CHAPTER 1 OVERVIEW OF VIETNAM’S COMMERCIAL BANKS OPERATION

Chapter expected learning outcomes  Review the basic knowledge about commercial banks  Understand the concept and characteristics of Vietnam’s commercial banks  Evaluate the effectiveness of service sectors at commercial banks  Understand the operation of commercial bank deeply  Understand the legal requirements for banking activities in Vietnam Overview of Commercial Bank Definion:  Commercial bank means a type of bank which may conduct all banking operations and other business activities for profit.  Banking operations means the trading in and regular provision of one or some of the following services:  Deposit taking;  Credit extension:  Via-account payment.

CHAPTER 1 OVERVIEW OF VIETNAM’S COMMERCIAL

BANKS OPERATION

Chapter expected learning outcomes

 Review the basic knowledge about commercial banks

 Understand the concept and characteristics of Vietnam’s commercial banks

 Evaluate the effectiveness of service sectors at commercial banks

 Understand the operation of commercial bank deeply

 Understand the legal requirements for banking activities in Vietnam

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References

 Commercial banking operation textbook

 Law on credit institutions (Law No 47/2010/QH12 and No 17/2017/QH14)

 Circular stipulating minimum safety limits and ratios for transactions performed by credit institutions and branches of foreign banks (No 36/2014/TT-NHNN) and related documents

 Decision on the issuance of regulation on the debts classification, provisioning and use of provisions

against credit risks in the banking activity of credit institutions (No 493/2005/QD-NHNN) and related documents

Overview of

Commercial

Banks

Commercial banking operations Content

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Influence of the

legal environment on the operation of commercial banks

Overview of Commercial Bank

Definion:

 Commercial bank means a type of bank which may conduct all banking operations

and other business activities for profit

 Banking operations means the trading in and regular provision of one or some of the following services:

 Deposit taking;

 Credit extension:

 Via-account payment

Overview of Commercial Bank

Characteristics:

 A traditional bank type

 Implement the most diversified financial services compared to other types of banks: Receive deposits, mobilize capital by issuing valuable papers, lending, providing trust, guarantee and financing services for trading, trading foreign exchange, international banking services, payment and treasury services

=> This is full service Bank

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Overview of Commercial Bank

Overview of Commercial Bank

 Based on ownership:

 State – owned commercial banks

 Joint – stock commercial banks

 wholly foreign – owned banks

 Joint - venture banks

 Foreign banks’branches and Representative Offices of Foreign Banks

 Based on business strategy:

 Retail bank

 Wholesale bank

 Based on organizational relationship:

 Bank head office

 Bank branch level 1,2, transaction office

Overview of Commercial Bank

Functions of commercial banks:

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Financial intermediaries

Commercial Banks

Borrowers (organization, individual)

Functions of commercial banks

 Payment intermediation and management of payment facilities: Commercial banks act as cashiers for businesses and individuals,

making payments at the request of

customers

 promoting goods circulation, saving

circulation costs, creating a foundation for

commercial banks to perform lending

operations

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Functions of commercial banks

 Create money

Major activities of commercial banks

 Capital mobilization activities:

 Receive deposits from organizations and

individuals

 Release valuable papers

 Borrowing from domestic and foreign credit

institutions

 Short-term loan from the SBV

 Credit granting activities:

 Loan Guarantee

 Discount Financial leasing…

 Factoring

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Major activities of commercial banks

 Payment and treasury service activities:

 Provide payment facilities

 Cash collection and payment: collection and

payment

 Payment services to join the domestic and

international inter-bank system

 Other activities:

 Investment

 Trading in Foreign exchange

 Trust and receive trust

 Finance support

KEY STATISTICAL INDICATORS (Q1/2019)

Categories of CIs Total

Assets

Regulatory capital

Charter Capital CAR

term funds/ long- term loans

%Short-State-owned banks 4.929.765 282.199 149 9,61 30,99 Vietnam Bank for Social Policies 204.785 13.893

Joint stock commercial banks 4.629.867 352.305 268.87 11,10 31,52

Joint venture, 100% foreign-owned

banks, foreign banks'branches 1.124.962 177.037 116.62 25,90

-Finance and leasing companies 173.849 36.315 26.42 20,91 29,43 Cooperative bank 33.179 3.939 3.027 19,21 28,56 People's Credit Funds 118.270 4.548

Total Assets of the credit

institutions in Vietnam (Q1/2019)

18

Charter capital of Vietnam’s commercial Banks

(VND Billion, 2018)

WHOLLY FOREIGN – OWNED BANKS

20

No Name of Banks Address Charter capital

Number of branches & transaction centers

Credit growth (9/2019)

22