Tiểu luận current status of the international payment service of the commercial banks in vietnam

BỘ GIÁO DỤC VÀ ĐÀO TẠO TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN - - BÀI TẬP THẢO LUẬN NHÓM Current status of the international payment service of the commercial banks in Vietnam Giáo viên hướng dẫn: Nguyễn Thanh Dương Lớp: Ngân hàng CLC K56 NEU Các sinh viên: Nguyễn Văn Quý Nguyễn Ngô Quang Thắng Lê Quỳnh Anh Vũ Quỳnh Anh Lê Thị Minh Ngọc Nguyễn Thị Hoàng Hà Nguyễn Thị Hồng Vân - Hà Nội, 2017 - Current status of the international payment service of the commercial banks in Vietnam I Definition Definition: - International payment is the process of making international currency revenues and expenditures through the banking system around the world in order to serve the international exchange relations arising among countries - International payment is one of the bank's operations in paying the value of shipments between buyers and sellers in the field of foreign trade Characters: 2.1 Payment relating to currency, place, means, modes and time of payment a Currency: All parties in the international payment must agree on a currency to secure the value of international transactions - In general , there are two types of currency used in international payment: the currency of payment and the currency of caculation + Money for calculations: usually stable currency or strong currency (eg USD, EURO, ) + Money for payment: the money that the two parties used to pay for each other The payment currency must be a freely convertible currency and then disseminated to the international payment practice + Payment currency and computed currency can be the same currency or different currencies b Means: The most means frequently used are drafts, bill of exchange, cash, but the most common is BE c Method: There are many methods of payment such as money transfer method, method of recording books, method of collection, mode of credit voucher each mode has different advantages and disadvantages The conflicts of benefit between the exporter and the importer The choice of payment method is specified in the foreign trade contract d Place of payment: The parties can choose a place as payment facility, which depends on the requirements of the business and the relationship between the parties e Payment terms: can be prepaid, postpaid, or mixed Time limits are usually the date of the draft, the date of acceptance of the draft, or any time frame agreed upon by the parties 2.2 International payment for external economic activities, non-trade, investment, finance - Payment is an important step in the process of production and circulation of goods, especially for export and import activities - Well-organized international payment => the value of goods exchanged and services performed between entities in different countries will be implemented, contributing to the development of foreign trade - International settlement became an important factor in evaluating a nation's economic efficiency - International payments also serve non-commercial non-commercial activities such as payment of expenses by diplomatic missions, etc 2.3 International payments are more risky than domestic payments - Unlike domestic payments, international payments are more vulnerable to currency fluctuations, political instability, legal differences, and policy mechanisms across countries, due to Geographic distance between countries involved in international payment operations As a result, exporters, importers and banks are passive in the fulfillment of their committed obligations, causing damage to the parties involved II Methods of international payment Bank transfer b Definition : is a method of transferring money by instructing a bank to directly transfer funds from one bank account to another without the use of check c Parties : ∗ Remitter ∗ ∗ ∗ d Remitting bank Paying bank Beneficiary Types of bank transfer Mail transfer Requirements of payment implemented through a letter Low expense Low time e Procedure of bank remittance Telegraphic transfer is Requirements of payment is implemented through fax, Telex and using SWIFT system High expense Fast time f Advantages and disadvantages Advantages Fast transaction, few documents Disadvantages Exporter and importer trust each other Have enough foreign currency to Exporter and importer trust partner pay Pay at any branch of the bank g Apply case in commercial activities ∗ Importer pay for the transaction when goods were loaded on board ∗ Exporter finish to delivery the goods ∗ Importer receive goods ∗ Importer pay partially of the international sale contract Open account a Definition: it means that the seller delivers goods or services to the buyer without receiving cash, a bill of exchange or any other legally binding and enforceable undertaking at the time of delivery, and the buyer is expected to pay according to the terms of the sales contract and the seller’s latter invoice b Features ∗ It is the most advanteageous option to the importer in cash flow and cost terms ∗ It is the highest risk option for an exporter because his goods along with all the necessary documents are shipped directly to the importer agreeing to pay the exporter’s invoice at a future date ∗ Exporter should be absolutely confident that the importer will accept shipment and pay at agreed time and that the importing country is commercially and polically secure ∗ The exporter and importer trust another implicitly and they have traded together for a number of years c Procedure of open account payment d Advantages Exporter Importer Both parties Easiest payment method, low expense, friendly payment method Reduce document expense Reduce goods prices Increase exporter’s completion in international market Pay the goods after receiving all of the cargo To be credited by the exporter in specific duaration time Reduce bank expense: Bnk does not participate in open account method There are only parties to be exporter and importer e Risks in method of open account payment Exporter Importer The exporter has not control over the goods The exporter cannot be guaranted payment The open account is perhaps the riskest method of trade available The seller annot deliver goods on category, time, quantity and quality f Apply cases ∗ Exporter and importer trust each other ∗ Use in regular transactions : from months to year ∗ Use in pay transport expense, commission expense, guarantee expense, interest rate expense Collection of payment a Definition: it is process, in which after deliver the goods The seller instructs his bank to forward documents related to the export of goods to the buyer’s bank with a request to present these documents to the buyer for payment, indicating when and on what conditions these documents can be released to the buyer b Features ∗ Collection order between exporter snd exporting bsnk is not a contract ∗ Banks are only intermediary in payment method ∗ It is only implemented after the seller delivers goods basing on issuing documents c Documents in collection of payment - Financial documents: ∗ banker’s bill of exchange, draft ∗ commercial promissory note ∗ Check - Commercial documents: ∗ Transport documents: seaway bill, airway bill, post receipt ∗ ∗ d e Owning documents: trust documents, packing list, commercial invoice, CO Other cargo documents Parties Principal Remitting bank Collecting bank and presenting bank Drawee Types of collection of payment collection of payment clean collection: is collection of financial documents without attached commercial documentary collection: is collection of financial documents, which may documents have attached commercial documents or collection of commercial documents without financial documents D/P( dilivery documents aganist payment): the D/A( delivery documents against acceptance) : the collecting bank releases the documents to the buyer collecting bank is permitted to release the only upon full and immediate cash payment D/P documents to the buyer against terms most closely resemble a traditional cash on acceptance( signing) of a bill of exchange or signing delivery transaction of a time draft at the bank promising to pay at a later date Documentary credit a Definition : it is the written promise of a bank undertake on behalf of a buyer, to pay a seller the amount specified in the credit provided the seller complies with the terms and conditions set forth in the credit The terms and conditions of a documentary credit revolve ảound D/OT or D/ against other feature issues: (1) the presentation of documents that evidence title to goods shipped by the seller, (2) payment b Features of LC - LC is different from international sale contract and it separates with sale contract - LC is considered to be an economic contract between importing bank and importer - Documents play a very important role in payment activities - The documentary credit method is the safest payment method among parties in international payment c Parties - Applicant - Opening bank - Beneficiary - Advising bank - Negotiable bank - Confirming bank - Norminated bank - Paying bank - Accepting bank - Bank by deferred payment d Standard types of LC - Revocable LC: LC that may be amended or canceled any time by the buyer without the approval of the seller - Irrevocable LC: this LC cannot be canceled ( or its term amended) without the seller’s prior written approval, and comes usually as a confirmed irrevocable letter of credit - Confirmed Irrevocable LC: LC that adds the endorsement of a seller’s bank to that of the buyer’s bank It provides the highest level of protection to the seller because not only the LC cannot be canceled unilaterally by the buyer, but also both banks involves in the transaction guaranty its payment on its due date - Irrevocable without Recourse LC e Procedure: III Role of bank The importance of the role played by banks in trade finance Commercial banks play an important role in international trade Commercial banks act as intermediaries between importers and exporters They have insight and wide practical experience in foreign trade coupled with legal knowledge of provision in different countries Banks have correspondents in most countries, through whom they deal woth the counter parties Some banks may have their own branches in other countries Banks provide a multitude of services to every operator in the trade chain and for every stage of any transaction The most complex deals can require pre-shipment and post-shipment finance, advances against goods in transit, in warehouse, in customs or even in the consignee’s possession Apart from granting pure trade-related credit, banks protect their customers, whether exporters or importers, against every type of risk they are likely to encounter by employing a range of guarantees, standby credits and indemnities Particular mention must be made of the importance of documentary credits and the skill that bank operators display when issuing and confirming credits, paying and negotiating documents Exporters are able to enjoy the guarantee of payment which banks provide and importers can be confident that the documentation they have demanded has been carefully scrutinized In addition to finance, banks provide a number of support services essential to exporters and importers wishing to enter new markets Credit and status reports on foreign operators, advance details of overseas contracts and government tenders are regularly supplied to customers seeking trading opportunities IV Services offered by commercial banks: The finance of international trade forms an important part of any major bank’s service package Many have specialised departments to handle the various aspects involved, comprising experienced staff able to cope up with the demands of customers with overseas business to transact Commercial banks offer various types of services to local and international business communities These services include financial facilities to exporters and importers by way of loán and overdrafts, discounting and purchasing of bill of exchange - Trade Enquiries: Banks with overseas branch networks or correspondent banking relationships are able to identify potential markets for their exporting customers, and assist to an extent with the introduction to their importing customer overseas - Credit information: by using the standard form of bank-to-bank status enquiry, it is posssible for banks based in the UK to obtain information on importers, for instance, in respect of their creditwwothiness, from banks overseas - Economic and political reports: many large international banks employ economists who provide reports on a number of countries, which are useful to exporters, particularly if the country concerned is politically unstable or its economy is weak - Travel services: in addition to the usual services avaiable to the travelling business executive, such as travellers’ cheques and foreign currency, the banks may also be able to provide a letter of introduction addressed to their overseas branch or correspondent This letter introduces the customer and requests that all possible assistance is given so that local trading terms and conditions may be fully understood - Exchange control regulations: many countries have restrictions on the amount of local and(or) foreign currency that can be taken into and out of the country at any one of time Consequently, an exporter who is unaware of the current situation may export goods to a country and then find that the importer is unable to transfer the funds due in settlement without the sanction of the Central bank Banks are able to provide their customers with advice to advoid such problems - Sale and Purchase of foreign currencies/exchange contracts: banks sell and purchase foreign currencies to and from their customers/non-customers and travellers An exporter may find that before payment in forein currency is received the exchange rate has reduced thus reducing profit on the transaction It’s possible for an exporter to enter into a forward exchange contract with a bank, which enables the bank to fix the exchange rate at which the currency will be converted on a specified date in the future Then, the exporter can price goods safe in the knowledge that the rrate will not change whatever happens in the foreign exchange markets The bank covers its own commitment by matching deals in the market - Collection of bills: a exporter who has drawn a bill of exchange on an overseas buyer í able to obtain reimbursement by asking their bank to send the bill to the importer’s bank i.e an exporter’s bank will collect the proceeds When a bank is asked to collect a bill of exchange, it acts as agent to the exporter V Current status of international payment in Petrolimex Group Commercial Joint stock bank (PG Bank) I Transfer money methods At PG Bank, the main means used in the money transfer is Telegraphic Transfer, money transfer by mail is almost no longer used The method of transfer money extremely quick and simple, the Vietnam export and import enterprises to choose to use for many years when working with foreign partners, on the basis of mutual trust And now this method is also applied quite popular, suitable for transactions with small and medium pay In 2009 and 2010, remittance turnover accounted for a significant proportion of total international payment at PG Bank Quarte r I/2009 II/2009 III/2009 IV/200 I/2010 Sales 5,024.5 7,723.5 12,028 13,020 13,279 transfer money away Sakes 12,509 12,948 15,987 17,340 17,513 transfer 75 75 money to Money transfer activities at PG Bank are always highly reputable, with automatic and highly accurate transactions The transactions at PG Bank rarely cause errors in the operation, only sometimes when order money transfer is not made immediately due to slow internet connection II.Collection method with documents This method of collection has quick procedures, service charges are not high so also many customers choose However, the amount of payment by collection is not much and mainly done in the form of collection of documents, because it has many risks as well as not guarantee the rights of the parties Quarte I/2009 II/2009 III/2009 r IV/200 I/2010 Export 200 775 1,243 1,439 7,587 collection Import 850 1,180 2,111 3,844 4,123 collection Payment collection at PG Bank actually generated some risks associated with both buyers and sellers There is a case where the buyer has accepted the payment but the maturity date is not fulfilled And the staff of the payment office of PG Bank must contact and urge buyers to fulfill their obligations When acting as collecting bank, PG Bank also incurred some risks due to the seller's breach of contract It is the buyer who wants to have the receipt of the goods sent a commitment to accept payment to PG Bank but after receiving the goods again delay payment due to the reason of incorrect delivery And PG Bank had to lend money to the borrower to pay to the foreign bank upon maturity III Payment methods-Documentary Credit or Letter of Credit (L/C) L/C is usually the best choice of enterpreneurs In the operation of international payment at PG Bank, payment values using L/C is the highest Figure 1: The situation of payment by L/C in 2009 Value ( thousand USD) Open L/C 71,025.45 For import 49,791.97 For export 86,508.81 Figure 2: The situation of payment by L/C in 2010 L/C import Number of Value Number of items 275 328 160 L/C export Number of Value items January/2010 65 Feb/2010 45 Mar/2010 49 (thousand USD) 38,534.27 29,808.99 37,022.93 items 44 24 25 (thouand USD) 18,708.11 28,491.23 19,494.19 - The operations using L/C at PG Bank also have risks Many cases incurred due to an error of the Bank, for example when Documentary Credit sent from foreign banks, Receptionist staff received the documents but forgot to transfer to the International Payment room And the document stays in the employee's cabin for more than business days until the foreign bank requests payment PG Bank got a mistake about it and paid it to the foreign bank, though we did not scrutinize the documents - Another risk arises when the customer becomes insolvent It happened when PG Bank issued to Shanghai Vietnam a Deferred L / C with the total amount of USD 5.7 million In the course of business, the company suffered a loss, went to bankrupt, unable to repay the bank, and eventually made up to 50% of the amount of debt  ... Hà Nội, 2017 - Current status of the international payment service of the commercial banks in Vietnam I Definition Definition: - International payment is the process of making international currency... through the banking system around the world in order to serve the international exchange relations arising among countries - International payment is one of the bank's operations in paying the value... international payment must agree on a currency to secure the value of international transactions - In general , there are two types of currency used in international payment: the currency of payment and the