LV Thạc sỹ_Improve effectiveness of international payment by letter of credit at VIB

NATIONAL ECONOMICS UNIVERSITY FACULTY OF FOREIGN LANGUAGES ENGLISH FOR BUSINESS DEPARTMENT  RECOMMENDATIONS TO IMPROVE THE EFFECTIVENESS OF INTERNATIONAL PAYMENT BY LETTER OF CREDIT AT VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK – HAI BA TRUNG BRANCH NATIONAL ECONOMICS UNIVERSITY FACULTY OF FOREIGN LANGUAGES ENGLISH FOR BUSINESS DEPARTMENT  RECOMMENDATIONS TO IMPROVE THE EFFECTIVENESS OF INTERNATIONAL PAYMENT BY LETTER OF CREDIT AT VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK – HAI BA TRUNG BRANCH ACKNOWLEDGEMENTS My report is completed not only thanks to my effort but also thanks to many people to whom I would like to express my sincere gratitude First of all, I would like to express my deep and warm thanks to the teachers and professors of National Economics University, especially the lecturers of Business English Department, for their advise and knowledge impartation during the past four school years In particular, I would like to express my greatest appreciation to my supervisor, Ms … for her dedicated guidance and support, as well as her encouragement in all the time of research and writing of this report Under her guidance, I not only completed the research but also learnt a lot of experience for my post-graduation Secondly, I am grateful to the leaders of VIB branch in Hai Ba Trung district for offering an opportunity to internship there, along with good working condition and valuable reference documents Thanks to them, I had chance to learn and exchange professional knowledge and skills for my future career Finally, my grateful thanks go to my family and friends, who always encouraged, supported and created the best conditions for me to finish my graduation report ii TABLE OF CONTENT LIST OF ABBREVIATION i LIST OF TABLES & CHARTS ii EXECUTIVE SUMMARY iii INTRODUCTION 1 Introduction of the research topic Rationales Research questions Scope of the research .2 Methodology Chapter I: INTRODUCTION 1.1 The establishment and development of VIB - Hai Ba Trung 1.2 The organizational structure of VIB – Hai Ba Trung .4 1.3 An overview of international payment operations at VIB – Hai Ba Trung 1.4 Key terms definition Chapter II: THEORETICAL FRAMEWORK 2.1 Definition of L/C 2.2 Classification of L/C 2.2.1 Basic types of L/C 2.2.2 Special types of L/C 2.3 Process of L/C 11 2.4 Main contents of L/C 14 2.5 Criteria to evaluate the effectiveness of international payment by L/C 16 2.5.1 Quantitative criteria 16 2.5.2 Qualitative criteria 18 2.6 Factors to influence the efficiency of international payment by L/C 19 2.6.1 Subjective factors 19 2.6.2 Objective factors 21 Chapter 3: ANALYSIS AND FINDINGS 23 3.1 The procedure of L/C payment transaction in VIB – Hai Ba Trung .23 3.2 Analysis of the effectiveness of international payment by documentary credit at VIB – Hai Ba Trung 25 3.2.1 Quantitative criteria 26 3.2.2 Qualitative criteria 31 3.3 Evaluating the efficiency of international payment by L/C at VIB – Hai Ba Trung 32 3.3.1 Advantages 32 3.3.2 Limitations 33 3.4 Factors causing limitations of international payment by L/C at VIB – Hai Ba Trung 34 3.4.1 Objective factors 34 3.4.2 Subjective factors 36 Chapter 4: RECOMMENDATIONS 38 4.1 The orientation for the development and goal of improving the efficiency of international payment by documentary credit at VIB – Hai Ba Trung 38 4.2 Recommendations to improve the efficiency of international payment by documentary credit at VIB – Hai Ba Trung 39 2.1 Managing risks in international payments 39 4.2.2 Diversifying international payment services related to documentary credit .40 4.2.3 Strengthening the marketing activities related to international payment 40 4.2.4 Enhancing the professional skills of staff 42 4.2.5 Improving technology infrastructure 43 4.2.6 Strengthening relationship with foreign banks 43 4.2.7 Increasing the source of the foreign exchange 44 4.3 Some recommendations 44 4.3.1 For Head Office of VIB .44 4.3.2 For the State Bank .45 CONCLUSION 46 APPENDIX REFERENCE ii LIST OF ABBREVIATION VIB – Hai Ba Trung L/C Vietnam International Commercial Joint Stock Bank branch in Hai Ba Trung district Letter of Credit AML Examining anti-money laundering ETS Economic and Trade sanction CTF Counter terrorism financing Vietcombank Joint stock Commercial Bank for Foreign Trade of Vietnam Viettinbank Vietnam Joint Stock Commercial Bank for Industry and Trade ICC International Chamber of Commercial i LIST OF TABLES & CHARTS Table 1: The revenue of import and export payment at VIB – Hai Ba Trung from 2010 to 2012 Table 2: .The revenue of foreign currency trading at VIB – Hai Ba Trung from 2010 to 2012 Table 3: The quantity and value of import and export L/Cs 26 Table 4: Revenue according to methods of international payments of VIB – Hai Ba Trung 27 Table 5: Revenue, cost and profit from L/C payment operation at VIB – Hai Ba Trung 28 Table 6: The maximum time of processing L/C transaction 30 Table 7: Number of agent banks and countries in relationship with VIB – Hai Ba Trung 31 Table 8: The growth of foreign currency funds of VIB – Hai Ba Trung from 2010 to 2012 .32 Chart 1: .The proportion of revenue from L/C method compared to total revenue from international payment from 2010-2012 28 ii EXECUTIVE SUMMARY Nowadays, the operation of international payment by Letter of Credit is becoming increasingly important to every Commercial Bank, including Vietnam International Bank and Hai Ba Trung branch Studying about the competitive advantages and limitations as well as drawing out some solutions and recommendations to enhance the effectiveness of this activity’s operation will help promote the profitability and reputation of the bank Therefore, this matter should be concentrated and studied in detail The real situation and the contribution of the research are analyzed and concluded basing on the data and documents offered by the bank during the researcher’s internship program, her personal observation and study through online searching engines and reference books The analysis and study of all the data and documents collected would be used to demonstrate that VIB – Hai Ba Trung has put special effort on developing the activities of international payment by L/C method However, beside certain achievements, there are also a number of weaknesses resulting from both subjective and objective factors On the basis of these findings, it is suggested that the branch has to take some steps to improve the efficiency of international payment by L/C, including managing risks, strengthening human resources and technology, diversifying the international payment services and relationship with foreign banks In addition, the Head Office of VIB and State Bank should also join hand to create favorable condition for the branch and the whole banking system to develop the international payment activities This dissertation is divided into four main chapters: Chapter 1: Introduction This chapter presents a brief overview of VIB – Hai Ba Trung branch’s establishment, organizational structure, missions and some business results in particular Chapter 2: Theoretical framework This chapter will provide readers with the essential background knowledge of the international payment by L/C method iii Chapter 3: Analysis and findings In this chapter, the author analyzes and evaluates the current situation about the performance of international payment by L/C at VIB – Hai Ba Trung from 2010 to 2012 At the same time, the obtained results, limitations and causes will be drawn out Chapter 4: Recommendations The final chapter is supposed to give some recommendations to improve the effectiveness of the international payment operation by L/C at the branch iv INTRODUCTION Introduction of the research topic Nowadays, globalization and integration is an obvious trend of the age Accordingly, all countries in the world are immersed in the integration and cooperation flow to achieve the common goal of peace, sustainable development and social progress As a result, all aspects of a country have close links with other countries, especially the field of international economic cooperation, in which international payments emerges as a bridge between the domestic economy with the rest of the world Along with the versatile operation trend of commercial banks at present, international payments is not the own strength of Joint stock Commercial Bank for Foreign Trade of Vietnam but the Vietnam International Commercial Joint Stock Bank (VIB) in general and the Hai Ba Trung branch in particular also pay special attention to develop international payment, especially by Letter of Credit method Therefore, after a period of internship at VIB – Hai Ba Trung branch the author decided to choose the topic: “Recommendations to improve the effectiveness of international payment by Letter of credit at Vietnam International Commercial Joint Stock Bank – Hai Ba Trung branch.” Rationales Among the international payment methods, Letter of credit is the most popular one with the benefits for both importers and exporters So far, this method have been used and developed at VIB – Hai Ba Trung and it has brought out many positive results for the branch However, in the current harsh economic condition, the management and development of the performance effectiveness of this service has met many difficulties and challenges, resulting from the global financial crisis, the Government, The State Bank and the customers Meanwhile, the requirement for the quality of international payment by L/C is increasing and the competitiveness between commercials banks offering this service become severe than ever Therefore, working out the solutions to control and develop the effectiveness of international payment using L/C method is really essential Consequently, my research will focus on helping VIB – Hai Ba Trung enhance this Trung branch is just at average level of the current Vietnam Joint Stock Commercial Banks, not to mention regional and international standard Besides, L/C activities are inconsistent with many other banks Compared with VietcomBank and a number of foreign banks’ branches, it is undoubted that VIB’s L/C services are not synchronized and heavily invested, especially for marketing and promoting the image Therefore, the competitiveness of VIB - Hai Ba Trung branch in the field of L/C is still limited In addition, the quality and the diversification of L/C method is not excellent enough As the major customers of VIB - Hai Ba Trung branch are medium and small sized or non-state enterprises, they not have a high demand on the quality and types of L/C payment, compared to Vietcombank's customers Consequently, the bank’s officials and staff are not urged and forced to improve the quality of L/C, enhance the professionalism in dealing with clients and innovate the procedure 3.4 Factors causing limitations of international payment by L/C at VIB – Hai Ba Trung 3.4.1 Objective factors  Unstable economic situation in domestic and international market The first and significant factor that badly affects the international payment by L/C at VIB – Hai Ba Trung is the unstable economic situation during the past year The extended financial recession has caused many negative effects on almost all the enterprises and financial institutions in regional and international markets in general and the branch in particular, including high rate of unemployment, low level of interest rate, high inflation rate, high tendency of trade deficit, low foreign exchange reserve, etc The weakening of many giant economies in the world, especially the US also has negative influence on the operation of many commercial banks Moreover, the recent credit tightening policy and domestic products protecting policy of the Government has put an increasing pressure and difficulty for domestic enterprises to survive and stabilize the operation, not to mention to extend the production and import-export activities  Inconsistent legal framework for international payment and L/C method 35 Until now, there is still no separate and particular document issued to guide domestic banks and financial institutions in processing import and export transaction This absence has caused asynchronism between banks while dealing with import and export payment Currently, the application of Letter of credit method and international payment in the country is processed based on two different regulations The international payment follows international regulation UCP500 whereas L/C method processed in domestic market is handled by the specific procedure of State Bank This causes some confuse for the domestic banks and financial institutions when processing the L/C payment At the same time, a number of enterprises have found and exploited holes in the incomplete regulatory system to defraud their counterparts and the bank as well  The cut-throat competition between banks Nowadays, the number of banks established and operated is increasing, especially in the capital area The sharing of customers, contracts and transaction is inevitable As stated below, while making efforts to attract new customers, the branch and the VIB in general also lost some traditional ones using L/C method as they decided to use another method to reduce cost or switching to another banks with more competitive fees and better services It is even harder for the branch to compete with the foreign banks with the advantage of information technology, simple procedures for credit ad experience in customer-care policies This challenge puts a pressure on the executive board of the branch to find down solutions to keep traditional customers and attract more new customers  Customers’ lack of awareness and knowledge about international payment and L/C method In fact, the lack of awareness and experience of customers about international payment and L/C has caused many difficulties to the branch In some cases, they not completely master economic law and compulsory regulation and procedure to follow, causing many mistakes and shortcomings, taking much time and cost of the branch In other cases, the enterprises intentionally not strictly execute the contract to earn money For example, the products of the exporters not meet demand of quality and quantity but still delivered as the contract is valid Sometimes this led to legal proceedings, causing loss of time, fee and prestige of the 36 branch The phase of checking L/C announcement in the export companies is also extremely loose and unthorough They not detect the ambiguity, the unfavorable terms or the terms which are unable to perform, thereby cannot fulfill L/C payment The consequent is lost of money, or worse refusal to pay 3.4.2 Subjective factors  Ineffective marketing strategy As stated below, the branch has not heavily invested in marketing and promoting the L/C service Many enterprises not know about this service applied by the branch The information offered on the website of the bank is still sparse and unattractive The customers nearly always have to directly contact to the international payment department or customer care centre to find down more information on the service Besides, the product portfolio and types of L/C are still not varied, meeting the diversified demand of the customers Meanwhile, many other banks have been very successful in their marketing strategies such as Vietcombank, Vietinbank, Standard Chartered…Therefore, VIB in general and Hai Ba Trung branch have lost some traditional customers as well as been unable to attract new more customers using L/C payment  Lack of facilities and inefficient use of technology The location of the branch and transaction offices under is at the centre of the capital, being convenient to communicate and trade with the customers However, the office area is quite small, leading to uncomfortable working condition and some difficulties in transaction processing of the officials, in addition to unpleased psychology of the customers coming to trade at the branch So far, the branch has been invested and equipped with qualified and modern infrastructure and facilities However, the technology standard, machinery and infrastructure system is just at average level of the current Vietnam Joint Stock Commercial Banks, not to mention regional and international standard Moreover, the staff has not taken full advantages of these facilities This caused the lateness in processing the transaction, inconsistence and lacking the coordination between the sections in dealing with the documents 37 Chapter 4: RECOMMENDATIONS 4.1 The orientation for the development and goal of improving the efficiency of international payment by documentary credit at VIB – Hai Ba Trung International payment is an important activity of the banks Particularly in the current international integration, the role of international payment operation and L/C payment is increasingly enhanced as it is one of the criteria to evaluate the ability of a bank to integrate globally With the goal of becoming a prestigious financial institution in Hai Ba Trung district as long as contributing to create the image for VIB in domestic and international markets, the branch has paid special attention to the proposal for development orientation for international payment to To execute the general direction for operation of VIB, the international payment by L/C at VIB – Hai Ba Trung has to follow these orientations:  Diversify banking services, including traditional services and modern services, in which focuses on developing letters of credit services, L/C supportive and relevant services  Continue to improve, expand and apply modern technology in international payment operations, at the same time develop various payment instruments, improve the quality and create reliability and guarantee for customers, soon reach the international standard for the products and services of international payments  Invest in improving the quality of human resources, including management and administration skills, professionalism, modern banking technology proficiency, new banking services knowledge  Work out effective marketing strategies for the development of banking services, focusing on both individual customers and corporate clients  Further expand the banking relationship with major financial institutions in the country and abroad, thereby enhance reputation on the world platform  Continue to develop international payment operation with the goal of building this activity into a strategic tool to integrate and expand the operation of 38 the bank in the domestic and international markets, to achieve the profitability and economic efficiency, thereby promoting other business activities of the bank 4.2 Recommendations to improve the efficiency of international payment by documentary credit at VIB – Hai Ba Trung 2.1 Managing risks in international payments Risk is one of the factors affecting the performance of international payment by L/C Therefore, the risk management and control should be specifically concerned Especially in the international banking integration, international payment operations are increasingly diverse and complicated, requiring the risk management to be carefully and well carried out The experience of the banks operating in the field of international payment shows that to manage risk in international payment operations by L/C, banks in general and VIB – Hai Ba Trung in particular has to systematize the risks into a manual to conveniently use in the management and control process; sum up the experience of losses handling, classifying risk markets; understand the content and the way to apply the rules and practices of international payments; classify types of customers and markets to determine the limit of L/C opened and finally always remain cautious of fraudulent behaviors It is recommended to execute regular monitoring in order to detect the potential risk to prevent and eliminate The organization of regular inspection on many stages including in the area of customers, through the documents, through questioning are all important Besides, the branch has to verify the authenticity of the transaction with the buyer and the seller, well grasp the transaction cycle of products from input to output, holding meeting with the partners of the importers to assess their marketing and sales, especially the issues related to payment Thereby identify and predict the possible risks to propose preventive measures and treatment In addition, in order to limit risk, the branch has to regularly monitor changes in economic situation, the politics of the countries in trade relations with Vietnam; research and master these countries’ custom to avoid the risks of payment or investigate and exploit information about the financial situation, delivery capability, 39 history and ethics of foreign partners in contracts through correspondent banking system 4.2.2 Diversifying international payment services related to documentary credit The balanced and comprehensive expansion and diversification of international payments types will prove the size and quality of the bank in the view of customers The variety of payment services will satisfy the increasing requirements of customer and in the integration trend it can meet the demands new business arising In recent times, the international payment services of VIB – Hai Ba Trung have developed fairly evenly, without excessive gaps However, the value of international payments by L/C still accounts for a high percentage of total revenue earned from international payments Therefore, the branch has to continue to diversify the types of services, extend the scale and quality of these services To support and improve the efficiency of the L/C payment method, VIB – Hai Ba Trung needs to develop the guarantee business such as international bidding guarantee, contract execute guarantee, deliver capability guarantee, deposit guarantee However, together with guarantee business, the quality of assessment should be also focused and promoted In addition, as the tourism are invested heavily to attract foreign tourists, the branch should focus on developing card transactions services including tourism card payment, Visa card, Master card to meet the customers’ demand 4.2.3 Strengthening the marketing activities related to international payment Customer is the decisive factor in the survival of any bank Attracting and creating customer confidence on the services the bank provides is a key factor that directly impacts the efficiency of the banking business Currently, VIB still holds a small proportion of market share as the customers have been familiar with international payment through Vietcombank, adding to the fierce competition from domestic banks and international banks in Vietnam Therefore, the implementation of effective marketing strategies will greatly impact the performance of the branch  Promoting advertising propaganda 40 In the condition of market-oriented economy and severe competition, to survive VIB – Hai Bai Trung should actively seek new customers To that, the marketing and advertising must be strengthened Currently, the branch’s advertising activities have been operated but less frequently The advertising strategies and activities of Marketing Department have not brought out positive results Therefore, the Marketing department should promote market research, advertising and frequently communicate with customers to find down their requirements In particular, the advertising propaganda can be executed through public media such as newspapers, radio, TV, mobile phone, especially the Internet with the development of information and technology By this, not only domestic customers but also foreign customers will be aware and informed of the branch’s services Along with advertising is promotion which helps attract customers The branch should diversify promotion forms to attract customers, such as low charges, lotteries dial with the number of customer accounts, usually payment In addition, the branch should have a list of businesses with good financial situation, import and export enterprises or firms having need of foreign currency trading and international payment The branch is recommended to regularly issue annual reports to the clients to help them grasp the branch’s activities, together with holding customer conference to timely understand the requirements of the customers to be able to provide the best products and services  Creating appropriate customer strategy In bank marketing, an appropriate customer strategy will bring out significant results Therefore, creating and implementing customer policy is an essential work which needs to be frequently changed to adapt the new situation With a proper customer strategy, VIB-Hai Ba Trung not only expands the number of customers but also improves business efficiency The branch needs to diversify types of customers in various sectors and practice no discrimination between economic sectors However, it should have favorable policy for traditional and large customers and try to fully satisfy customer needs The goal of the construction of a reasonable customer policy is to build and promote the customer’s credibility of the branch Therefore, the branch has always drawn out measures to maintain trust of the customers 41 The customer policies need to be specified on the basis of customer classification and the forms of customer preferences The review and classification of customers should be carried regularly 4.2.4 Enhancing the professional skills of staff In every aspect, human being always plays a central role Therefore, to extent the operation of import and export payment by documentary credit, the branch has to care about staff issue Human potential is enormous and implicit Especially in the banking sector, the bank's staff will be the people who show the image, the quality of products and services of the bank Also, in many cases, the bank's safety depends largely on the stability of professional, prudence and experience elements of officers and employees On the other hand, the nature of the banking business in general and international payment operations in particular requires the bank officials to have the qualifications, the variety of knowledge in many areas, the grasp of the law of international trade relations, as long as good foreign language, experience, inquiring mind and the desire to refresh themselves Thus, the branch has to focus on recruitment, staff training and retraining In particular: Annual recruitment needs to be in accordance with the practices of foreign banks, joint venture banks and in the form of examinations with specific standards, objective board of examiners, appropriate content for each section It is necessary to consider professionalism, qualifications, graduation level, then language proficiency and computer skills, ability to communicate and behave The integration trend and increasingly competitive environment require staff with high qualification, professional proficiency, solid skills and good communication Current staff of VIB - Hai Ba Trung branch should be regularly retrained in various forms, including inviting experts to train staff on the premises, holding presentations, sending staff to attend training courses, training programs on international payment by L/C of VIB in at home and abroad Furthermore, the branch should encourage the staff to self study and self-train on different channels towards improving their professional qualifications It is essential to organize officials evaluation according to the positions and the work they undertake If they are not qualified enough, then they would be 42 transferred to different section Attached to that is a strict rewards and punishment regime, clear and fair remuneration, timely appreciate and compliment for qualified staff In addition, the branch should formulate policies to attract talented people from other banks, other industry and universities at home and abroad, who have the capacity to operate international payment by L/C These policies are mainly staff arrangement and employment, the remuneration policy, working conditions and professional working atmosphere in VIB - Hai Ba Trung Another important issue is regular education to raise awareness for the tellers, professional staff to prevent moral hazard as well as a sense of the overall effectiveness of the branch On the other hand regularly monitor activities and behaviors of officers to prevent the abnormal changes in spending, in daily life, lifestyle to take precautions against ethics risk of officers 4.2.5 Improving technology infrastructure The quality of international payment by L/C depends on the second important factor which is level of technology Having qualified staff but if the facilities system is not modern and advanced enough, the branch cannot make a L/C service with high quality Thus, it is urgent to upgrade technology infrastructure However, the level of technology and machinery system depends on the implementation of the modernization project of VIB - Hai Ba Trung branch But to a certain extent, VIB Hai Ba Trung can fearlessly invest purchasing systems of modern machinery, equipment with high-speed transmission, better security and large capacity 4.2.6 Strengthening relationship with foreign banks International payment activities are directly related to the banking agent network in the foreign countries Currently, VIB has had a relationship with the bank in 623 banks throughout 61 countries all over the world This not only helps to better develop international payment services but also help exploit foreign currency sources in the international financial markets and other sources of funding to meet the need of domestic investment Therefore, in the future, VIB – Hai Ba Trung need to focus on some of the following solutions: Strengthen and maintain relationships with former banks, traditional banks to enhance its trust, reputation and position in the international arena; access to and expand relationships with new agent banks in 43 new countries to meet the settlement requirement of customers in international settlement 4.2.7 Increasing the source of the foreign exchange  Mobilizing domestic resources: The branch has to develop the foreign exchange desks and take measures to attract foreign currency deposits from clients such as raising interest rates of foreign currency deposits or offering promotional activities  Enhancing sources of foreign exchange: It is recommended to promote partnerships with foreign banks, sign framework credit agreements to obtain the necessary financing from partner banks The branch should avoid granting credit for import and export payments beyond its foreign exchange capacity then have to ask for support It should take the initiative to self-help for self-improvement to achieve better performance in payment business  Developing forex trading: Foreign currency for import and export payment can be also got from forex trading operations This activity is completely dependent on the bank’s ability and acumen, so the only solution is to always research and study to improve the performance and qualifications To avoid the risk of fluctuations in the currency market and meet the customers’ need of foreign currency, the branch should increasingly develop forex trading operation to ensure solvency and encourage customers to conduct transactions at VIB-Hai Ba Trung 4.3 Some recommendations 4.3.1 For Head Office of VIB The first recommendation for Head Office of VIB is to tightly monitor the implementation of the L/C payment process to modify appropriately The Board of Directors need to closely supervise L/C payment activities at each of its branches, considering the feedback and reaction from customers so as to evaluate whether the 44 current process is appropriate or not, thereby timely adjust to reach the most effective measures Secondly, VIB should strengthen the inspection and control by regularly sending competent officers to the branches to examine the expansion of international payments in general and L/C method in particular The inspection should be carried out seriously and thoroughly, without formalism Thirdly, VIB is advised to organize staff training and retraining, with advanced classes and courses to improve and update knowledge for tellers On the other hand, the bank should appoint the most competent staff from the branches to abroad to study and research, especially the field of banking technology, new product development and contemporary marketing skills in order to comprehensively develop the activities of international payments of the whole system The fourth recommendation is to expand agent relationships In the coming period, to create favorable conditions for the branch to meet transaction requirement of customers, VIB should establish and expand relationships with agent banks all over the world, particularly potential markets such as Germany, Japan, Korea, etc 4.3.2 For the State Bank First of all, we all know that only stable exchange rate policy would help enterprises fell secure to implement long-term import and export business strategy, thereby facilitate the development of international payment operations especially by L/C method Moreover, the exchange rate was one of the most important factors that impact the performance of international payment Therefore, to improve the performance of international payment by L/C, the State Bank has to introduce policies to maintain stable exchange rate Secondly, it is recommended that the State bank propose and execute a number of foreign exchange policies, specific guidance documents on forex management issues, at the same time carry out appropriate measures to develop of foreign exchange markets, thereby facilitate the international payment activities Thirdly, the State Bank should promulgate rules on the process of check and trade paper payments both at home and abroad to help the banks have a legal basis to enforce their business missions 45 Finally, as the development of the interbank foreign exchange market is one of the most essential conditions for commercial banks to expand foreign currency operation, the State Bank should continue executing measures to improve interbank forex markets CONCLUSION Nowadays, international payment and trade finance are becoming increasingly important to commercial banks and an essential link to promote other business services of the bank, while supporting, promoting exports – imports activities and foreign investment International payment bases on international trade, but the survival and development of international trade depend on whether the payment process is transparent, timely, safe and accurate or not For commercial banks, international payments play an important role in creating effective business operations Along with the expansion and development of international payments, L/C method has a chance to take effect This method is widely used in the commercial banks in general and VIB – Hai Ba Trung in particular VIB considers the documentary credit as a powerful tool in the operation of international payments, in order to satisfy the demands of import and export operation and economic growth of Vietnam On the basis of the comprehensive use of research methods, the research focuses on a number of issues as follows: Firstly the research has compiled and systematized the basic theory of international payment operations Secondly, the research has assessed the status of international payment operations in general and L/C method in particular at VIB – Hai Ba Trung Finally, the research provided some solutions and recommendations to the authorities of VIB, the Hai Ba Trung branch and the State Bank of Vietnam As the knowledge of a student is limited, my research inevitably has some shortcomings However I hope that my research will somehow contribute a small part in the process of expanding international payment activities at VIB – Hai Ba 46 Trung branch in particular and our country in general I expect to get sincere comments of scientists, teachers and those who are interested in 47 APPENDIX The international payment by L/C management report of VIB – Hai Ba Trung (2010-2012) Criteria 2010 2011 2012 Quantity Value Quantity Value Quantity Value L/C 328 180,219,808 248 98,688,732 125 76,489,787 Sight L/C 24 68,368,124 16 34,313,958 14 48,079,654 Deferred L/C 304 111,851,684 232 64,374,774 139 28,410,133 Import L/C 327 146,866,326 250 121,093,332 128 84,867,331 Export L/C 53 3,529,367 41 4,254,390 10 590,515 REFERENCE Vietnamese Ngô Văn Hiệp (2009) Những nguyên nhân dẫn đến sai sót giao dịch L/C, retrieved from: http://luatsuhanoi.vn/index.php? page=productView&viewParent=301&id=934 Trần Văn Hòe ( 2009) Tín dụng tốn Thương mại Quốc tế Nhà xuất Đại học Kinh tế Quốc dân Trần Hồng Ngân (2007) Thanh tốn quốc tế Nhà xuất Thống kê Nguyễn Thị Lan Phương (2010) Một số rủi ro chủ yếu phương thức tốn tín dụng chứng từ, retrieved from: http://voer.edu.vn/module/kinh-te/mot-so-rui-ro-chu-yeu-trong-phuongthuc-thanh-toan-tin-dung-chung-tu.html Nguyễn Văn Tiến (2011) Thanh toán quốc tế tài trợ ngoại thương Nhà xuất Thống kê English Hinkelman, G.E (2003) A short course in International Payments World Trade Press, USA International Chamber of Commercial (2007) Uniform Customs and Practice for Documentary Credit Joseph Zaritski ( 2002) Payments and Export Credit Insurance Gretchen Morgenson & Campbell R.Harvey (2002) The New York Times Dictionary of Money and Investing: The essential A-to-Z Guide to the Language of the New Market, Times Books Publisher, USA Laurel J Delaney (1998) Start and Run a Profitable Exporting Business, Self-Counsel Press, USA Scotiabank, Trade Finance Services (2008) A Practical Guide on Documentary Letters of Credit ... enhance the effectiveness of international payment operation by L/C method at VIB – Hai Ba Trung?  What are the strengths and limitations of international payment operation by L/C method at VIB –... the cost of international payment by L/C  Proportion of L/C payment in the total international payment operation of the bank The international payment operations can be implemented by three... goal of improving the efficiency of international payment by documentary credit at VIB – Hai Ba Trung 38 4.2 Recommendations to improve the efficiency of international payment by documentary credit