Discussion multination financial management topic foreign currency loan service offered by bidv

However, it is important to be aware of the risks involved, such as currency fluctuations and exchange rate risk. Here are some of the key features of foreign currency loan services:- L

THUONG MAI UNIVERSITY FINANCE & BANKING

- -DISCUSSION MULTINATION FINANCIAL MANAGEMENT

Topic: Foreign currency loan service offered by BIDV

Teacher:

Group: 1

Ha Noi, 2023

TABLE OF CONTENTS

CHAPTER 1: BANK LOAN SERVICE 3

1.1 Bank Loan Service 3

1.1.1 Introduction to Bank Loan Service 3

1.1.2 Characteristics of Bank Loan Service in Vietnam 4

1.2 Foreign Currency Loan Service 5

1.2.1 Definition of Foreign Currency Loan Service 5

1.2.2 Characteristics of Foreign Currency Loan Service 6

1.2.3 Factors Affecting the Foreign Currency Loan Service 8

CHAPTER 2: FOREIGN BANK LOAN SERVICE AT BIDV 10

2.1 Overview of BIDV 10

2.2 Foreign Loan Service Offered by BIDV 11

2.2.1 Export financing 11

2.2.2 Import financing 12

2.2.3 Overseas education loan 15

2.2.4 Foreign currency trading 16

2.3 Comparison of Foreign Currency Loan Service and Local Currency Loan Service at BIDV 17

2.4 Comparison of Loan Services at BIDV and Eximbank 19

CHAPTER 3: CONCLUSION 21

1.1 Bank Loan Service

1.1.1 Introduction to Bank Loan Service

Bank loan services are financial products offered by banks to individuals,businesses, and organizations in need of funds These services provide a convenientand accessible way to borrow money for various purposes, such as purchasing a home,starting a business, or funding personal expenses

Bank loan services typically involve the lender providing a specific amount ofmoney to the borrower, which is then repaid over a predetermined period of time, alongwith interest and any applicable fees The terms and conditions of the loan, includingthe interest rate, repayment schedule, and collateral requirements, are agreed uponbetween the borrower and the bank

One of the key advantages of bank loan services is that they offer a reliable andregulated source of financing Banks have established lending criteria and processes inplace to assess the creditworthiness of borrowers, ensuring responsible lendingpractices Additionally, banks often offer a range of loan options tailored to differentneeds, such as personal loans, home loans, car loans, and business loans

Bank loan services also provide borrowers with the benefit of professional guidanceand expertise Banks have experienced loan officers who can assist borrowers inunderstanding their financial needs, evaluating loan options, and structuring repaymentplans that align with their financial capabilities

Furthermore, bank loan services often come with added features and benefits, such

as flexible repayment options, competitive interest rates, and the potential for building

a positive credit history Borrowers may also have access to additional bankingservices, such as online account management, automatic payment options, and theability to consolidate debts

However, it is important to note that bank loan services require borrowers to meetcertain eligibility criteria and provide necessary documentation, such as proof ofincome, identification, and collateral (in some cases) Failure to repay the loan asagreed can result in penalties and damage to credit scores, and potential legalconsequences

Overall, bank loan services play a crucial role in providing individuals andbusinesses with the financial resources they need to achieve their goals and managetheir financial obligations effectively.

1.1.2 Characteristics of Bank Loan Service in Vietnam

- Loan Amounts: Banks in Vietnam offer a wide range of loan amounts to cater to different financial needs The loan amount is determined based on factors such as the borrower's income, credit history, and collateral

- Loan Tenure: The tenure of bank loans in Vietnam can vary from a month to several years, depending on the type of loan Short-term loans are typically for a period of 1-3 years, while long-term loans can extend up to 20 years or more

- Collateral Requirements: Banks in Vietnam often require collateral for certain types

of loans, such as mortgage loans or business loans Collateral can be in the form of vehicles, or other valuable assets that can be used to secure the loan

- Repayment Options: Bank loan services in Vietnam offer various repayment options, including monthly installments, quarterly installments, or bullet payments Borrowers can choose the repayment schedule that best suits their financial situation

- Loan Purpose: Bank loans in Vietnam can be used for various purposes such as purchasing a home, buying a car, funding education, or starting a business Different loan products are designed to meet specific needs and have specific eligibility criteria

- Loan Approval Process: Banks in Vietnam have a thorough loan approval process thatinvolves assessing the borrower's creditworthiness, income stability, and repayment capacity The process may include document verification, credit checks, and evaluation

of the borrower's financial situation

- Customer Support: Banks in Vietnam provide customer support services to assist borrowers throughout the loan application and repayment process This includes guidance on loan eligibility, documentation requirements, and assistance with any queries issues that may arise

1.2 Foreign Currency Loan Service

1.2.1 Definition of Foreign Currency Loan Service

A foreign currency loan service is a financial product that allows borrowers toobtain a loan in a currency other than their own This type of loan can be useful for

businesses and individuals who need to finance international transactions or who haveincome in a foreign currency.

Foreign currency loans can be either covered or uncovered A covered loan is one inwhich the borrower enters into a forward currency contract to lock in the exchange rate

at which they will repay the loan This helps to protect the borrower from adversecurrency movements An uncovered loan is one in which the borrower does not enterinto a forward contract, and therefore bears the risk of currency fluctuations



 Foreign currency loans can be used for a variety of purposes, including:

- Working capital: Businesses can use foreign currency loans to finance their day operations, such as paying for imports or payroll

day-to Fixed asset investment: Businesses can also use foreign currency loans to finance thepurchase of long-term assets, such as machinery or equipment

- Individual consumption: Individuals can use foreign currency loans to financeinternational travel, education, or other expenses

Foreign currency loans can be attractive to borrowers because they can offer lowerinterest rates than domestic loans However, it is important to be aware of the risksinvolved, such as currency fluctuations and exchange rate risk



 Here are some of the key features of foreign currency loan services:

- Loan amount: Foreign currency loans can be for any amount, from a few thousanddollars to millions of dollars

- Term: Foreign currency loans can have terms of anywhere from a few months toseveral years

- Interest rate: Foreign currency loan interest rates can be fixed or floating Fixed-rateloans offer borrowers more certainty about their monthly payments, while floating-rateloans offer the potential for lower interest payments if interest rates decline

- Repayment: Foreign currency loans can be repaid in installments or in a lump sum atthe end of the term



 Who should consider using a foreign currency loan service?

Foreign currency loans can be a good option for businesses and individuals who:

- Have income in a foreign currency

- Need to finance international transactions

- Are comfortable with the risks associated with currency fluctuations

Before applying for a foreign currency loan, it is important to compare rates fromdifferent lenders and to understand the terms and conditions of the loan carefully

1.2.2 Characteristics of Foreign Currency Loan Service

Foreign Currency Loan Service (FCLS) is a type of loan that allows borrowers toborrow money in a foreign currency This can be useful for businesses and individualswho need to make payments in a foreign currency, such as to import or export goods orservices, or to invest in foreign assets

- Expand your business internationally: FCLS can help you to expand your businessinternationally by giving you access to foreign markets and suppliers.



 Risks of FCLS:

- Currency exchange risk: The main risk associated with FCLS is currency exchangerisk This is the risk that the value of the foreign currency will change relative to yourdomestic currency, which could make your loan more expensive to repay

- Interest rate risk: Interest rates can also fluctuate, which could affect the cost of yourloan

- Country risk: There is also the risk of country risk, which is the risk that the political

or economic situation in the country where you are borrowing money could change,making it difficult or impossible to repay your loan

1.2.3 Factors Affecting the Foreign Currency Loan Service.

The provision and utilization of foreign currency loan services are influenced byvarious factors, and these factors can impact both lenders and borrowers Here aresome key factors affecting foreign currency loan services:

- Exchange Rates: Fluctuations in exchange rates can significantly affect the cost ofservicing foreign currency loans Borrowers may face increased repaymentobligations if the local currency weakens against the currency in which the loan isdenominated

- Interest Rates: Changes in interest rates, both in the domestic and foreign markets,can impact the cost of borrowing and the attractiveness of foreign currency loans.Higher interest rates may increase the overall cost of servicing the loan

- Economic Conditions: The economic conditions of both the borrower's country andthe country where the currency is issued play a crucial role Economic stability andgrowth can positively influence the ability of borrowers to repay loans

- Political Stability: Political stability in both the borrower's country and thecurrency-issuing country is essential Political instability can lead to uncertaintiesand increased risks for lenders, affecting the terms and conditions of foreigncurrency loans

- Regulatory Environment: Regulatory frameworks, including foreign exchangecontrols and capital flow restrictions, can impact the availability and terms of foreigncurrency loans Changes in regulations may affect the ability of borrowers to accessthese services.

- Currency Hedging Options: The availability and cost of currency hedginginstruments can influence the decision to take foreign currency loans Borrowersmay use hedging tools to mitigate the risk of adverse exchange rate movements

- Global Financial Market Conditions: Conditions in the global financial markets,including changes in investor sentiment and risk appetite, can impact the terms andconditions of foreign currency loans

- Terms of the Loan Agreement: The specific terms and conditions negotiatedbetween the lender and borrower, such as loan maturity, repayment structure, andcovenants, can impact the overall dynamics of foreign currency loan services

2.1 Overview of BIDV



 History of establishment and development

- BIDV was founded on 26 April 1957 under the initial name of Bank for Construction

of Vietnam BIDV is the bank with the longest history in the system of creditinstitutions in Vietnam In history, BIDV has changed its name 4 times in accordancewith each period of national construction and development:

+ 1957 - 1981: Bank for Construction of Vietnam

+ 1981 - 1990: Bank for Investment and Construction of Vietnam

+ 1990 - 2012: Bank for Investment and Development of Vietnam

+ 2012 - present: Joint Stock Commercial Bank for Investment and Development ofVietnam

- Mission: To deliver the best interests and conveniences to customers, shareholders,employees and society

- Vision: As a leading financial institution in the Southeast Asian region, with the mostadvanced digital platform in Vietnam, we aspire to be among the top 100 largest banks

in the Asian region

- Core Values: Intelligence - Trust - Integrity - Professionalism - Aspiration

- Now, BIDV has 25.000 employees, 190 branches, 871 transaction offices, 57.825ATM and POS



 Lines of business

- Banking: A full range of modern and convenient banking products and services

- Insurance: Life and non-life insurance product bundles are tailored to the needs ofcustomers

- Securities: Diverse brokerage, investment and consultancy and services, with the ability

of quickly developing agents

- Financial investment: Contributing capital for investment in projects, taking the lead inkey national projects.



 Awards and Accolades

BIDV has been recognized and awarded by many international and major financialinstitutions for its outstanding business performance The bank is listed in the Top 500world’s most valuable banking brands (by Brand Finance), named “Best Retail Bank inVietnam” for the fourth consecutive year (by The Asian Banker) and received a series of

IT awards Since 2009, BIDV has ranked first amongst Vietnamese commercial banks interms of readiness for IT application and development in the Vietnam ICT Index ofVietnam Ministry of Information and Communications and Vietnam Association forInformation Processing

2.2 Foreign Loan Service Offered by BIDV



 Characteristic

- Non-recourse discount on Bills of exchange under deferred payment L/C based onForfaiting Agreements with Correspondent Banks (Hereinafter referred to as Non-recourse discount under deferred payment L/C): is BIDV's purchase and Receiveownership of the Bill of Exchange with the set of export documents presented to BIDVunder the deferred L/C before payment due from the Customer when:

 There has been confirmation of payment acceptance from the Bank withpayment obligation for the Bill of Exchange/Export Document Set;

 The agent bank agrees to discount without recourse the above Bill ofExchange/Set of export documents according to the Forfaiting Agreementsigned between BIDV and the agent bank



 Benefit

- Receive additional working capital in a timely manner because BIDV has paid the Bill

of Exchange/set of export documents under deferred payment L/C before the paymentdue date;

- The non-recourse discount is not included in the Customer's short-term credit limit atBIDV

- Guaranteed payment risk in case the Bank with payment obligations becomes insolvent

2.2.1.2 Loan for export contract performance

- Loan amount: Maximum 85% of export contract value or 90% of export LC value

- Loan term: maximum 9 months



 Benefit

- Financing working capital for production and business activities

- Collateral is flexible and suitable for business realities

- Support and advise on foreign trade contract terms, LC, payment methods to ensure thebest benefits for Customers

2.2.1.3 Discount Bill of Exchange with export documents



 Key information

- BIDV advances to exporters on the basis of presenting a bill of exchange with a set ofexport documents in the forms of LC, collection, and wire transfer