IMPROVING THE POLICIES AND LAWS SYSTEM TO PROMOTE INTERNATIONAL TRADE FINANCE IN VIETNAM’S COMMERCIAL BANKS

MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS IMPROVING THE POLICIES AND LAWS SYSTEM TO PROMOTE INTERNATIONAL TRADE FINANCE IN VIETNAM’S COMMERCIAL BANKS Major: International Trade Policy and Law Student: Hoang Thi Thu Phuong Instructor: Associate Professor, Dr Dang Thi Nhan Hanoi - 2016 TABLE OF CONTENT PLIGHT LIST OF TABLES LIST OF FIGURE ABBREVITION LIST PREFACE CHAPTER 1: GENERAL THEORY OF POLICY AND LAW IN THE INTERNATIONAL TRADE FINANCE OF COMMERCIAL BANKS 1.1 International trade finance 1.1.1 International trade 1.1.2 International trade finance 1.1.3 The entities involved in international trade finance 1.2 International trade finance of commercial banks 1.2.1 Definition 1.2.2 Main types of international trade finance of commercial banks 10 1.2.3 Role of international trade finance of commercial banks 30 1.3 Applicable laws and policies system on international trade finance in commercial banks 31 1.3.1 Applicable laws system on international trade finance in commercial banks 32 1.3.2 Applicable policies on international trade finance in commercial banks 40 CHAPTER 2: REALITY OF APPLICABLE POLICIES AND LAWS SYSTEM IN TRADE FINANCE OF VIETNAM COMMERCIAL BANKS 43 2.1 International trade finance of the Vietnam commercial banks system 43 2.1.1 Reality of international trade finance at Vietnam Commercial Banks 43 2.1.2 Assessment of international trade finance of Vietnam‟s commercial bank system 49 2.2 Reality of policies and laws system on International Trade Finance of Commercial Banks in Vietnam 52 2.2.1 Reality of Applicable laws system on International Trade Finance of Vietnam Commercial Banks 52 2.2.2 Reality of Applicable policies system in International Trade Finance of Vietnam Commercial Banks 83 CHAPTER 3: ORIENTATION AND SOLUTION TO IMPROVE THE LEGAL SYSTEM AND POLICY IN ORDER TO PROPEL THE INTERNATIONAL TRADE FINANCE ACTIVITY IN VIETNAM’S COMMERCIAL BANKS 90 3.1 The need of improving law and policy in order to propel the international trade finance in Vietnam’s Commercial Banks 90 3.2 Orientation and viewpoint to improve laws and policies system to propel the international trade finance 92 3.2.1 Orientation and viewpoint to improve laws system to propel the international trade finance 92 3.2.2 Orientation and viewpoint to improve regulations system to propel the international trade finance 97 3.2.3 Orientation and viewpoint to improve policies system (interest rate policy and exchange rate policy) to propel the international trade finance 99 3.3 Solutions to improve the law system and policies to promote the International Trade Finance in Vietnam Commercial Banks 101 3.3.1 Solutions to improve the law system to promote the international trade finance in Vietnam commercial banks 101 3.3.2 Solutions to improve the regulations system to promote the international trade finance in Vietnam commercial banks 108 3.3.3 Solutions to improve the policies system (interest rate policy and exchange rate policy) to promote the international trade finance in Vietnam commercial banks 117 3.3.4 Providing specific regulations and guidance for new issues 118 CONCLUSION 120 REFERENCE 122 PLIGHT I plight that this thesis is my own study and there is no information used with unauthorized data from study of other authors All secondary information used in my thesis has clearly sources and be downright noted I respond to accuracy of my own thesis absolutely Due to limited time and knowledge, this thesis certainly faces flaws I therefore look forward to receiving the contributing ideas to complete this research To complete this thesis I would like to sincerely thank Associate Professor, Doctor Dang Thi Nhan, who enthusiastically guided me under the process of conducting this thesis Hanoi, December, 2016 Student: Hoang Thi Thu Phuong LIST OF TABLES Table 1: Total Factoring Volume by country in the last years (in million euros) 64 Table 2: Interest rate of interbank market (value date: 28/11/2016) 84 Table 3: Interest rate of SBV 84 Table 4: Central exchange rate of SBV, value date 01/12/2016 86 Table 5: International trade finance fees at Techcombank 88 LIST OF FIGURE Figure 1: Rate of finance working capital loans for SME enterprises 45 Figure 2: Rate of finance working capital loans of Wholesale banking enterprises 45 Figure 3: Fees/charge collected from international trade finance services with SME enterprises 48 Figure 4: Fees/charge collected from international trade finance services with Wholesale banking enterprises 48 ABBREVITION LIST AMLOCK : Anti-money laundering BEA : Bill of Exchange Act D/A : Against Document acceptance - D/A D/P : Document Against payment -D/P D/TC : Document Against other terms and conditions-D/TC DBB : Draft buy back letter of credit EUR : Currency of European Union FCI : Factors Chain International GATS : General Agreement on Trade in Services ICC : International Chamber of Commercial ISBP 745 : International Standard banking practice for the examination of documents under documentary credits subject to UCP600 ISP 98 : International Standby Practices 1998 JPY : Japanese Yen L/C : Letter of credit L/G : Letter of Guarantee MFN : Most Favoured Nation SBV : State Bank of Vietnam SME : Small and medium enterprises UCC : Uniform Commerce Code UCP 600 : The Uniform customs and Practice for Documentary Credits, 2007 Revision, ICC Publication No.600 ULB : Uniform Law for Bills of Exchange UNCITRAL: United Nations Commission on International Trade Law UPAS : Usance Payable At Sight Letter of credit URC 522 : Uniform Rules for Collection 522 URDG : Uniform Rules for Demand Guarantee USD : United State dollar VND : Vietnam Dong WTO : World Trade Organization PREFACE Rationale of study Vietnam is on the path of deeper integration into the world economy In recent years, Vietnam has achieved a lot of success in the integration process leading the growth in Vietnam economy Obviously, opportunities and benefits of integration are tremendous However, the challenge is still significant Vietnam joyfully raised the victory wine when becoming the 150th member of The World Trade Organization („‟WTO‟‟) However, behind that joy is an enormous challenge posed to both Vietnam economy in general and banking sector in particular According to statistics, banking sector is one of the most intensely competitive sectors after joining WTO The commercial banks have to compete not only with each other but more importantly, to compete with competitors which are the foreign banks with strong financial power and professional banking services Moreover, after joining WTO, both domestic and international trade have become ever more active Thanks to that, Vietnam commercial banks have increasingly been focusing further on the development of international trade finance which is a traditional activity and brings a great benefit to the bank, in order to meet the needs and inevitable development trend of the market In order to promote the international trade finance in Vietnam commercial banks, in addition to the efforts to improve the service quality of the commercial banks themselves, it is necessary to complete the system of policies and laws to create a clear legal framework for the international trade finance in Vietnam commercial banks Therefore, I choose to research the topic "Improving policies and laws system to promote the international trade finance in Vietnam’s commercial banks " in order to systematize the theoretical issues about policies and laws in international trade finance, to assess the reality of policy and law of the international trade finance of Vietnam commercial banks in the current context, to give the orientation and views to complete the policy and law of international trade finance; and to subsequently propose solutions to promote and enhance international trade finance of Vietnam commercial banks 2 The purpose of the study The general objective of the thesis is analysis the characteristic of policy and law of Vietnam on international trade finance in commercial banks, provide assessments include positive points and negative points, then to offer suggestions for Vietnam policy and law development To achieve this overall aim, there are specific tasks that the thesis needs to solve:  Interpreting of basic theoretical issues of international trade finance, policy and law relate to international trade finance  Analysing the situation of international trade finance at commercial banks, impact of policy and law on international trade finance services  Assessing the overall situation of Vietnam policy and law on international trade finance, identifying the deficiencies that restrict international trade finance services at commercial banks  Providing some suggestions for improvement of policy and law systems to promote international trade finance in Vietnam commercial banks Literature review In recent years, with an increasingly important role in determining competitiveness, international trade finance has attracted the attention of researchers Studies of laws and policies system on international trade finance are also focused, out of which these following researches are typical: The group of authors J F Hornbeck, Coordinator - Specialist in International Trade and Finance and Mary A Irace, Coordinator - Section Research Manager in their paper „‟ International Trade and Finance: Key Policy Issues for the 113th Congress‟‟ (April 15, 2013) analysis policy issues cover such areas as: U.S trade negotiations; tariffs; nontariff barriers; worker dislocation from trade liberalization, trade remedy laws; import and export policies; international investment, economic sanctions; and the trade policy functions of the federal government Congress also has an important role in international finance It has the authority over U.S financial commitments to international financial institutions and oversight responsibilities for trade- and finance-related agencies of the U.S Government Other researches mentioned mostly about international trade law such as „‟International economic law‟‟ of Jean M Wenger or about international trade finance such as „‟New challenges for State-backed International Trade Finance‟‟ of Erdal Yalcin - (19th January 2015) In Vietnam, before this thesis, there is just only study about international trade finance in commerce banks or study one law or policy relevant to international trade finance such as „„Law on negotiable instruments the need to enact and some basic legal issues‟‟ of Doan Son Thai, „‟Circular 07/2015/TT-NHNN and points to unlock the guarantee‟‟ of Ninh Giang and especially, textbook „‟Legal environment in international trade finance‟‟ of Dr Dang Thi Nhan (2015) In comparison with recent researches on the relevant topic, the thesis provides some new contributions:  Analysing the current status of Vietnam‟s laws and policies system on international trade finance, compare with relevant international laws and policies  Giving the overall assessment on compatibility of current laws and policies system on international trade finance in Vietnam commerce banks Suggest solutions for improvement of policies and laws system to promote international trade finance in Vietnam commercial banks The scope of the study The studying object of the thesis is the status of laws and policies system on international trade finance and it is impact to international trade finance in commercial banks The thesis mainly analyses the impact of laws and policies systems on international trade finance services in Vietnam commercial banks within the period of recent years Therefrom the thesis give recommendations for development of Vietnam‟s laws and policies system on international trade finance, promote international trade finance in commercial banks Research methodology The thesis uses qualitative research method: observe phenomena, analysis situations and therefrom give appraisal about objective „‟laws and policies system on international trade finance‟‟ The structure of the thesis With the aforementioned research topic, this thesis is divided into three chapters: Chapter General theory of policy and law in the international trade finance activity of commercial banks Chapter 2: Reality of policy and law in the trade finance activity of Vietnam commercial banks Chapter 3: Orientation and solution to complete of policy and law system to promote the trade finance activity of Vietnam commercial banks 110 International Chamber of Commerce, other commercial practice not contrary to Vietnam‟s regulations.” Second, identify precisely the nature of factoring in regulations: most states identify factoring conforming to the definition of factoring stipulated in international conventions and regulations Accordingly, it is not only regulated that factoring includes receivable amounts but also identify precisely the nature of factoring as a full financial package and credit risks protection, helping factoring entities build a practice procedure and organize the factoring activity with full functions, as well as enhance the positive role of factoring It is necessary to supplement the definition of “Reserve the right to recourse” in order to detail the definiton of factoring stipulated in Clause 17 Article Law on Credit Institutions as follows: “Reserve the right to recourse is the activity of the factoring entity to demand payment advanced for the customer and interest, factoring charge in case the purchaser does not fulfill the payment obligation when payment is due as stipulated in the factoring agreement In case factoring for domestic sellers or for exporters, the factoring entity is entitled to demand payment from the seller when the purchaser is unable to pay the debt In case factoring for domestic sellers and for importers, the factoring entity is entitled to demand payment from the purchaser.” As regards applicable subjects of factoring: leave the Financial Leasing Company out of the applicable subjects because the Decree No 39/2014/ND-CP dated May 07th 2014 as regards activities of financial and financial leasing companies only stipulates the factoring activity for financial companies, not the Financial Leasing Companies Third, identify specifically the present and future receivable amount: beside regulations on present receivable amounts, there must be regulations on futureacquired receivable amounts when the seller transfers goods, services for the purchaser in accordance with the signed agreement Accordingly, factoring entities advance cash for the seller, promptly meeting the demand of production and 111 business and developing the factoring activity on the legal basis which had been strictly stipulated Fourth, regulations permit the dynamic formation of factoring entities and forms of factoring: beside credit institutions permitted by law to conduct factoring, many states permit the formation of independent factoring companies which are specialized companies doing business in factoring Factoring conducted by several factoring entities with various forms will contribute to diversify the factoring activity, positively affect the competition among suppliers, promote the development, expand and enhance the quality of factoring, reduce costs and increase the efficiency and benefit for enterprises Fifth, sufficiently stipulate the prerequisite for conducting factoring: When conducting factoring, factoring entities must meet requirements such as: ensure good financial state, invest uniformly the technical infrastructure, information technology used for transactions and receiving information in factoring; ensure that the human resources from the management, executive level to professional staffs work really efficiently with their knowledge of organizing and managing transactions, processing information, managing risks, internal control to evaluate the credit quality of customers and receivable debts in transactions of factoring,… These requirements would provide factoring entities with sufficient necessary capacity to ensure the safe and efficient development of factoring In case ineligibility to conduct factoring, restrict factoring and implement factoring limit: Supplement regulations on ineligibility for credit extension, credit restrictions and credit extension limits as pursuant to Article 126, 127 and 128 Law on Credit Institutions; Abolish regulations on receivable amounts ineligibility for factoring arising from service provision agreement in construction area As regards receivable amounts arising from service provision agreement in financial, banking area as stipulated in appendix of Decision 30/2008/QD-NHNN, it is necessary to refer to the construction area stipulated in Decision No 10/2007/QD-TTg dated January 23rd 2007 issued by the Prime Minister regarding Vietnam economic sectors system in order to identify precisely that factoring is not applied for which services in 112 financial and banking area Sixth, identify the right to claim debts of factoring entities and stipulate strictly rights and obligations of parties in transferring receivable amounts: detailing rights and obligations of parties in the process of transferring receivable amounts, the transferee is obliged to protect the right of factoring entity and ensure the priority right for factoring entities The relation in assigning the right to claim debts is stipulated strictly, regulating on the transferring receivable amounts in commerce, creating an appropriate legal framework for factoring entities to conduct efficiently the factoring activities Meanwhile, by protecting rights for factoring entities, regulations also ensure rights for the transferor which capital is financed, promptly meeting the business‟ demand Seventh, to increase the autonomy in activities for credit institutions, foreign bank branches, regulations should not be detailed as regards the procedure of factoring Instead, regulations should stipulate some requirements when conducting factoring on the basis of combining important points in the procedure of factoring in Decision No 1096 and supplement some prerequisite contents when conducting the factoring activity Specifically:  As regards non-notification factoring: non-notification factoring is a form of factoring permitted in several states worldwide In non-notification factoring, the seller and factoring entity not inform the purchaser as regards receivable amounts which had been assigned to the factoring entity Therefore, the process of payment request, debt collection is still conducted on behalf of the seller Because the non-notification factoring form contains more risks than the notification factoring, in some states, factoring entities establish stricter requirements for customers when using this form In Vietnam, at present, some credit institutions, foreign bank branches demand to be provided factoring service in which the seller does not inform the purcharser This form conforms to regulations of Civil Code 201514 Moreover, according to 14 Clause Article 365 Civil Code 2015 stipulates that: “The transfer of the right to demand does not require the consent of the obligor The transferor the right to demand must notify in writing to the obligor as regards 113 current regulations of Vietnam, only factoring with the right to recourse to be reserved is permitted, risks in non-notification cases is insignificant Therefore, it is necessary to permit credit institutions, foreign bank branches to conduct nonnotification factoring as regards factoring for domestic sellers and only permit factoring entities to provide such form if customers meet certain requirements so that risks for factoring entities could be limited - As regards non-commitment factoring (the purchaser receives the notification but does not have any payment commitments): current regulations permit credit institutions, foreign bank branches to conduct and take selfresponsibility if risks arise However, in order to limit risks for factoring entities, it is advisable to permit factoring entities to conduct non-commitment factoring for domestic sellers only if customers meeting requirements as in case of nonnotification factoring Besides, as regards other forms of factoring, the commitment document which commits to perform in compliance with the notification document is compulsory - In export factoring, usually, due to the insufficient information of overseas importers, the export factoring entity would require a factoring entity in the country of the importer to inspect the financial state of the importer, supply the service of debt collection and ensure credit risk of the importer In this case, if the importer is unable to remit, the required factoring entity would remit on behalf of the importer To ensure safety in the process of international factoring, regulations must require the export factoring to be conducted via a factoring entity in the country of the importer, specifically: “As regards export factoring, the factoring entity is only permitted to conduct factoring via a factoring entity in the country of the importer on the basis of agreeing upon the conduct of factoring in compliance with international practices or with general regulations of an international factoring association and conforming to Vietnam regulations, which stipulates rights and obligations of parties, measures to control risks and dispute resolution mechanisms the transfer of the right to demand, unless otherwise agreed upon In case the transferor does not notify as regards the transfer of the right which incur cost for the obligor, the transferor shall pay for such cost.” 114 The factoring entity is entitled to choose the branch or parent bank in the country of the importer to be the partner in conducting such factoring.” Eighth, transactions of transferring receivable amounts must be registered with competent authorities: stipulating that transactions of transferring receivable amounts must be registered with competent authorities prevents the circumstance which the seller transfers receivable amounts to various factoring entities, conducts mortgage and pledge at various credit institutions Meanwhile, registration would help inspecting and establishing the transfer transaction of receivable amounts which was conducted, ensuring rights for parties Ninth, form sufficient information as regards factoring in the credit information system: information regarding factoring is formed and updated regularly in order to control and evaluate the credit quality of customers, control risks, contributing to enhance the quality of factoring and ensure safety in factoring Besides, together with the development trend of the present factoring activity, especially with Law on Credit Institutions permitting credit instructions and foreign bank branches to conduct factoring for the purchaser, the supplementation regulations on factoring under electronics form is necessary Tenth, as regards the provision of agreements, documents of goods trading, service provision: pursuant to current regulations, the seller send the factoring entity the original version or authenticated copy of goods trading, service provision agreement; documents as regards the good trading, service provision and other relevant documents In fact, sending a list enclosed with original (or authenticated copy) documents regarding goods trading, service provision wastes time of both the factoring entity and the seller With a large number of documents and small amount of money in these documents, using the list containing documents regarding goods trading, service provision is necessry and appropriate At present, the State Bank of Vietnam has permitted some credit institutions, foreign bank branches to pilot conducting factoring exempting list enclosed wiith original such as: Deustche Bank Ho Chi Minh Branch, Citibank Ha Noi and Ho Chi Minh Branch and Vietnam HSBC Bank, As regards risks, banks have measures to control risks regarding the 115 authenticity of the list of documents regarding goods trading, service provision disregarding the original documents Because of the above reason, it is necessary to permit using authenticated copies of goods trading, service provision agreement and copies, lists of documents regarding goods trading, service provision in the transaction process of credit institutions, foreign bank branches with customers under the requirement that the factoring entity and relevant parties agree upon applying risks control measures b Solutions to improve Regulations on bank Guarantee Bank guarantee is an objective existence to the economy, meeting the demand to continuously develop the economy Its role is similar to a catalyst which harmonizes, promotes a series of relations in the economic agreement Owing to bank guarantee, parties are assured to enter into economic agreements and take responsibilities for the signed agreement Bank guarantee contributes to enhance the international commercial relationship among states As a result, perfecting regulations on Bank Guarantee is an objective demand for the State Bank of Vietnam in specific and for the economy in general Circular 07 as regards Bank Guarantee has created a fairly complete legal framework and met with necessary requirements for participants However, as the above analysis, the Bank Guarantee activity still has some certain underlying risks Therefore, I would like to propose a few solutions for such shortcomings as following: First, as regards the risk of paying the guarantee money when no violation occurs: because the bank must pay the obligee within working days, commencing from the date receiving the request to perform the guarantee obligation, it is very difficult for the bank to verify the violation in such a short time Moreover, neither does the bank have the ability nor the tribunal authority to declare whether (i) a violation has occurred and (ii) provided documents or papers have proved the violation In fact, banks can only usually examine on the surface of documents, papers In order to partially prevent this, in the guarantee issuance agreement signed with 116 the obligor, banks could specify that the obligor has an irrevocable authorization for banks to pay for the obligee without having to verify the violations or the accuracy of the notification content of the obligor or documents, papers provided by the obligor when it calls the guarantor - Second, as regards the extension of term to perform the guaranteed obligation: Circular 07 has not mentioned about the legal outcome as regards performing the guarantee obligation of the guarantor in the case the guarantor negotiates with the obligor about (i) extending the term to perform the obligation for the obligee or (ii) amending, supplementing other agreement‟s regulations that arises the guaranteed obligation Risks in these cases are because of the unclear legal basis, it is difficult for banks to refuse to perform the guarantee obligation Therefore, the guarantee commitment must specify if the abovementioned change would terminate the guarantee obligation This is an issue that up until now, very few guarantee commitments issued by banks have covered - Third, as regards the risk of not agreeing upon a clear scope of the guaranteed obligation: Circular 07/2015/TT-NHNN stipulates that the guarantee commitment must specify the guarantee sum of money, meaning that even if the guaranteed obligation is not detailed, the guarantee commitment must specify the exact amount of the guarantee sum of money In other words, the guarantee sum of money must be limited within a certain amount Without the limit, the guarantee commitment is apparently void As regards this form of guarantee, regulations of a few states such as England stipulate the right of the guarantor to revoke the guarantee commitment via prior notification sent to the obligor but the guarantor is still responsible the obligations arising before the notification (Case Offord v Davies (1862) 12 CB NS 748 and Case Lloyd‟s v Harper (1880-81) 16 Ch D 290) - Fourth, as regards the authority to sign the guarantee issuance agreement, the guarantee commitment, Circular 07/2015/TT-NHNN needs to supplement regulations on the commitment to issue via Swift wire (usually used MT 760) - Fifth, as regards the term to examine documents and the refusal notification: Circular 07/2015/TT-NHNN should supplement the regulation that if the guarantor 117 does not send the refusal notification within the stipulated term, it will lose its right to declare that the money request and relevant documents not form a legitimate provision - Sixth, as regards shortcomings relating to counter guarantee such as not permitting to exclude the counter guarantee balance of foreign banks when calculating the credit limit of a customer, I propose that the State Bank of Vietnam should permit the exclusion guarantees issued on the basis of counter guarantee of foreign bank branches when calculating the credit limit separately in order to conform to the international practice Regarding the concern that the State Bank of Vietnam would not be able to control foreign bank branches, I propose that the State Bank of Vietnam could require organizations to send annual reports of such overseas entities as well as their credit ranking provided by prestigious international organizations for the State Bank of Vietnam‟s consideration 3.3.3 Solutions to improve the policies system (interest rate policy and exchange rate policy) to promote the international trade finance in Vietnam commercial banks The State Bank of Vietnam must continue to manage the monetary policy (include interest rate policy and exchange rate policy) actively, flexibly and cooperate closely with the fiscal policy in order to control inflation, ensure the stability of the macroeconomic state and support the reasonable economic development, implement solutions to remove difficulties for enterprises but not being subjective to inflation Specifically, the State Bank of Vietnam needs to focus on implementing the following main solutions: First, follow the macroeconomic, monetary state, and banking activities in order to manage uniformly, flexibly the monetary policy instruments; regulate mainly via the practice of open market, refinancing with a reasonable term, quantity and interest rate in order to support liquidity and capital resources for credit institutions but still ensure the control of inflation Continue to guide credit institutions to apply measures to balance the capital resource and use the capital to maintain a stable mobilized interest rate, reduce operation costs, increase the 118 business efficiency to have opportunities to decrease the loan interest rate; Second, control the credit growth of credit institutions system to ensure the safety, efficiency; focus the credit on the production area, especially areas like agriculture, rural area, export, assistance industry, small and medium enterprises, high technology application enterprises, start-up enterprises; control the credit in some sectors, areas with underlying risks; applying measures to create opportunities to approach the credit capital resource Third, continue to publish the central exchange rate daily conforming to the monetary policy management‟s goal, implement solutions to stabilize the exchange rate and foreign currency market Implement uniformly solutions to efficiently manage the foreign exchange market, conforming to the macroeconomic, monetary state and goal against the dollarization of the Government Fourth, continue to cooperate closely with the fiscal policy, follow closely the market state, the available capital of credit institutions, the plan of issuing, disbursing Government Bonds in order to actively and promptly manage the monetary policy 3.3.4 Providing specific regulations and guidance for new issues Laws and policies system of Vietnam is lack of some specific regulations and guidance for issue relate to dispute settlement under letter of credit Learning experience in building legal framework for L/C from other developed countries is the best suggestion Currently, there are two famous specific regulations: a) Uniform Commerce Code 1995, Article (from article 5-101 to article 5-118) In generally, regulations on letter of credit of UCC are adhere closely to principles of ICC Especially UCC 1995 add provisions on how to handle the occurrence of fraud, forgery (Article 5-109): if set of document presented under an L/C is determined comply with L/C but one of documents is fraud or forgery, issuing bank must honour base on honest unless there are claims of applicant In this case, a competent court may adjudicate the suspension or prohibition of payment base on convincing evidence Thus, UCC1995 solved problems of counterfeit fraud and offered reasonable and fairly solution Specifying the manner of dispute 119 resolution in UCC 1995 was the legal basic and favorable conditions for involve parties to avoid the cumbersome hassle to apply the provision on dispute resolution under different laws Therefore, having a separate source of law guide mode of letter of credit in Vietnam is necessary b) 18 Rules in dispute settlement relate to letter of credit (China) International trade finance, especially letter of credit is very developed in China Therefore, on 14/11/2005, China Supreme Court promulgated regulations to resolve problems when hearing cases involving dispute of L/C: 18 Rules in dispute settlement relate to letter of credit This Rules built base on Chinese legal framework and principles of ICC The Rules is considered consistent with legal practices of China and is widely used Similar to UCC1995 this Rules also add guidance relate to fraud and forgery, prevention method, legal procedures, …, thereby, creating favorable conditions for involve parties, especially in case disputes occur In summary, Vietnam should learn above developed countries to build a legal framework in dispute settlement relate to L/C Addition of specific provisions in this issue require the need to have a specific agenda and must be seriously set clear and timely 120 CONCLUSION International trade finance is not only the operating segment bringing a huge benefit for commercial banks but also creating the favorable environment and conditions for the economic development of our country Development of international trade finance is the right direction and will be the field that continues to make high profit for Vietnam commercial banking industry, helping Vietnam commercial banks continue to develop, firmly control the domestic market in the context of integration Development of international trade finance also means the support of Vietnam enterprises in business and operation Furthermore, development of international trade finance is a necessary condition for a rapid economic development in the context of integration, helping the country to grasp and take the full advantages of opportunities of the international economic integration process To develop international trade finance, apart from the condition that commercial banks themselves need to have a strategy to develop specific products, it is necessary for central bank to build a complete legal framework to help commercial banks to develop their products, ensure the safety in business competitiveness, and promote the economic development By studying the topic "Improving policies and laws system to promote international trade finance in Vietnam commercial banks", the thesis has shown the importance of the development international trade finance of the Vietnam commercial bank as well as the development of the economy and legal framework The thesis has also analyzed, evaluated, and commented on the current policies and laws related to international trade finance products at Vietnam commercial banks currently and has also provided advantages and disadvantages of the applicable policies and laws On that basis, it has offered the micro and macro solutions in order to improve effective of policies and laws system which subsequently promote the development of international trade finance in Vietnam commercial banks for the upcoming period as bellow: + Control the credit growth of credit institutions system to ensure the safety, efficiency; focus the credit on the production area, especially areas like agriculture, 121 rural area, export, assistance industry, small and medium enterprises, high technology application enterprises, start-up enterprises; control the credit in some sectors, areas with underlying risks; applying measures to create opportunities to approach the credit capital resource + Follow the macroeconomic, monetary state, and banking transactions in order to manage uniformly, flexibly the laws and policies system + Learning experiences in building laws and policies system of the developed 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access on 13/10/2016, http://www.sbv.gov.vn/webcenter/portal/vi/menu/trangchu/hdk/hdkhcn/htnc/htn c_chitiet?leftWidth=20%25&dID=251846&showFooter=false&showHeader=fa lse&dDocName=SBVWEBAPP01SBV078219&rightWidth=0%25¢erWid th=80%25&_afrLoop=155825116033912 29 State Bank of Vietnam, 2016, The rate of credit compared with the capital source, access on 10/10/2016, http://www.sbv.gov.vn/webcenter/portal/vi/menu/trangchu/tk/hdchtctctd/tlctdsv nhdv?_afrLoop=155381959741912 30 State Bank of Vietnam, 2016, Tools of State monetary policy, access on 10/10/2016, http://www.sbv.gov.vn/webcenter/portal/vi/menu/trangchu/cstt/ccccstt?_afrLoo p=154782012003912 31 The Business Times, 2016, Ordinance on Foreign exchange Control: „‟Open‟‟ or „‟Close‟‟?, access on 15/9/2016, https://www.vietinbanksc.com.vn/News/2013/3/19/247184.aspx ... on international trade finance and it is impact to international trade finance in commercial banks The thesis mainly analyses the impact of laws and policies systems on international trade finance. .. Vietnam commercial banks Therefore, I choose to research the topic "Improving policies and laws system to promote the international trade finance in Vietnam’s commercial banks " in order to systematize... of policies and laws system to promote international trade finance in Vietnam commercial banks The scope of the study The studying object of the thesis is the status of laws and policies system