ENHANCING THE COMPETITIVENESS OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE VIETINBANK IN INTERNATIONAL TRADE FINANCE IN VIETNAM

In general, there has been very little indepth research on the topic of enhancing international trade finance activities in commercial banks in Vietnam. Although the issue of developing international trade finance is increasingly concerning in the context of the outbreak of the Covid19 epidemic and complicated developments causing many difficulties for the world economy, most of the research theses only present the most common problems and difficulties along with shortterm solutions. Moreover, most of the studies were done more than 5 years ago, so the data are not close to the real situation and are too old to use, analyze and compare. Therefore, it is necessary to do brand new research about trade finance activities in Vietnam with the information in the 20182020 period. This thesis will focus on the current situation of Vietnam’s commercial banks especially the Joint Stock Commercial Bank for Industry and Trade VietinBank.

BANKING ACADEMY INTERNATIONAL BUSINESS FACULTY



GRADUATION THESIS

ENHANCING THE COMPETITIVENESS OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE VIETINBANK

IN INTERNATIONAL TRADE FINANCE IN VIETNAM

Student : LUONG TAN MINH

School year : 2017 – 2021 Student ID : 20A4050228 Lecturer : M.A Ngo Duong Minh

Ha Noi, May 2021

BANKING ACADEMY INTERNATIONAL BUSINESS FACULTY



GRADUATION THESIS

ENHANCING THE COMPETITIVE CAPACITY OF

VIETNAM JOINT STOCK COMMERCIAL BANK

FOR INDUSTRY AND TRADE VIETINBANK

IN INTERNATIONAL TRADE FINANCE IN VIETNAM

Student : LUONG TAN MINH

School year : 2017 – 2021 Student ID : 20A4050228 Lecturer : M.A Ngo Duong Minh

Ha Noi, May 2021

ACKNOWLEDGEMENT

In order to complete this research, first of all, I would like to express my endless thanks and gratefulness to Mr Ngo Duong Minh, M.A., who wholeheartedly helped, guided, and instructed me during the course of the thesis

Besides that, I would like to thank the teachers in the International Business Faculty and all the lecturers of the Academy, who have imparted useful and valuable knowledge to me during my study and research at school

Despite many efforts, due to limited time, my qualifications and experience are still limited Therefore, shortcomings cannot be avoided Hence, I hope to receive comments from teachers and friends to make this thesis more complete Thank you sincerely!

DECLARATION

I commit the graduation thesis "Enhancing the competitive capacity of Vietnam Joint Stock Commercial Bank for Industry Trade Vietinbank in International Trade Finance Activity in Vietnam" is my own and independent research, under the guidance

of Mr Ngo Duong Minh, M.A The figures in the thesis are truthful and have clear, specific origins The results of the thesis are truthful and have never been published in any other research that I know of

TABLE OF CONTENTS

INTRODUCTION 1

1 The urgent of the study 1

2 Object and scope of the study 2

3 Research question 2

4 Research Methods 3

5 Research Overview 3

5.1 Foreign study 3

5.2 Vietnamese study 5

5.3 Research gap 6

6 Thesis Structure 7

CHAPTER 1: 8

1.1 Definitions of Trade finance and Competition 8

1.1.1 Definition of trade finance 8

1.1.2 Definition of competition 9

1.2 Competitive capability in international trade finance at commercial banks 12

1.2.1 Evaluation criteria for enhancing competitive capability in trade finance 12

1.2.2 Necessity of enhancing competitive capability in international trade finance at commercial banks 14

1.2.3 Factors affecting the competitive capability in trade finance 15

1.2.3.1 External factors 15

1.2.3.2 Internal factors 16

CHAPTER 2 23

2.1 Vietnamese economy and its impact on competitive capability in

international trade finance 23

2.1.1 The volatility of the world market in the context of covid-19 pandemic 23

2.1.2 Size of import and export market of Vietnam 26

2.2 Current situations of enhancing competitive capability in international trade finance at VietinBank 27

2.2.1 Strength 27

2.2.2 Weakness 30

2.2.3 Opportunity 32

2.2.4 Threat 33

2.3 Reason 34

CHAPTER 3: 38

3.1 Orientation goals to enhance Vietinbank's competitive capacity according to the Law on Credit Institutions 2010 38

3.2 Solutions to enhance Vietinbank's in competitive capacity 41

3.2.1 Improve strengths to take advantage of opportunities: 41

3.2.2 Overcoming weaknesses to get over challenges: 42

3.3 Recommendations for Vietnamese Government 44

3.4 Recommendations for import-export businesses 46

CONCLUSION 48

1.1 Conclusion 48

3.2 Limitations 49

3.3 Future research 49

LIST OF REFERENCES 50

IAB Investing Across Borders

RCEP The Regional Comprehensive Economic

Partnership Agreement SBV State Bank of Vietnam

SMEs Small and medium enterprises

SOCBs State-Owned Commercial Banks

UKVFTA UK-Vietnam Free Trade Agreement VAMC Vietnam Asset Management Company VietcomBank Joint Stock Commercial Bank for Foreign

Trade of Vietnam VietinBank Vietnam Joint Stock Commercial Bank

for Industry and Trade VpBank Vietnam Prosperity Joint Stock

Commercial Bank WTO World Trade Organization

LIST OF FIGURES

Figure 2.1 Profit after tax of VietinBank 27

Figure 2.2 Evaluate the effectiveness of personnel after training 31

Figure 2.3 Scale of Vietinbank and Vietcombank's non-performing loan 32

LIST OF TABLES

Table 2.1 List of Top 10 prestigious Vietnamese commercial banks 29

INTRODUCTION

1 The urgent of the study

In a period of rapid and widespread international economic integration trend around the world, Vietnam used to be a low-middle-income country until achieved economic achievements, reform society 1986 and a series of participation in international organizations such as ASEAN, WTO Over the years, investors can be impressed with

a new Vietnam in the business environment This place is an attractive investment destination for foreigners to start a business in Vietnam At the same time, the role of the Bank - the key economic sector of the country, where managing capital flows in and out

of enterprises takes on more and more core meaning than ever, is the connection point between domestic and foreign enterprises through international payment activities, promote the import and export of goods and services, foreign investment and international credit finance With that trend, the influx of capital pouring into Vietnam has increased the competition in the market to become extremely fierce, posing problems for domestic banks: What to do to compete and develop against these competitors?

VietinBank is a Vietnamese State-owned commercial bank, established on March

26, 1988, on the basis of separation from the State Bank of Vietnam under Decree No 53/HDBT of the Council of Ministers With available potentials and excellent market conditions, VietinBank has all the ingredients to become a leader in trade finance in Vietnam However, there is still strong competition from other banks, such as VietcomBank, BIDV, in terms of international banking, so the full potential has not been brought into play completely

In general, there has been very little in-depth research on the topic enhancing international trade finance activities in commercial banks in Vietnam Although the issue

of developing international trade finance is increasingly concerned in the context of the outbreak of the Covid-19 epidemic and complicated developments causing many

difficulties for the world economy, most of the research theses only present the most common problems and difficulties along with short-term solutions Moreover, most of the studies were done more than 5 years ago, so the data are not close to the real situation and are too old to use, analyze and compare Therefore, it is necessary to do a brand new research about trade finance activities in Vietnam with the information in 2018-2020 period This thesis will focus on the current situation of Vietnam’s commercial banks especially Joint Stock Commercial Bank for Industry and Trade VietinBank

In order to solve the stated problem, the topic: "ENHANCING COMPETITIVE CAPACITY OF VIETINBANK IN INTERNATIONAL TRADE FINANCING ACTIVITIES IN VIETNAM" was selected for research with the hope of improving Vietinbank's high position in the market

2 Object and scope of the study

Research object: Trade finance capacity of Vietnam Joint Stock Commercial Bank for Industry and Trade VietinBank

Research scope: Competitiveness of Vietnam Joint Stock Commercial Bank for Industry and Trade, Vietinbank in international trade finance in the period of 2018-2020

3 Research question

What are the strengths, weaknesses, opportunities and challenges of VietinBank

in terms of competitiveness in International Trade Finance?

What should VietinBank do to improve its competitive capacity in International Trade Finance in the integration context?

The research will illustrate:

- Systematize the basic issues of competition and competitiveness of commercial banks in international payment activities, factors affecting competitiveness and evaluation criteria of a commercial bank's competitiveness

- Analyzing and assessing the strengths, weaknesses, opportunities and challenges

of the SOCBs of Vietnam, thereby assessing the competitiveness of Vietnam Joint Stock Commercial Bank with other commercial banks

- Proposing solutions and recommendations to improve competitiveness of Vietnam Commercial Bank in the context of integration

Having published in July 2016, the study: “Trade finance in crisis: Market

adjustment or market failure?” by Chauffour, J.P Thomas, F (2009) brought

international experience to bear on trade finance and identifies instruments that could benefit small companies and new exporters, focusing on companies not currently part of supply chains, including the garment industry, and discussing issues relating to general access to credit Given the constraints of the local marketplace, a clear need exists to open the door to easier access to foreign financing, which could enhance competition, increase liquidity, and reduce interest costs, helping the several industries and other exporting sectors, as well as potential new exporters In addition, it would support small and medium enterprises (SMEs) suppliers to the export industry, which have traditionally proven difficult to finance in Bangladesh The study reviewed the main bottlenecks to overall investment in Bangladesh and then focuses on foreign direct

investment (FDI) performance and the openness of Bangladesh to FDI, relying extensively on 2012 indicators from the World Bank’s Investing Across Borders (IAB) initiative Although Bangladesh remains one of the most open countries to foreign equity ownership, the IAB data find (1) gaps between policies and practice; (2) lengthy and discretionary administrative procedures; (3) weak dispute arbitration systems; and (4) poor access to land-related information

Study: “The impact of trade finance on international trade: Does financial development matter?” carried out by Liston, D P and McNeil, L (2011) illustrated that approximately 80 percent of global trade relies on some version of trade finance By using analytical methods and methods of theoretical classification and systematization, this study seeks to further the understanding of the relationship between trade flows and the availability of trade finance, while accounting for the development of the sample countries’ financial sectors The model also controlled for additional established variables that significantly influence trade patterns, such as import/export demand and exchange rates The results indicate that trade finance is a positive correlate with export and import volumes However, we also find that trade finance becomes even more important in determining trade volumes when countries have a higher level of financial development

Back to the current world situation, the trade finance landscape is undergoing profound changes, with digitalisation a major factor driving process and product innovation in the asset class Existing players are forming new coalitions to respond to and leverage on the impact of technology in this business field, with new actors such as Fintechs enter the market Digitalisation is making trade finance more accessible to SMEs, enabling more of them to integrate into global value chains SMEs stand to gain from these recent developments, which can contribute to mitigating structural challenges hampering access to trade finance, including through improved process efficiency and quality, new products and approaches to trade finance, as well as new providers that tailor solutions to SMEs Those opportunities and threats were described in the study:

“Trade finance for SMEs in the digital era”, produced by the OECD Centre for

Entrepreneurship, led by Lamia, K.C in 2021, through qualitative research methods based on information gathered from Global Supply Chain Finance Forum

In term of the current crisis on around the world, the thesis: “Trade finance in the

Covid era: Current and future challenges” published under the responsibility of the

Secretary-General of the OECD on 23 March, 2021 shows that the pandemic has severely impacted the global economy and, more specifically, international trade However, information remains limited on the level and on the type of the disruptions that have emerged, as comprehensive data on trade finance does not exist Nonetheless, information from surveys and other related indicators allow for some emerging trends in trade finance to be identified ST trade finance appears to be the most affected by the crisis, in part due to pressures on the access to trade finance opportunities caused by the diminished risk appetite of the private market Governments acting through their ECAs can attempt to alleviate these barriers by providing liquidity to exporters and increasing the availability of export support programmes In contrast, MLT financing appears to have been more resilient to the current crisis

5.2 Vietnamese study

In 2016, a graduation thesis titled :” Solution to improve quality of trade finance

activities by Documentary Credit at Joint Stock Commercial Bank for Investment and Development of Vietnam BIDV – Cau Giay Branch” – by the authors Tran, T.H.N,

focused on systematizing the theory of trade finance activities in the form of documentary credit Based on that knowledge, focus on researching and evaluating the current status of trade finance by documentary credit method at BIDV The thesis pointed out the outstanding limitations of BIDV and at the same time gave clear and specific solutions for the purpose of improving the quality of trade finance activities for the bank and making detailed recommendations to related organizations However, the thesis only focused on documentary credit activities and had not provided sufficient specific

evidences in trade finance activities in general to give the most comprehensive opinion

on raising awareness competitiveness not only with the domestic market but also around the world

In the thesis: “International trade finance activities at VPBank” by author Chi,

T.T.K (2007) after studying the theoretical basis, current situation and applying investigation and analysis methods, the thesis had proved that international trade finance, although not the strength of VPBank and the inexperienced bank, nevertheless has partly met the needs of corporate customers However, there are still many challenges due to both subjective and objective reasons leading to the low efficiency and revenue of the bank Therefore, the competitiveness of VpBank is still limited

According to the study “development of international trade finance at vietinbank

vietnam industry and trade joint stock company” – by Nguyen, T.T.H (2014) argued

very closely about how and how to promote the development of trade finance activities, its role in the development of the country's economy Trade finance is an intermediary stage that connects the production, business and consumption of goods between countries with comparative advantages, and at the same time regulates and effectively uses capital However, with a relatively broad and complex topic, the thesis only stops

at the level of mentioning and solving the most basic issues in international trade finance,

in the areas of capital mobilization, the situation of capital utilization, growth rate and service activities

5.3 Research gap

In the above mentioned dissertations, the concept of trade finance is mentioned a lot, in supporting SMEs, during the covid 19 pandemic and especially in import and export activities, trade finance has become an effective tool to support the national economy of commercial banks

However, these studies only complete the analysis of the surface of the iceberg, commercial banks are an indispensable factor in any market economy and most of the

new researches point to the impact and importance of external factors, and it is not clear the internal strength and potential of the commercial bank itself in the context of international integration is increasingly widespread when the corona virus pandemic broke out

Faced with a situation full of opportunities but also challenges, what VietinBank holds and how can it promote it What the SBV and the authorities have done and can

do to facilitate commercial banks to overcome this crisis

6 Thesis Structure

The thesis consists of three main chapters: (1) Theory of Competitiveness Enhancement

in International trade finance activities at Commercial Banks, (2) Enhancing competitive capacity of Vietnam Joint Stock Commercial Bank for Industry and Trade in International trade finance activities, (3) Recommendations to Enhance competitive capacity in International trade finance of VietinBank

The first chapter explains how the main topic is chosen, especially in the context

of recession in Vietnam currently The introduction part also states aims of the study, research questions, methodology, overview and the organization of the thesis

In the second chapter, Trade Finance concept of Joint Stock Commercial Bank for Industry and Trade VietinBank has been illustrated

The third chapter draw conclusions, limitations of the topic and future research directions

CHAPTER 1:

THEORY OF COMPETITIVENESS ENHANCEMENT

IN INTERNATIONAL TRADE FINANCE ACTIVITIES

AT COMMERCIAL BANKS

1.1 Definitions of Trade finance and Competition

1.1.1 Definition of trade finance

In the current economic context with many conditions for development, commercial activities are also becoming more and more vibrant This is one of the fields surrounded by competition but offers the labor market attractive job opportunities Businesses operating in this field want to have a competitive advantage, customers must always have the top business purpose, providing them with quality products and services, serving demanding needs and consumer diversity In addition, financial issues are also very important to pay attention to in order to realize the purpose of business development, market expansion, and increase competitiveness with competitors operating in the same industry That's why businesses when participating in commercial activities always want to receive support from many sides and trade finance activities have helped businesses solve difficulties when having problems and financial problems

There are many different concepts that define trade finance Firstly, trade finance

is another name for commercial lending, which acts as a payment intermediary between buyers and sellers in business activities This definition is used in commercial banks, and trade finance is considered the main source of income in credit activities of commercial banks Second, trade finance is defined to include measures and forms of direct or indirect financial support for business and production activities in enterprises and economic units in the commercial sector

As mentioned, trade finance activities are very active because of the variety of types of financing for many businesses to choose depending on the purpose of use when registering for trade finance at banks to receive money The most suitable type of consulting in the following types:

- Export/Import trade finance: Support trade activities with the participation of buyers and sellers to bring benefits to both parties at the same time

- Domestic trade finance: Support buying and selling activities within the territory

of Vietnam to meet working capital needs to purchase goods and raw materials for production and business to complete the signed commercial contract

- Foreign trade finance, also known as international financing, serves the purpose

of providing financial support to business units participating in the field of International Trade in some or all stages of the investment process, from production to consumption

of products or provision of services in the world market to make a profit

- Guarantee for goods receipt: That is, the bank stands as the representative to pay for the goods to the buyer so that they can receive the goods and then within the specified time must return to the bank the principal + interest

- Export/Import finance loan: Is a loan package for short-term capital needs of import-export businesses to help businesses minimize exchange rate risk

- By collecting import-export documents: This is a form in which business customers re-authorize the bank to receive, check and notify documents sent by the bank from the exporting enterprise on behalf of the enterprise then pay the money on behalf

of the business as requested

1.1.2 Definition of competition

Competition is a very broad concept, popular in almost different fields of social life, from daily life to economic, political, cultural, and sports fields and there are many different definitions as well as understandings of competition

According to the common understanding shown in the English Language

Dictionary, “competition” is “an event or a race, in which competitors compete for more

or absolute dominance toward theirself”

In economic science, up to now, scientists do not seem satisfied with any concept

of competition Because, competition is an economic phenomenon that only appears and exists in the market economy, including every field, every stage of the business process and associated with all business entities operating in the market Therefore, competition

is seen in many different angles depending on the intentions and approaches of scientists

As the intrinsic driving force in every business entity, the book "Activities to

restrict competition and unwholesome commercial activities" of Unified, Trust for

Consumers (India) has been describes: "Competition in the market is the process in

which suppliers try to compete for customers by different methods "

According to the Business Dictionary, published in the UK in 1992,

"competition" is understood "rivalry between traders in the market to compete for the

same production resources or the same type of customers on their side" The Vietnamese

encyclopedia also explains competition in the economic sense: Competition between producers of goods, traders and traders in the economy in order to win the most profitable production, consumption and market conditions

In the twentieth century, a series of theories of competition came into being, most notably is "competitive advantage" theory of Michael Porter, analyzed and proved

"competitive advantage" and "comparative advantage" are indispensable factors when businesses participate in the international trade process From that theory, it can be drawn that competition is not the rivalry, mutually destructive of the participants but the driving force for the development of the enterprise, with the aim of market share, profit, and reputation,

Competition always exists in any sector, industry, banking as well, domestic and foreign commercial banks always face fierce competition from all competitors in the financial industry, economic, not just among banks However, competition among commercial banks has the following distinct characteristics:

(1) Business in the monetary sector is a very sensitive business sector, affected

by many factors in economics, politics, society, psychology, and cultural traditions… Each of these factors has even the smallest change, which also has a very rapid and strong

impact on the general business environment For example: Just a rumor blowing, even if

it is false, can cause a great shock, even threaten the survival of the entire system of credit institutions A commercial bank with weak operations and low liquidity can also become a burden for many economic organizations and people in the area… Therefore,

in business, commercial banks have to compete to gradually expand their customers, expand market share, but cannot compete at any cost, use all tricks, despite the law to take over competitors Because, if the opponents of other commercial banks are weakened and lead to collapse, the consequences are usually very big, even leading to the collapse of this commercial bank due to a chain effect

(2) Business activities of commercial banks are related to all economic, political

- social organizations, to each individual through savings deposit mobilization, lending

as well as different types of other financial services; at the same time, in their business activities, commercial banks also open accounts for each other to serve common customers Therefore, if a commercial bank has difficulties in business and is in danger

of collapse, it will inevitably affect almost all other commercial banks, not only that, non-bank financial institutions will also be "plagued" This is exactly what commercial banks never want Therefore, commercial banks in business always have to compete with each other to gain market share, but always have to cooperate with each other to aim for

a healthy environment to avoid systemic risks

(3) Because the activities of commercial banks are related to all subjects, to all aspects of social-economic activities, so to avoid the activities of commercial banks that have the risk of system collapse, all central banks of all countries have closely monitored this market and put in place an early warning system to prevent risks Reality has shown expensive lessons, when the Central Bank is indifferent to the unfavorable developments

of the market, resulting in the collapse of the financial and monetary market, causing the collapse of the entire national economy Therefore, the competition in the system of commercial banks cannot lead to weakening and mutual annexation like other types of business in the economy

(4) The activities of commercial banks are related to cash flows, not only within one country, but involving many countries to support foreign economic activities; therefore, business in the commercial banking system is influenced by many domestic and international factors, such as: Legal environment, business practices of other countries, international practices especially, it is strongly influenced by financial infrastructure conditions, in which information technology plays an extremely important role, decisive for the business activities of these banks That also means, the competition

in the system of commercial banks must first be governed by many monetary practices and practices of other countries, the competition must first be based on a technical and technological foundation that meets the requirements of minimum business activities; Because, a commercial bank that opens a type of service to customers must accept competition with other commercial banks operating in the same field, however, in order for this service field to be implemented, it must meet the minimal requirement to financial infrastructure conditions without which it cannot function Obviously, the competition of commercial banks is highly competitive, requiring stricter standards than any other type of business

1.2 Competitive capability in international trade finance at commercial banks 1.2.1 Evaluation criteria for enhancing competitive capability in trade finance

- Firstly, increasing the size of trade finance activities:

The effectiveness of an activity shows the concentration of economic development in both width and depth In which, scale increase is a composite indicator reflecting the bank's development level in terms of breadth

The higher the scale of the trade finance and the larger the growth rate, the greater the growth, competitiveness and development of the bank in the field of trade finance

- Secondly, the diversification level of products and services:

Is an indicator to assess the quality of trade finance activities according to traditional credit method in the research and development of products and services The

quantity and type of products and services provided in the market is also an indicator of the development level of each bank as well as the economy in general

Diversifying banking products and services is considered an inevitable and objective trend for all banks The higher the level of diversification, the more banks can reduce risks, and can survive and develop firmly in the current market economy

- Thirdly, quality products and services:

No matter how many banks promote their products with high quality, but if they

do not receive the support and acceptance of consumers, it does not mean anything This

is a core characteristic for leaders to plan their product quality policies, goals, and strategies Accordingly, we must stand from the point of view of consumption, put our position in the position of the consumer, take the satisfaction of customers' needs as a measure of quality to bring about the most reasonable product quality level Product and service quality indicators show the ability and level of satisfying consumer demand with high efficiency in certain conditions

- Finally, risk management in trade finance activities:

The main goal of banks when providing financial products and services is profit But in today's fiercely competitive market economy, along with the complexity of operations, the success and efficiency of banks' financing activities are threatened, affected by many subjective and objective factors

Therefore, good risk control creates a premise for banks to be able to develop business activities and trade finance effectively It can be said that risk control is one of the indicators reflecting the quality of trade finance activities in terms of the depth of the bank when participating in providing products and services

1.2.2 Necessity of enhancing competitive capability in international trade finance

at commercial banks

When developing trade finance business, first of all, commercial banks can significantly increase their revenue and profits through interest and service fees The revenue is not a small number because the value of the sponsorship signed in the contract

is also quite high

Another point is that trade finance helps commercial banks limit risks and ensure safety Limiting risks when limiting the situation of pouring capital into unfeasible projects when using capital for the wrong purpose with sponsor applicants Ensure safety because trade finance can control all activities through the payment account

Third, trade finance helps commercial banks expand their cooperative relationships with foreign commercial banks and gain access to the global financial-banking market, especially international trade finance Since then, commercial banks have more conditions to strengthen their position and reputation in the market, always full of vitality to participate in the financial process in banking and integrate with the domestic economy Therefore, enhancing competitive capability in trade finance is urgent and necessary

Trade finance is not only a collective term that includes a variety of financial products that banks or companies use to conduct commercial transactions, but also is considered a useful tool for international trade enterprises, helping import and export businesses to trade conveniently

Trade finance is extremely active, so the types of sponsorship are also extremely diverse such as:

- Trade finance for export/import

- Domestic trade finance

- International trade finance

- Guarantee to receive goods

- Loan to finance export/import

- Import and export documentary collection

The trend of globalization promotes strong growth of international trade, from which banks are increasingly stepping up to provide trade finance products So what role does trade finance play:

- Helping businesses quickly get financial resources to invest in production and business through commercial credit loans

- Helping businesses to quickly increase the turnover of capital, thereby improving production and business efficiency, increasing revenue and profit

- Trade finance products of banks contribute to improving the prestige and competitiveness of enterprises, making negotiations easier and more convenient when signing international goods trading contracts

- Trade finance helps businesses reduce risks related to politics, interest rates, exchange rates, payments, etc when doing international trade These risks are borne by the trade finance banks

In general, trade finance products of banks are useful tools to help businesses trade more easily internationally

1.2.3 Factors affecting the competitive capability in trade finance

1.2.3.1 External factors

Firstly, Government policy on trade finance activities

The import-export guidance and support policies are properly oriented, in line with the country's economic situation and regional and global fluctuations, especially the fluctuations of the commodity market, then it will open up possibilities and opportunities for businesses operating in the import-export field in expanding and accessing international markets, receiving great funding from banks Banks in this condition will

be able to expand trade finance credit activities along with safety and efficiency because most of the projects, production and business plans of import and export enterprises have good orientation from the Government - basis to ensure high feasibility

Thus, the monetary as well as forex management policies of the State have a profound and wide influence, determines the scale and effectiveness of commercial finance credit of commercial banks

Secondly, domestic and abroad economic, political and social environment

This is one of the important factors that have a strong impact on all economic activities in general and import-export activities in particular:

- Economic factor: Economic conditions in the region that banks serve greatly affect the size and effectiveness of credit in general and Trade Finance credit in particular A stable economy will create favorable conditions for credit expansion and high efficiency On the contrary, if the economy is not stable, the factors of high inflation and crisis will make the credit capacity and loan repayment ability fluctuate greatly

Only when the subjects participating in the credit relationship understand and strictly comply with the law, the credit relationship will bring benefits to both and the credit efficiency will be high, expanding the credit scale

1.2.3.2 Internal factors

Firstly, financial capacity:

The financial capacity of commercial banks is reflected in the following factors:

- Equity capital:

Theoretically, charter capital and own capital are playing a very important role in banking activities High charter capital will help the bank create a reputation in the market and create trust in the public Low equity means weak financial strength and low risk tolerance of the bank According to the regulations of the Bassel Committee, the equity capital of commercial banks must reach at least 8% of the total convertible assets

of that bank It is a safe condition for the bank's business activities

- Scale and ability to raise capital:

The ability to mobilize capital is one of the criteria to evaluate the business performance of banks The ability to raise capital also shows the efficiency, capacity and reputation of that bank in the market The ability to raise capital well also means that the bank uses effective products and services, or capital mobilization tools, to attract customers

- Liquidity:

According to international standards, a bank's solvency is expressed through the ratio between its "current" assets that can be paid immediately and its "Liabilities" that are immediately payable This indicator measures the ability of banks to meet the cash needs of consumers When depositors' demand for cash is limited, the reputation of that bank is significantly reduced, resulting in the bank's bankruptcy if this happens

ROE: represents the rate of return of a dollar of equity

The risk level of a bank is usually measured by the following two basic criteria:

Capital adequacy ratio (CAR)

CAR is the ratio of equity to total assets with conversion risk (according to Basel Credit Supervision Committee) According to international standards, the CAR must be

at least 8% The higher this ratio, the stronger the bank's financial ability, the greater the credibility and trustworthiness of customers with the bank

Credit quality (overdue debt ratio)

Credit quality is mainly reflected in the ratio of overdue debt to total debt If this ratio shows that the credit quality of that commercial bank is good, the financial situation

of that bank is healthy and vice versa, the financial situation of that commercial bank should be concerned

Diversity of products and services

With the unique characteristics of the banking industry that products and services are almost no different, commercial banks promote their competitiveness not only by basic products but also by their uniqueness, variety of its products and services

A bank that can differentiate its products on the basis of traditional products will make its product portfolio more diversified, which will satisfy most different needs of

different customers, thereby easily occupying the market share and increasing the competitive strength of the bank

In addition, commercial banks also use other complementary products and services to attract customers and generate income for the bank such as providing periodic statements, financial advice, etc

Human Resources

In a service business like commercial banks, the human factor plays an important role in showing the quality of the service The bank's staff is the person who directly gives customers the feeling about the bank and the bank's products and services, and creates customers' trust in the bank Those are the important requirements for the bank's staff, thereby helping the bank capture market share as well as increase business efficiency to improve its competitiveness

The competitiveness of human resources of commercial banks must be considered

in terms of both quantity and quality of labor

* Quantity of labor:

To be able to expand their network to increase market share and serve customers well, commercial banks must have a sufficient workforce in number However, it is also necessary to compare this indicator in relation to the network system and business performance to see the labor productivity of employees in the bank

* Quality of labor:

The quality of human resources in the bank is reflected in the following criteria:

- Cultural level of the workforce: including education level and supporting skills such as foreign languages, informatics, communication ability, presentation, decision

making, problem solving, This criterion is quite important because it is the foundation showing the ability of employees in the bank to learn and grasp the job to perform well

- Management skills for operators; Professional qualifications and professional performance skills for employees: this is an important criterion that determines the quality of services that the bank provides to customers Commercial banks need a team

of good executives to help the apparatus operate effectively and a staff with high professional skills, able to advise customers to create trust with customers and impressive about the bank These are the key factors that help banks compete for customers

Thus, the quality of human resources plays an important and decisive role in the competitiveness of a commercial bank The quality of human resources is the result of the competition in the past and at the same time the competitiveness of the bank in the future Having a good team of executives and employees who are able to create and execute strategies will help the bank operate stably and sustainably It can be affirmed that the human resources are sufficient in quantity and full in quality, which is a manifestation of the high competitiveness of commercial banks

Technology Capabilities:

In the banking sector, the application of technology is one of the factors that create the competitive strength of commercial banks To improve the quality of products and services to meet all customer requirements, technology needs are extremely important Technology will contribute to creating unique and more convenient changes, it helps commercial banks Today, commercial banks are developing high-tech application products, and using technological translation products as a measure of competition, especially in the field of payment and other electronic products and services

In the international forum "banking vietnam" affirms that the use of information technology is the main tool to affirm the competitiveness of commercial banks, the

development of E-banking products and services is a trendy trend, technology is the factor that makes the difference between commercial banks in business

Banking management capacity:

An important factor determining the success or failure of any business is the role

of business leaders, whose decisions affect the entire operation of the business

The management, control and administration capacity of leaders in the bank plays

a very important role in ensuring the efficiency and safety in banking operations The leader's vision is a key factor for the bank to have a sound business strategy in the long term Usually, when assessing the management, control and administration capacity of a bank, people consider and evaluate the standards and strategies that the bank has built for its operations High operational efficiency, growth over time and ability to overcome uncertainties are proofs of the bank's high governance capacity

Some criteria showing the bank's governance capacity are:

- Business strategy of the bank: including marketing strategy (building reputation, brand), market segmentation, product and service development,

- Organizational structure and ability to apply effective banking management methods

- Growth in the bank's business results

Reputation, prestige and ability to cooperate:

Operating in the banking sector is always associated with the prestige factor of that commercial bank, consumer psychology is always the decisive factor for the survival

of commercial banks' operations with the chain effect due to the psychology of the consumers Therefore, the reputation and prestige of commercial banks is a huge internal force factor, it determines the success or failure of that bank in the market Increasing