually recovering, the stock market has gradually developed a more upbeat, average non-interest earnings increased to reach 667 billion, but the average interest income decreased to 4.785 billion, this was the year
that the average interest income is lowest in period 2008-2014 2.2.2 Profitability of VCB
The most important index reflecting business efficiency and profitability ratios of banking sector is ROA, ROE, NIM ROA, ROE
of banks decreased over the years; especially ROE, ROA of 2013 is 5,46% and 0,54% respectively
2.3 Reality of international banking services of VCB
2.3.1 The legal basis of international banking services in Vietnam
The specific laws governing each IBS adhere mainly by laws
of State bank of Vietnam (SBV) issued and the international practice
by the International Chamber of Commerce issued International Chamber of Commerce is a highly reputable non-governmental organization in the field of international trade and finance has issued
a number of rules governing trading in IBS such as UCP, URC, URR, URDG, Incoterms
2.3.2 Some mainly international banking services of VCB
2.3.2.1 Currency trading services
Since appearing, the derivative currency services in Vietnam has been growing very modestly with the pilot program of the central bank A number of complex derivative products have appeared but very limited and operate mostly by foreign banks in Vietnam