The development of international payment at vietnam joint stock commercial bank for industry and trade thanh xuan branch

13 1.2.2 The indicators reflect the development of international payment...14 1.2.3 Factors affect international payment operations...17 CHAPTER 2: CURRENT SITUATION OF THE DEVELOPMENT O

NATIONAL ECONMICS UNIVERSITY

EXCELLENT EDUCATION PROGRAM

Student’s ID : 11162720Supervisor : Dr Phung Thanh Quang

Hanoi, 2020

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STATUTORY DECLARATION

I herewith declare that I have authored the present thesis independentlymaking use only of the specified literature Sentences or parts of sentences quotedliterally are marked as quotations; identification of other references with regard tothe statement and scope of the work is quoted The thesis in this form or in anyother form has not been submitted to an examination body and has not beenpublished

Hanoi, … /…… / 2020 Author’s signature

NGUYEN THI MINH LE

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First and foremost, I would like to express profound gratitude to my researchsupervisor, Dr Phung Thanh Quang for his invaluable support, encouragement,supervision and useful suggestions throughout this project work Without hisassistance and dedicated involvement in every step throughout the process, thispaper would have never been accomplished I would like to thank you very muchfor your support and understanding over these past two months

I am also grateful for my instructor, Miss Cao Phuong Nhung and the Largecorporate customer Department for providing me an opportunity to do myinternship and project work in Vietinbank Thanh Xuan Branch

Last but not least, I am thankful and indebted to all those who helped medirectly or indirectly in completion of my bachelor’s thesis

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TABLE OF CONTENTS

ABBREVIATIONS ……… ….

……… i

LIST OF TABLES0……….……… ……… ii

LIST OF FIGURES0……… ……….……… ii

INTRODUCTION 1

CHAPTER 1: THEORETICAL BASIS OF INTERNALTIONAL PAYMENT AT COMMERCIAL BANKS 3

1.1 INTERNALTIONAL PAYMENT AT COMMERCIAL BANKS 3

1.1.1 Overview of international payment 3

1.1.1.1 Definition of international payment 3

1.1.1.2 Characteristics of international payment 4

1.1.2 The roles of international payment 5

1.1.2.1 The roles of international payment to commercial banks 5

1.1.2.2 The roles of international payment to the economy 6

1.1.3 International payment operations 8

1.1.3.1 Main tools used in international payment 8

1.1.3.2 Terms of international payment 9

1.1.3.3 Methods of international payment 11

1.2 DEVELOPMENT OF INTERNATIONAL PAYMENT OF COMMERCIAL BANKS 13

1.2.1 The concept of developing international payment of commercial banks 13 1.2.2 The indicators reflect the development of international payment 14

1.2.3 Factors affect international payment operations 17

CHAPTER 2: CURRENT SITUATION OF THE DEVELOPMENT OF INTERNATIONAL PAYMENT AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE- THANH XUAN BRANCH 21

2.1 OVERVIEW OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE -THANH XUAN BRANCH 21

2.1.1 History of establishment and development of Vietnam Joint Stock Commercial Bank for Industry and Trade – Thanh Xuan Branch 21

2.1.2 Organizational structure 22

2.1.2.1 Organizational chart 22

2.1.2.2 Tasks of the departments 22

2.1.3 Business operations of Vietinbank - Thanh Xuan Branch 26

2.1.3.1 Capital mobilization activities 26

2.1.3.2 Credit operations 26

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2.1.3.3 Payment activities and funds 28

2.1.4 Business situation at Vietinbank - Thanh Xuan Branch 29

2.2 CURRENT SITUATION OF INTERNATIONAL PAYMENT OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE 32

2.2.1 Organizational structure of international payment activities at Vietinbank - Thanh Xuan Branch 33

2.2.2 The situation of international payment under the import-export structure .34

2.2.2.1 International payment methods at Vietinbank Thanh Xuan 34

2.2.2.2 Customer structure of international payment transactions at the branch 38

2.2.3 The development of international payment activities through a number of indicators 39

2.2.3.1 Quantitative indicators 39

2.2.3.2 Qualitative indicators 42

2.3 EVALUATION OF DEVELOPMENT OF INTERNATIONAL PAYMENT ACTIVITIES AT VIETINBANK - THANH XUAN BRANCH 44

2.3.1 Advantages 44

2.3.2 Drawbacks 45

2.3.3 Reasons of drawbacks 47

2.3.3.1 Subjective reasons 47

2.3.2.3 Objective reasons 48

CHAPTER 3: SOLUTIONS FOR DEVELOPING INTERNATIONAL PAYMENT AT VIETNAM INDUSTRIAL AND COMMERCIAL BANK - THANH XUAN BRANCH 51

3.1 OPPORTUNITIES AND CHALLENGES OF VIETINBANK - THANH XUAN BRANCH 51

3.1.1 Opportunity 51

3.1.2 Challenges 51

3.2 ORIENTED DEVELOPMENT 52

3.2.1 Business development orientation 52

3.2.2 Development orientation of international payment activities 53

3.3 SOLUTIONS TO DEVELOP INTERNATIONAL PAYMENT 54

3.3.1 Improving the qualifications of staff 54

3.3.2 Improving and renewing technologies for international payment activities 55

3.3.3 Improving the quality and developing a range of related services 56

3.3.4 Strengthening marketing activities 57

3.3.4.1 Building broad strategy to attract customers 57

3.3.4.2 Improving promotion 58

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3.3.5 Building a reasonable customer policy 58

3.3.6 Improve the quality and diversify international payment services 59

3.3.6.1 Improving the quality of international payment 59

3.3.6.2 Diversifying Payment Services: 60

3.2.7 Perform good consulting services for customers 60

3.4 RECOMMENDATIONS 60

3.4.1 For the Government 60

3.4.2 For the State Bank 61

3.4.3 For the headquarter 63

CONCLUSION 65

REFERENCES 66

COMMENT……… 73

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LIST OF TABLES

Table 2.1: Main targets of Vietinbank Thanh Xuan in 2017 – 2019

Table 2.2: Revenue, expense and profit of Vietinbank-Thanh Xuan Branch in 2019

2017-Table 2.3: Export payment activities at Vietinbank Thanh Xuan

Table 2.4: Import payment activities at Vietinbank Thanh Xuan

Table 2.5: Quantitative indicators reflecting the development of internationalpayment activities

Table 2.6: Quality target of international payment at Branch

LIST OF FIGURES

Firgure 2.1: Organizational chart of Vietinbank Thanh Xuan

Figure 2.2: International payment structure at Vietinbank Thanh Xuan 2017-2019Figure 2.3: Payment structure according to different payment methods

Figure 2.4: Customer structure of international payment transactions

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1 Urgency of research topics

In the trend of world development today, international economic relationstake place very excitingly, which leads to the complex diversity of internationalgoods circulation as well as the movement of cash flows in payments The paymentprocess has an important role for the operation of businesses, organizations andindividuals in particular and the economy in general

International payment takes place in a wide and complex market due to thegap between buyers and sellers, the laws of each country and the difference in thecurrency of payment Most businesses, organizations and individuals cannot makeinternational payments by themselves Therefore, the demand for paymentassistance is made by commercial banks

International payment activities are an integral part of the commercial bank'sbusiness operation chain and increasingly prove its position and important role.Nowadays, modern banks are multipurpose activities to increase income not onlyfrom traditional banking operations, but also to expand off-balance sheet operationssuch as international payment, foreign exchange business, and guarantee Off-balance sheet activities bring income to banks in the form of increasing fees notonly in quantity but also in proportion However, off-balance sheet activities arealso potentially risky, especially when some people think off-balance sheetactivities bring attractive income, but banks do not have to invest capital, whichmakes them subjective and inconsistent face the potential risks In off-balance sheetbusiness, international payment is an important business with high growth rate,bringing increasing fees for commercial banks

Vietnam Joint Stock Commercial Bank for Industry and Trade -Thanh XuanBranch (Vietinbank Thanh Xuan) is a highly reputable bank in the area As acommercial bank, it has the advantage of providing international payment services

in the locality However, the scale of international payment at Vietinbank - ThanhXuan branch is still small, the quality of international payment is low, the products

of international payment services are mainly traditional services, many modernoperations have not been applied, few customers use international payment

Therefore, it is necessary to find solutions to develop international paymentactivities atVietinbank Thanh Xuan From the urgency and usefulness of theproblem, through the research process at Vietinbank Thanh Xuan and with the

learned knowledge, the author chose to study the topic: “The development of

international payment at Vietnam joint stock commercial bank for industry and trade- Thanh Xuan branch”.

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2 Objectives of the study

 Systematize theoretical issues on developing international paymentactivities of commercial banks

 Analyzing the status of developing international payment activities overthe years by Vietinbank Thanh Xuan branch, thereby drawing out achieved results,limitations and causes

 Proposing and proposing solutions to develop international paymentactivities at Vietinbank Thanh Xuan branch

3 Research subject and scope

 The object and scope of the study is the development of internationalpayment activities at Vietinbank Thanh Xuan

 The report focuses on assessing the status of development of internationalpayment activities at Vietinbank Thanh Xuan during 2017-2019

4 Research Methodology

The report uses the method of analyzing economic information according tonorms, the method of comparison, synthesis, method of analyzing tables andgraphs based on the statistics of Vietinbank Thanh Xuan during the period of

2017 - 2019

5 The structure of the report

In addition to the Introduction, Conclusion, the report is structured into 3chapters, including:

Chapter 1: Theoretical basis of international payment at commercial banks Chapter 2: Current situation of the development of international payment at Vietnam Joint Stock Commercial Bank For Industry And Trade- Thanh Xuan Branch

Chapter 3: Solutions for developing international payment at Vietnam Industrial And Commercial Bank - Thanh Xuan Branch

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CHAPTER 1: THEORETICAL BASIS OF

INTERNALTIONAL PAYMENT AT COMMERCIAL

BANKS

1.1 INTERNALTIONAL PAYMENT AT COMMERCIAL BANKS

1.1.1 Overview of international payment

1.1.1.1 Definition of international payment

International relations among countries are manifested in many fields, such aseconomy, politics and foreign affairs exchange, culture, science and technology

in which economic relations, mainly foreign trade, occupy the leading position,which is the basis for other international economic relations to exist and develop.The process of international activities leads to the need for payment and paymentbetween owners in different countries, from which international payment activitiesare formed and developed In particular, the bank is an intermediary bridge betweenthe parties

“International payment is the performance of payment obligations and monetary benefits arising on the basis of economic and non-economic activities between organizations, countries, or between a country and international organizations, through the relations among the banks of the related countries” (Source:PGS TS Phan Thị Thu Hà (2013),Giáo trình Ngân hàng thương mại, NXB Đại học Kinh tế quốc dân.)

From the above concept, international payments serve both economic andnon-economic activities In practice, however, these two areas of activity oftenintersect and do not have a clear boundary Moreover, international paymentactivities are formed on the basis of foreign trade activities and primarily serveforeign trade activities Therefore, in payment regulations, international payment

activities are often divided into two clear areas: foreign trade and non-foreign

payments.

Foreign trade is the payment made on the basis of import and export goodsand commercial services provided to foreign countries at international marketprices The basis for parties to buy, sell and pay for each other is foreign tradecontract

Non-foreign trade payment is the payment made not related to import andexport goods as well as labor supply to foreign countries, that is payment for non-commercial activities

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1.1.1.2 Characteristics of international payment

Compared to domestic payment, international payment has some following characteristics:

International payment is governed by international laws and practices.

International payment activities involve entities in two or more countries, sothose involved in international payment activities are governed by national laws, butalso must comply with international legal documents The International Chamber ofCommerce has issued UCP, URC, INCOTERMS, etc., inorder to establish a fairand equal legal framework for entities involved in international trade and paymentactivities, avoiding unfortunate misunderstandings

Payment refers to the currency, location, means, methods and time of payment

When conducting international payment activities, it is necessary to clearlyidentify five important issues including currency, location, means, payment methodand time The selection of any currency in the international payment is importantbecause not all currencies has the ability to implement international payment, butthe required currency must be strong and recognized by countries in theinternational payment activities After that, the selection of currency to match withthe specific content of the international payment activities to bring the dependenteffect and the following factors: quick payment, minimize risks to the minimum,meet the mutual benefits, etc., Therefore, when signing commercial contracts,credits or services, negotiators often agree on the currency used in the transaction,which is the currency of the importing country, the exporting country or the thirdcountry

 International payment activities are carried out largely through the banking system.

Except for a very small number of import and export goods traded throughnon-quota ways, most of the country's import and export turnover is reflected in theinternational payment turnover of the commercial banking system In practice,exporters and importers are not allowed to make direct payments to each other butare legally required to pay via the banking system Paying through bank ensurespayments are made safely, quickly and efficiently

International payment mainly serves external economic activities

International payment mainly serves foreign economic activities, of which,most of them are for foreign trade transactions Payment is one of the importantstages in the production and circulation of goods, so when the payment takes place,

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it means ensuring a sure end of a part or the whole of an exchange process goodsand services The value of goods and services exchanged between entities indifferent countries is implemented and contributes to promoting foreign tradedevelopment only when international payment is well organized Therefore,international payment has become an important factor to evaluate the effectiveness

of foreign economic activities in the context of increasingly expanded internationalrelations

International payment activities are often at risk due to currency fluctuations

Unlike domestic payments, international payments are often at risk due tocurrency fluctuations, a country's political instability, differences in laws, policymechanisms, and geographical locations of the parties involved limits theunderstanding of the solvency of the importer Therefore, the bank's guaranteeoperations, credit activities of monetary organizations were born as a weak factor.Indispensable factors to support international settlement activities

1.1.2 The roles of international payment

Today, in the trend of globalization, while the economy and international tradeare growing, international payment has also become an essential and indispensableactivity of commercial banks Obviously, the international payment activities ofcommercial banks are an indispensable link in the whole line of implementing aforeign trade contract

1.1.2.1 The roles of international payment to commercial banks

Developing international payment to help commercial banks attract more customers and expand the market

In the process of participating in international payment activities, customersalso want to meet many other needs of the bank's services such as financing importand export contracts, payment guarantee for contract performance, foreign currencytrading, etc This will enable the bank to develop foreign exchange, guarantee andother international services, thereby helping commercial banks increase the number

of customers and expand the business market

Developing international payment to facilitate for commercial banks to increase their revenue and profits

As the number of customers increases, the benefits of the bank will increase.Not only did the bank's revenue significantly grow thanks to fees collected fromproviding more services to its customers, but it also supported other activities of the

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bank Moreover, the bank has conditions to raise the mobilized capital, facilitate theexpansion of credit scale, especially, the bank can increase foreign currency capital

by temporarily managing the idle capital of businesses transact via the bank

Therefore, international payment activities directly improve the bank'srevenue and profits, as well as support and complement other activities, thus, itindirectly generates profits from its operations

 Developing international payment to open way for the expansion of banking scale and network

International payment helps the bank satisfy customers' demands better,thereby enhancing its reputation in the international market In addition to workingwith documents or issuing money order orders, commercial banks also show a duty

of responsibility in advising customers to prepare the perfect set of documents

International payments help the bank's operations go beyond the nationalscope, integrate with other banks in the world, enhance the bank's reputation in theinternational arena, help develop agent relationships, exploiting the capital sources

of foreign banks and capital sources in the world financial market in order to bettermeet the needs of socio-economic development capital

 Developing international payment to reduce risk

Banking business is the riskiest business, especially in the context when theworld economy is always volatile, frauds are increasingly sophisticated Indeed,banks incur more and more risks such as credit risk, interest rate risk, exchange risk,liquidity risk, technology and operational risk, and national risk Diversifyingbusiness and service sectors is an effective way to disperse these types of risks.Profits earned from international settlement activities will support banks when themarket fluctuates, helping banks maintain stability The import and export businesshave inherent risks, so it requires the international payment center to carry outcarefully from the stage of information acquisition, processing to feedback To meetthat requirement, banks are required to renovate technology, well organize theinternational payment process from technical equipment to training experts, and inthe fierce competition environment, banks are also important pay attention to pricefactor (service charge) to attract customers

1.1.2.2 The roles of international payment to the economy

In the trend of increasingly global economic integration, countries are striving

to develop a market economy, openness, cooperation and integration, internationalpayment is applied as a bridge between the domestic economy and the outside

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world economy International payment has a great role to the economy, specifically

 International payment facilitates for the development of goods and services

Through the international settlement service, business entities can buy andsell goods and services That ensures the reproduction process is carried outnormally, the circulation of goods and services is smoothly Therefore, without thedevelopment of international payment, the production and circulation of goodscannot be improved Moreover, the international payment contributes to theexpansion of consumption capacity, the beneficiary level of individuals andbusinesses' enjoyment, the promotion of production and the expansion of thedivision of labor in society

 International payment help connect the domestic economy with the world economy

Along with the development of social division of labor and the advancement

of science and technology, the international payment network has been increasinglyexpanded, and at the same time, the interdependence among countries has beenpromoted Therefore, it is clear that the international settlement has existed for along time, it exists as an objective factor and its development is associated with thedevelopment of human civilization

 International payment is the basis for expanding and promoting external economic relations, contributing to the integration process

International payment has fully exploited the comparative advantages of eachcountry, reaches the maximum scale for each manufacturing industry, createfavorable conditions for building key economic sectors, improve labor productivityand lowering costs of products, promote in-depth development factors, exchangeand quickly apply new technologies, attract investment from outside and improvethe growth rate and efficiency of the national economy

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1.1.3 International payment operations

1.1.3.1 Main tools used in international payment

In order to conduct international payment operations in a convenient and effective manner, the parties involved in the payment must select and use one of themeans of payment

 Bill of exchange

In accordance with Uniform Law for Bill of Exchange, a bill of exchange is

an unconditional payment order issued by one person to another, asking that person

to receive a bill of exchange, or up to a specified date on the bill of exchange mustpay a certain amount to someone, or by order of one person to another person, or tothe holder of the bill of exchange

Characteristics of the bill of exchange:

 Compulsory payment: The person who is obliged to pay cannot give anyreason to refuse to pay the amount stated in the draft (except when the draft iscontrary to the law governing it)

 Abstraction: the bill does not specify the reason for arising the draft, onlythe amount payable

 Circulation: the bill of exchange is transferable one or more times withinits term

According to the international covenant on cheque signed in Geneva in 1931,

a cheque is an unconditional payment order of the account holder asking the bank todeduct from his account to pay the beneficiary (whose name is on the cheque or thecheque holder) a certain amount of money

With the concept of cheque as above, the following conditions must be met inorder to use this means:

 The user of the cheque must be a customer of the bank with money on theaccount opened at the bank

 The amount on the cheque is in the account balance

 The check is the bank's signature delivered to the customer for use, so thecheck is printed on the form, the drawer must write fully and accurately the contents

on the check

The beneficiary of a cheque must transfer to the cheque drawer's bank withinthe validity period of the cheque.Cheques are used not only domestically but alsowidely in international payments for goods, labor, services and other non-tradepayments

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 Promissory note

A promissory note is a payment commitment written by the debtor to pay thebeneficiary With such passivity in payment, promissory notes are rarely used ininternational payments

 Payment cards

A payment card is a non-cash payment instrument issued by the bank andprovided to customers to use for their common purpose of paying for goods,services or cash withdrawals at automatic counters This instrument is not only used

in domestic payment but also widely used in international payment

Payment card is a form of payment for application of high-tech electronictechnology which is normally issued by a certain organization upon the request andaffordability of customers Particularly, the card enables users to make theirpayments quickly, conveniently, accurately and securely

When making international payment, the place that accepts card paymentmust sign the card payment contract with the international card payment center andmust use specialized equipment in payment

1.1.3.2 Terms of international payment

When negotiating with the buyer, the seller needs to determine the detailed terms of payment to be included in the sale contracts This can be a complicated process in which, initially, both parties could have different views For more

complex transactions, new buyers or countries with an increased political risk, the terms of payment are often among the last areas to be agrees

In order to enter negotiations, it is essential to know what details the terms if payment must contain and what minimum requirements the sellers must adhere to inorder to maintain the expected level of security These necessary minimum

requirements are as follows:

 Time of payment

The payment period specifies the time limit for the importer to pay to theexporter in accordance with the foreign trade contract Fast or slow payment timeshave an impact on capital turnover as well as the ability to limit risks on factorssuch as interest rates and exchange rates There are usually three ways to set apayment period: prepayment, immediate payment and post-pay

 Currency of payment

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Monetary conditions provide for the use of a country's monetary unit tocalculate and pay in international payment contracts, and also deal with changes inthe value of currencies in the process of performance of goods import-exportcontracts and payment.

There are many ways to classify currencies used in contracts Based on theexistence of currencies, there are two types: cash and book money or bank transfer.Meanwhile, based on the purpose of using monetary instruments in payment, it can

be classified into two types: calculation currency and payment currency On theother hand, based on the scope of use of currencies, they include world currencies,international currencies and national currencies The use of which currency is thepayment in the foreign trade contract It depends on many factors such as comparingthe correlation of position between the two buyers and the position of the paymentcurrency in the international market

When making payment, each party wants to use their own currency becausethere are many advantages such as to enhance the prestige of its currency in theworld market, not to use foreign currency to pay foreign debts or to avoid it risksdue to sudden fluctuations in foreign currencies However, in order to decide onwhich currency to use, attention should be paid to its ability to guarantee foreignexchange

Conditions to ensure foreign exchange: In order to ensure the real value ofthe income from foreign trade contracts as well as minimize the losses caused bythe frequent fluctuations of exchange rates on the market, It is possible to agree onthe conditions of contractual exchange assurance This includes gold guarantee,foreign exchange guarantee and money basket guarantee

 Place of payment

In international payment between countries, each party wants to pay in theirown country, taking their country as a payment place because there are manyadvantages such as their country's banks obtaining professional fee procedures orimprove the position of its currency market in the world

In foreign trade payments, the payment place may be in the importingcountry or in the exporting country or in the third country But in fact, thedetermination of the payment location is due to the force comparison between thetwo sides decided, and at the same time, using the currency of payment of anycountry, the payment location is usually that country

receive goods for delivery When making a contract, one can choose many differentpayment methods to collect money or pay, but the choice of any method must comefrom the seller's request that is to collect money quickly, full and on-time.

1.1.3.3 Methods of international payment

International payment method is the whole process and conditions for buyers

to pay and receive goods, while sellers receive and buy goods in international trade

In fact, the conditions for goods delivery and payment parties are apparentlydiverse The selection of the appropriate payment method must be discussed andagreed by both exporting and importing sides in the foreign trade contract

 Bank remittance

Money transfer is the simplest international payment method that the payerrequires the bank to transfer a certain amount to the beneficiary according to theauthorization letter This form of payment has different implementation times andsecurity, so the cost is also different When making a transfer, the bank only acts as

an intermediary of payment according to the mandate to gain fees and is not bound

to any responsibilities to the sender and the beneficiary

In payment by money transfer, whether or not to pay depends on thegoodwill of the buyer After receiving the goods, the buyer may not transfer money,

or intentionally extend the time of money transfer in order to appropriate the seller'scapital, thus making the rights of the seller not guaranteed Because of thisweakness, in foreign trade, money transfer is usually only applied in cases wherethe buyers are reputable and have a close relationship

 Collection of payment

Collection of payment is an international payment method in which theexporter, after delivering goods or providing a service to the importer, will issue abill of exchange, asking the bank to collect the amount stated in draft

Under the collection of payment, banks participate in a more extensive andcomprehensive payment process than the remittance method The level ofinvolvement of banks in the collection process depends entirely on the content ofthe instructions and what the seller authorizes the bank to serve for his collection

It is worth noting that regardless of the content, scope or instructions given

by the seller and the extent of the bank's participation in the collection, the bankmust always follow the international standard rules (Uniform Rules ForCollections)

According to different standards for classification of collection:

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 Based on how it is done: Electricity collection and mail collection.

 Based on professional content: Clean Collections and Documentarycollection

 Based on payment time: Documents against accept - D/A and Documentsagainst payments - D / P

 Letter of credit

Letter of credit is a method of payment in which a bank undertakes to pay acertain amount to the beneficiary or accepts a bill of exchange issued by that persononly if this person presents a set of payment documents in accordance with theprovisions of the letter of credit

 The advising bank: A bank that issues L/C notices to the Beneficiary

 The confirming bank: A bank that complements its confirmation to theL/C at the request or under the authorization of the issuing bank

 The paying bank: A bank open a letter of credit or another bank isappointed by the opening bank to pay for the payment or discount of the draft to theexporter

There are many types of Letter of credit, which are: Revocable letter ofCredit, Irrevocable letter of credit, Confirming L/C, Revolving L/C, TransferableL/C, Back to Back L/C, Red clause L/C and Stand – by L/C

Characteristics of Letter of credit:

 Banks and related parties only transact on the basis of documents

 The letter of credit must specify whether to cancel or irrevocable, in theabsence of such a note, it will be considered irrevocable

 According to Article 14 on document checking standards of UCP 600:

The issuing bank shall have a maximum period of no more than 5 working daysafter receiving the documents to check documents and determine whetherappropriate documents or Inappropriate, if overdue, the issuing bank has no right toreport errors

 The bank is not responsible for checking documents not specified in L/C

 If the bank decides to refuse the document, it will have to notify in themedia before the close of the 5th business day

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 The Bank is not responsible for delays caused by transmission or forspelling errors arising during the transfer or transmission.

 Open account

Open account is the method by which the seller opens an account to debit thebuyer after the seller has completed the delivery of goods or provided the service;then, by the agreed period (month, quarter, year) the buyer pays the seller

Characteristics of the method:

 There is no participation of banks with the function of opening accountsand making payments

 Only opening a marginal account, not opening a bilateral account

 Only sellers and buyers participate in the payment

 Using this method poses a risk to the seller, that the seller loses control ofhis goods

 Clearing

This method is usually applied to business organizations with largeinternational transaction scale or between groups of organizations with the samefield of operation in many countries around the world

Clearing is performed on the basis of an agreement between the members ofthe organization Clearing takes place for organizations that always have mutualliabilities In order to reduce the number of back and forth transactions that result inunnecessary transaction costs, these organizations shall agree to perform at thescheduled times to select the previous accounting of previous debts This form ofpayment reduces transaction volume and saves costs

1.2 DEVELOPMENT OF INTERNATIONAL PAYMENT OF

COMMERCIAL BANKS

1.2.1 The concept of developing international payment of commercial banks

Development is considered as the change or making the change in thedirection of increase from less to more, from narrow to wide, from low to high,from simple to complex

On a macro level, development is the economic development of a nation.Accordingly, economic development is understood as the process of increasingprogress in all aspects of the economy, which is considered as the process of change

in both quantity and quality However, when the development takes place too fast, itwill bring negative impacts to the future of people Therefore, the issue ofsustainable development was posed

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At the micro level, development is the development of activities ofenterprises Accordingly, development is perceived as a change in a good directionboth in terms of quantity and quality in the operation of the enterprise In terms ofquantity, it is the expansion of the production scale, the expansion of the market,and the financial indicators have shown well In terms of quality, development is thelevel of management and qualifications or skills of employees are improved.

Therefore, basically, the development of international payment activities ofcommercial banks can be understood as a change in the good direction both in terms

of quantity and quality in international trading activities of commercial banks Interms of quantity, it is the expansion of customer size, transaction turnover, number

of methods, value of each transaction, market expansion and financial indicators toshow a positive trend In term of quality, international payment transactions must be

carried out quickly, accurately, safely and effectively.

The quick execution of international payment transactions will certainlyensure customers' time requirements as well as bank regulations and internationalstandards In addition, transactions must be made exactly according to thecustomer's request about the beneficiary, the amount, the content of the transaction,other terms and conditions depending on the customer's payment method At thesame time, during the payment process, the bank must ensure a safe level in thetransaction so as not to lose customers 'assets as well as the bank, to keep thecustomers' information confidential

Moreover, international payment transactions need to be carried outeffectively On the customer side, this is reflected in the benefits gained and thecosts customers have to pay when using international payment services On thebank side, it is the profit gained from international payment activities, the addedefficiency of other supporting operations such as credit, import and exportfinancing, foreign currency trading, foreign guarantee, mobilizing capital as well asincreasing the competitiveness and reputation of the bank

1.2.2 The indicators reflect the development of international payment

The development of international payment of commercial banks is assessed

by a system of qualitative and quantitative criteria through its direct or indirecteffects Currently, commercial banks do not have any specific standards to evaluatethe development of international payment activities However, from the author'spoint of view, the development of international payment activities of commercialbanks can be assessed on the following criteria:

1.2.2.1 Quantitative indicators

 Collecting international payment service fee

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When fulfilling the requirements of customers related to internationalpayment, the bank obtains a certain fee according to the bank's service fee schedulefor each specific operation such as opening fee, L/C amendment, L/C payment fee,sending fee and payment of export documents, fee for money transfer, etc This alsoshows the development of international payment activities which help attract morecustomers to trade.

 Profit from international payment activities

The development of international payment activities is reflected throughprofitability indicators of international payment activities In order to determine theprofits generated from international settlement activities, banks must calculate thecosts incurred for this activity It is the difference between the revenue ofinternational payment and the cost of international settlement This high indexreflects the development of international payment activities, on the contrary, itshows that the bank needs to have solutions to improve the situation

 The development of international payment activities is assessed by the ratio of international settlement profits to international payment revenue.

The ratio of profit from international payment to international paymentrevenue = profit from international payment / international payment revenue Thisratio indicates how much profit a VND made in revenue from internationalsettlement activities in the period

 The development of international payment activities is assessed by the

ratio of the international payment revenue to the total income (total revenue).

The ratio of the revenue from international payment to total income =International payment revenue / Total income This ratio reflects the proportion ofrevenue brought about by international settlement activities compared to the totalrevenue from business activities of banks

 Ratio of International payment revenue to total number of international payment staff

Ratio of International payment revenue to total number of internationalpayment staff = International payment turnover / Number of staff in charge ofinternational payment This index determines the labor productivity of aninternational payment officer on the revenue from international settlement activities,showing how much of an international payment revenue officer generates

 Ratio of international payment Profit to total international payment staff

Ratio of international payment Profit to total international paymentstaff =International paymentprofit / Number of international payment staff This index

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determines the labor productivity of an international payment staff based on theefficiency brought about by international payment activities whichshows how much

of an international payment staff can generate profit

 Number of customers

For international payment activities, customers are normally import-exportenterprises and those who have partnerships with foreign traders These clients needinformation of foreign trade skills, as well as foreign laws and international laws.When commercial banks attract customers with good financial and businesscapacity, it will create favorable conditions for transactions to take place smoothly,limiting risks in international payment for both banks and customers, contributing toimproving the quality of international payment of the bank

When the number of international payment transactions customers increases,

it proves that the international payment activities have developed, because thecustomers have not only the purpose of implementing international paymentservices but also the demand for other related services such as import and exportguarantee, purchase and sale of foreign currencies, capital mobilization credit, etc

1.2.2.2 Qualitative indicators

 Trademark and reputation of the bank

Trademark - as defined by the World Intellectual Property Organization(WIPO): This is a special (tangible and intangible) sign that identifies a certainproduct or service provided by an individual or an organization

Trademark of the banks can be considered as a term used in marketingactivities, showing the transaction name of a bank, associated with the identity,prestige and image of the subject in order to create a profound impression oncustomers with the banks as well as distinguish them from other banks in theirmonetary business activities and provision of banking services In other words, thetrademark of a bank is the customer's perception of the bank Customers is probablyunnecessary to know the meaning of a name or a symbol of a certain bank but ifthey have financial demand and they come to the bank unconsciously, that bank hasbuilt up

 Solvency

This indicator reflects the speed of completion of international paymenttransactions at the request of customers The transaction time here includesinternational standards for each transaction and the goals set out by commercialbanks It is arranged for each specific international payment operation and is

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published to customers for tracking and payment planning Therefore, the shorterthe transaction time is, the faster the capital can be transferred, helping theefficiency of production and business, saving costs, increasing labor productivityand contributing to improving the quality of international payment.

 Risk minimization

Banking business is the riskiest business, especially in the current context,when the world economy is always volatile Diversifying business and servicesectors is an effective way to disperse risks in banking business Profits earned frominternational payment activities will support banks when market fluctuations helpbanks maintain stability

International settlement helps to strengthen the competitiveness of banks.The import-export business has inherent risks, as a result, it requires that theinternational exchange must perform from the stage of information acquisition andprocessing to the thorough feedback process To meet such requirements, banksmust renovate banking technologies, well organize the international payment stage

to help the process of performing operations be safe and effective Besides,managing and controlling risks will greatly contribute to improving the efficiency ofinternational payment operations of commercial banks

1.2.3 Factors affect international payment operations

Researching the factors affecting the development of international paymenthas an important role in achieving optimal solutions to develop that activity Ingeneral, when analyzing the development of international payment activities, it isnecessary to mention the following factors:

1.2.3.1 Subjective factors

 Domestic and international economic and political environment

The economic environment includes the level of development of theeconomy Commercial banking activities in a stable and developed economy will besafer and more effective The bank can focus on developing new products andservices, expanding its operations internationally, creating a better ability to provideinternational payment services with higher quality

The political stability will create favorable conditions for the economy of adeveloped country including international trade activities, as a result, the demandfor import and export payment will increase accordingly All political risks such aswars, riots, strikes, or economic sanctions seriously affect the international payment

of commercial banks

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 Regulatory environment

International payment activities of commercial banks are not only governed

by domestic mechanisms, policies and laws, but also must comply withinternational rules, standards and practices One of the policies directly affectingimport and export payment activities is the exchange rate policy The State Bankwith a macro management role in managing monetary policy can use the exchangerate tool to encourage export or restrict imports Meanwhile, the payment fromthese activities is performed via commercial banks, so it has influenced theinternational payment activities of banks

Additionally, the State Bank's foreign exchange management policy also has

a considerable impact on the international payment activities of commercial banks.Through foreign exchange management, the State can control and restrict imports ofgoods from abroad, which reduces the ability to pay for goods imported via banks

At the same time, the State can use foreign exchange policy to restrict investmentcapital flowing abroad or attract foreign currency sources from abroad to thecountry

Regarding international law, although the International Chamber ofCommerce has issued a number of international rules and standards that apply tocountries when making international trade transactions However, in reality, theystill have disadvantages and loopholes creating conditions for fraudsters who arecertainly lack of business leaders to take advantage of causing damage to theparties, affecting the quality of international payment of commercial banks

 Risks in international payment

Risks in international payments are those arising in the process of makinginternational payments In particular, risks generally arise from the relationshipbetween the parties involved in international payment (exporters, importers, banks,intermediaries, individuals ) or due to objective factors (natural disasters, war,politics )

To assess risks and propose effective measures to prevent and limit risks, wecan classify risks into two main groups:

 Trade risks: For exporters, it is the importer's ability to pay; for animporter, it is in a breach of the contractual terms of export by the exporter(shipping terms, quantity and quality of goods, prices, shipping conditions, termsand time of payment, )

 Payment risks: These are unexpected losses to the parties involved inpayment, especially for banks when providing international payment services Thisrisk includes credit risk, moral hazard, national risk, foreign exchange risk, andoperational risk

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1.2.3.2 Objective factors

 Financial capacity

Financial capacity is often expressed through the capital potential of banks

If banks have large capital, they will have the ability to expand their operations,equip the most modern machinery and technology for the payment process, andattract human resources with high quality In the international payment activities,trading foreign currencies financial capacity reflected in the payment source is moreimportant, especially in the business environment in Vietnam today Whenimporting enterprises have a need to buy foreign currencies to make payments,banks are not able to meet or have to buy at higher prices

 Human factor

The qualifications, capabilities, skills and attitudes of the internationalpayment staff are decisive to the development of international payment activities ofcommercial banks If the international payment officers are good at professionalskills, knowledgeable about foreign trade activities, transportation, insurance,customs, import and export policies and good at foreign languages, then, clearly, thequality of payment international improve higher Indeed, they are able to advisecustomers from the simplest to the most difficult stage in the process of makinginternational payments as well as customer support after the transaction

On the contrary, customers are provided with lower quality payment services

if the staff are still shortage experience or have a huge gap in knowledge of foreigntrade and foreign language skill Then, the consequence is obvious that the bankwill gradually lose customers, which will reduce its revenue and profit ininternational payment

 Information technology platform

This is the basis for international payment which can be done quickly,accurately, safely and confidentially An information technology system that hasslow connectivity, or its program is not standardized according to internationalpractices or its ability to import, export, store data is low or the level of control andsecurity is poor, is unable to fulfill the requirements for international paymentquality Therefore, commercial banks have to invest in a modern informationtechnology system that meets international standards to better meet the diverseneeds of customers

group will be different Large customers, using the service regularly, being rankedwell, will have certain advantages and specific care Quality for this customer mustalways ensure the highest level, both to ensure the reputation and to increase theBank's competitiveness.

 Operational scale and business strategy of the bank

A small-scale bank, lacking in both capital and human resources, is likely toprovide limited service products If implemented, it is also difficult to meet therequirements of customers as well as the control of risks Because of the lack ofcapital of the loan, the bank will not be able to guarantee the ability to pay thecustomer's limit, lack of trading manpower cannot be done quickly with theaccuracy and high safety On the other hand, because of the small scale, theinvestment in information technology infrastructure will be limited, without theexisting machines, equipment, programs, advanced, making the payment faster,more efficient It directly affects the products of the service supplied by the bank,with the corresponding quality A centralized bank that develops credit, does notpay attention to services (international payments), then, the investment level intechnology, people, services it provided will probably be inferior As such, theservice quality of this bank is not as excellent as another bank with a strongcentralized strategy to focus on promoting banking services

 Risk management capability

International commercial activities of commercial banks always containunpredictable risks and due to many causes It can be possibly due to objectivereasons from the macroeconomic policies of the State, the lack of understanding ofinternational trade or the intentional behavior of fraud of customers; or may be due

to subjective reasons from the major banks such as the shortage and not theMinistry of mechanisms, policies, business processes for the operation ofinternational payment, the risks of banking officials or the lack of understanding ofbanking staff of foreign trade Its consequences will deteriorate the financialsituation of the bank and influence the credibility as well as the brand of NH.Therefore, good risk management will ensure the operation of international paymentsafe, more efficient

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CHAPTER 2: CURRENT SITUATION OF THE DEVELOPMENT OF INTERNATIONAL PAYMENT

AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE- THANH XUAN

Vietinbank- Thanh Xuan Branch is located in the Khu Noi Chinh, NhanChinh Ward, Thanh Xuan District, Hanoi City It was established in July 1993 inaccordance with Decree 53/HDBT separated from the State Bank of Dong District.Planned under Industrial and Commercial Bank of Hanoi City Since April 1993,when renewing the organization, Vietnam Joint Stock Commercial Bank ForIndustry And Trade in Thanh Xuan district was transformed into the Industrial andCommercial Bank branch of Thanh Xuan Area directly under the Vietnam JointStock Commercial Bank For Industry And Trade, one of the largest banks in thewhole country

Up to now, Vietinbank Thanh Xuan has been in operation for more than 25years Thanh Xuan District has 11 wards, which is considered one of the largest,densely populated districts, with many large state-owned enterprises, privateenterprises and joint ventures operating in various fields With a wide operatingarea, diversified customers and the right motto "Development and success of thebank is the goal of the bank's business", although it is located in a fairlymodest

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position in Noi Chinh, Thanh Xuan, Hanoi, the Bank of Industry and Trade branchhas been many customers come to and create regular relationships with customers.

2.1.2 Organizational structure

2.1.2.1 Organizational chart

From 2003, by implementing a one-door trading model under the unifiedINCAS program throughout the Vietnam Joint Stock Commercial BankFor IndustryAnd Trade, the branch had a strong development both structuring and organizing.The current organization of the branch is as follows

Figure 2.1: Organizational chart of Vietinbank Thanh Xuan

(Source: Organizational chart of Administration Department of Thanh Xuan

Branch)

After implementing organizational arrangement according to the modernmodel, Vietinbank-Thanh Xuan Branch has not only perfected on the discipline, theactivity, but its business operation has grown significantly The branch has beenchosen by many private corporations and large corporations of the State to be themain service banks and reliable partners

2.1.2.2 Tasks of the departments

SALES LEADER

Individual customer

Dep

Administration Dep

IT DepDebt management Dep

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information to the head office, the deputy directors usually work as assigned by thedirector.

Customer Department

Vietinbank Thanh Xuan includes 03 customer dep which are Large corporatecustomer, Small and Medium Enterprises (SMEs), Individual customer The tasks

of these rooms are:

Customer service development

 Proposing the Board of Directors in market development

 Deploying programs, work plans, business plans as well as marketingsolutions to maintain and expand market development, brand promotion

 Deploying banking products and services and providing them tocustomers within the scope of their assigned customers

 Creating and managing customer information records, receiving requests

to change customer information, managing intermediary accounts as assigned by thebranch, performing other tasks as required by branch manager

 Conducting foreign currency business operations

 Introducing capital mobilization products and currency trading products

to customers; supporting other business departments to sell products; providinginformation on market and cost price for relevant departments to handle in businessactivities

 Ensuring solvency and foreign exchange status of the Branch; beingresponsible for the strict compliance with the regulations on the work of capital inthe branch

Credit activities

 Being responsible for finding customers, developing credit operationswith customers within the scope of handling

 Suggesting credit limits and credit proposals

 Disbursing loans to customers based on the approved credit file;monitoring and managing customers 'operations and collecting debts and interestsfrom customers' loans

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 Selling products and services at the counter, dealing with individualcustomers and performing operations as prescribed.

 Making payment of remittances to individual customers

 Implementing the prevention of money laundering for transactions arisingunder the provisions of the state and Vietnam Joint Stock Commercial Bank forIndustry and Trade; detecting reports and promptly handling suspicious signs inemergency situations

 Being in charge of checking the legality, completeness, correctness oftransaction documents;strictly complying with professional regulations andprocesses, authority and confidentiality provisions in all transactions with individualcustomers, fully implementing internal control measures before completing atransaction with customers

Debt management department

 Classifying debts into different groups of debts according to theregulations of the State Bank as well as the standards of Vietinbank

 Monitoring and recommending to management about how to deal withsubprime debt

Treasury department

 Carrying out the operations of warehouse management, fund import andexport, transporting money to transaction offices, transferring money to the StateBank or its partner and vice versa according to process of Vietnam Joint StockCommercial Bank for Industry and Trade

 Coordinating with related units to measure the amount of cash transactedwithin a day, thereby proposing a reasonable amount of cash balance to ensureeffective use of capital, limit the capital stagnation and improve safety of treasury

 Proposing to the managements about methods and conditions to ensuretreasury safety and monetary security

 Monitoring and synthesizing monetary reporting, treasury safety

 Conducting cash collection and payment transactions for customers inaccordance with regulations such as payment of account money, outwardremittance, remittance payment, collection on behalf of internal branches

Accounting department

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 Management and implementation of detailed accounting, generalaccounting; preparing reports on business activities according to the regulations ofVietnam Joint Stock Commercial Bank for Industry and Trade.

 Conducting post-auditing on accounting operations of the branch,including transaction offices and savings funds

 Perform the task of financial management

 Proposal to advise the board of directors on the guidance of theimplementation of financial regimes, accountingand financial management, savinginternal spendingin accordance with the regime and regulations of Vietnam JointStock Commercial Bank for Industry and Trade

 Being responsible for the truthfulness, accuracy, reasonableness,timeliness of accounting data and regulations of the State and Vietnam Joint StockCommercial Bank for Industry and Trade

 Conducting payment operations in accordance with the regulations ofVietnam Joint Stock Commercial Bank for Industry and Trade

Administration department

 Gathering information for planning work

 Proposing and developing business development plans

 Developing implementation measures to implement monthly, quarterlyand annual business plans of the branch

 Monitoring, collating, checking and monitoring the progress of businessplan implementation, coordinating and supporting the units in the branch to preparethe results of the plan completion on each operation

 Running an overall assessment of the branch's business operations

 Legal work, regime

 Marketing work

 Being a member of board of directors as required

 Perform other duties as required by the branch

IT department

 Receiving information, providing data quickly, accurately, and fully inorder to create favorable conditions for branch leaders in the managementto achievehigh efficiency

 Supporting the branch offices, guiding the training of units to createinformatics devices and information technology applications

 Establishment and administration of network systems, transmission linesand computer equipment

 Management of information technology application systems

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HR department

 Performing the arrangement, recruiting employees, promotingpromotions for employees Assisting the Board of Directors in managing the staff ofthe branch in accordance with the regulations of Vietnam Joint Stock CommercialBank for Industry and Trade

 Researching and proposing options to continuously strengthen, improveand develop the organizational structure to suit the business operation requirements

of the branch

 In addition, it also helps the Board of Directors in planning and takingmeasures to organize the training and retraining of professional, political andprofessional staff

2.1.3 Business operations of Vietinbank - Thanh Xuan Branch

2.1.3.1 Capital mobilization activities

 Deposit service

For individual customers:

Branches accept deposits in VND and foreign currencies in the form ofpayment deposits, savings deposits, certificates of deposit of individuals who areVietnamese or foreigners legally residing in Vietnam Deposit products of thebranch for individual customers are relatively diverse and abundant, includingpayment deposits, demand deposits, flexible time-based savings deposits, bonussavings, promissory notes, certificates of deposit, etc

For enterprises

The branch provides deposit products to corporate customers such as currentaccounts, deposits, demand savings accounts, term deposits and deposits productssuch as promissory notes, bonds, certificates of deposit and other types of depositaccounts In addition, Vietnam Joint Stock Commercial Bank for Industry andTrade as well as Thanh Xuan Branch also offer some new forms of deposits likeinvestment deposits with floating interest rates, investment deposits with interestrates, ladder deposits, etc

 Raising capital from credit institutions

In each specific case, the branch also conducts borrowing operations of othercredit institutions

2.1.3.2 Credit operations

 Loan

For individual customers

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Vietinbank Thanh Xuan provides credit services to Vietnamese people andhouseholds as well as foreigners legally residing in Vietnam Main products of thebranch include:

 Loans for financial proofing

 Loan for study abroad

 Loan to buy house in house projects, loans to buy houses in VietinBankaffiliated housing project, loans to buy houses including land use rights, loans forhouse construction and repair, loans for purchased/rented houses

 Normal car loan, Truong Hai car loans

 Consumer loans to officials and employees

 Normal consumption loans

 Loan for normal business, loan for market retail units, loan for retailstores, loan for famers, loan for farm owners

 Lending through credit card issuance and use

For corporate customers:

Thanh Xuan Branch provides loans for capital needs for production,business, services, investment, development, etc except those prohibited by law.Forms of lending include:

 Short-term loans: A short-term loan is a type of loan that is obtained to

support a temporary personal or business capital need As it is a type of credit, itinvolves a borrowed capital amount and interest that needs to be paid by a given duedate, which is usually within a year from getting the loan With short-term loans,VietinBank Thanh Xuan ensure to respond fast and timely to company’s workingcapital needs of based on its understanding the Corporate production and businessplans Short-term loans are divided into several types, including:

+ Working capital loans: This type of loan meets all the regular and legalworking capital needs of corporate for the production and business activities

+ Business loans for microenterprises with collaterals: Be responsive tothe typical working capital requirements for production and business ofmicroenterprises with simple and convenient procedures

+ Overdraft loans: Allow customers to spend over the available funds intheir Corporate Transaction Account in VND to cover for the temporary shortageduring payment periods

L/C beneficiaries immediately upon the presentation of specified documents

 Working capital loans: This type of loan meets all the regular and legalworking capital needs of corporate for the production and business activities

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 Mid-term and long-term loans: VietinBank Thanh Xuan help customersfund short term and long-term working capitals for their corporate projectinvestments or production and expansion.

 Special loans: VietinBank Thanh Xuan offers a wide range of solutions,meeting the special capital needs of customers’ corporate

 International credit program loans: VietinBank Thanh Xuan provides

loans with special privileges for the corporate through its international credit capitalfunds

 Guarantee and re-guarantee

With its reputation and experience, Vietinbank as well as Thanh XuanBranch are now providing customers with common guarantee methods in theeconomy Especially in international trade, businesses can contact Vietinbank toobtain guarantee certificates of international standards and are widely accepted byover 800 correspondent banks in 90 countries and territories around the world.Forms of guarantee of a branch include:

 Other types of guarantee

2.1.3.3 Payment activities and funds

Thanh Xuan Branch offers the following payment and budget products:

 The means of payment

 Implementing domestic payment services for customers

 Providing collection and payment services

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2.1.4 Business situation at Vietinbank - Thanh Xuan Branch

In recent years, especially in the period of 2017-2019, the operation of thebank in general and the whole banking system of Vietinbank as well as Thanh XuanBranch in particular have been affected significantly by macroeconomicfluctuations Especially after 2018, commercial banks affected by the tighteningpolicy have had a strong impact on credit growth in 2018, reaching the lowestgrowth rate in recent years Growth in outstanding loans of banks listed on the stockmarket reached 13.4% Deposits also started to slow down following a slowdown incredit growth In 2018, deposit mobilization growth reached 12.1%

NPL ratio increased gradually from the beginning of the year to the end ofQ3 but dropped back to the end of the year, reaching 1.63% Thanks to strong profitgrowth, banks actively set aside and dealt with bad debts with provisions to reducethe NPL ratio By 2019, after the trend of expanding interest rates in the world, theState Bank of Vietnam also officially adjusted the operating rates Before 2019, theState Bank expects a credit growth target of 14% However, many recent updatedforecasts show that the actual credit growth rate for the whole year may not reachthis target In addition, Vietnam commercial banking system has 18 banks certified

to apply Circular 41 before maturity (Basel II) before maturity Meanwhile, abouthalf of the system, especially large members such as Agribank and VietinBank, isstill unclear about the prospects for meeting the requirements This is expected to be

a constraint in the growth targets for 2020, especially for credit

It is worth mentioning that, early 2020, Vietnam's economy as well as thewhole world was greatly affected by the epidemic so-called Covid - 19, includingthe financial-banking sector It is estimated that this epidemic has an impact on thebanking industry in three important aspects The first is that credit demand is downdue to lower demand for businesses and households, especially in the first andsecond quarters The second impact is the potential for increased bad debts, whenbusinesses and households are negatively affected by the epidemic, leading todifficulties in production and business activities Thirdly, there is an increase indemand for transactions via digital banks, non-cash payments due to a number ofcustomers who are afraid to contact

In such difficult circumstances, the management of Thanh Xuan branch hasimplemented a number of strong and resolute measures, besides being guided andsupported by the leadership and some key departments of Vietnam Joint StockCommercial Bank for Industry and Trade, together with efforts to overcomedifficulties, the branch gainedconsiderable achievements, making a significantcontribution to the overall success of the Industrial and Vietinbank system

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Table 2.1: Main targets of Vietinbank Thanh Xuan in 2017 – 2019

Unit: Billion VND

2017 2018 2019

(Source: Report on Vietinbank Thanh Xuan's business activities in 2017 - 2019 )

Table 2.2: Revenue, expense and profit of Vietinbank-Thanh Xuan Branch in

2017-2019

Unit: Million VND

1 Revenue 366,416 389,459 573,700 1.1 Interest income 340,840 358,676 540,043

1.2 Other non-interest income 25,576 30,783 33,657