Final report international payment

To perform this function, connect international banks such as Import-Export Finance, Foreign Exchange Business, Bank Guarantees in Foreign Trade, International Payments, especially payme

MINISTRY OF EDUCATION AND TRAINING

Hé Chi Minh City, August, 2021

MINISTRY OF EDUCATION AND TRAINING

V¥ HOA SEN FACULTY OF ECONOMICS AND BUSINESS

Nguyễn Vy Trâm Anh (2170439)

Phạm Thị Ngọc Thắm (2001819)

Võ Minh Duy (2181790)

Nguyễn Lý Minh Thư (2172866)

Hé Chi Minh City, August, 2021

DISCLAIMER

“We have read and understand violations of academic integrity

We pledge with personal honor that this work was done on our own

and does not violate academic integrity.”

(Student's name and signature)

INTRODUCTION

Facing the trend of the world economy becoming increasingly

internationalized, Vietnam is developing a market economy, opening up, cooperating and integrating In the first scenario, international trade and Investment activities emerge as a bridge connecting the domestic economy with the outside world To perform this function, connect international banks such as Import-Export Finance, Foreign Exchange Business, Bank Guarantees in Foreign Trade, International Payments, especially payments by L/ C serves as an essential tool and is becoming increasingly important On this day, international payment is an increasingly important service for Vietnamese commercial banks,

an important link in promoting the development of other business activities of the

bank, and ending support and supporting the export - import business activities of developed enterprises International payment was born on the basis of international trade, but whether international trade exists and develops or not depends on and the payment manager has all information, time, safety and correct or not International trade and payments is inherently complex and risky compared to domestic trade and payments, because it is governed by local laws and customs, but also international and national laws

Therefore, stakeholders and participants in the process of International Trade and Payment need to have a thorough understanding of not only the technical and

professional processes but also local and international practices, customs, and

laws economic The essay with the topic "Causes for commercial banks to evaluate solvency" of the group 03-08, we study the concepts as well as the

causes of one of the international payment methods- with the goal of helping

people understand and grasp and apply this method in a reasonable and accurate way Although we have tried to collect and concentrate our knowledge, our team still cannot avoid mistakes We sincerely thank you and look forward to receiving your comments!

TABLE OF CONTEN

INTRODUCTION 4

TABLE OF CONTENT 5

PART 1 THEORETICAL BASIS 6

1.1 The concept of a bank's credit line, classificafion ss«=es sse 6 1.2 What issues do banks usually consider when appraising credit lines

(conditions when appraising limits for buSII€SS€S) 555-555 5555995 6

PART 1 THEORETICAL BASIS 1.1 The concept of a bank's credit line, classification

A committed credit line is a monetary spending loan balance offered by a financial institution that cannot be suspended without notifying the borrower A committed credit line is a legal agreement outlining the conditions of the credit line between the financial institution and the borrower

1.2 What issues do banks usually consider when appraising credit lines (conditions when appraising limits for businesses)

Depending on each bank, there will be different conditions, but there will be the following main conditions:

Domestic enterprises have a continuous business period of 12 months or more from the time of registration Or have local confirmation of the actual business time from 12 months

Business registration lines are suitable for borrowing loans, business

plans,

Have a viable business plan, have the full financial capacity, and clear

source of repayment

Having secured assets with loan security value

There are no bad debts at banks or other credit institutions

Banks often consider what issues to consider when evaluating credit limit

commitments :

First, pay attention to the determining side of the business: grasp the capacity of the operator, the competitive power of the product, the technical strength

Second, quantitative analysis without depending on financial information: even if financial information is not available, by various methods it is

necessary to grasp and analyze the financial situation of the business.

Moreover, it is required to check the suitability between items, the suitability of the quantitative side compared to quantitative numbers e@ Thirdly, analyze the purpose of using loans: after grasping the situation of the enterprise, conducting a project analysis based on short-term forecasts 1.3 What is escrow? Classification

Definition:

An escrow is an amount of money, gemstone or some related important

papers taken into an account, then blocked, strictly controlled in the bank for the purpose of guaranteeing companies and organizations, when doing projects or Investing

Escrow deposits can be money or precious metals, gems, or valuable papers that are frozen in banks or credit institutions to ensure the performance of obligations

Escrow is a legal concept describing a financial instrument whereby an asset or escrow money 1s held by a third party on behalf of two other parties that are in the process of completing a transaction Escrow accounts might include escrow fees managed by agents who hold the funds or assets until receiving appropriate instructions or until the fulfillment of predetermined contractual obligations Money, securities, funds, and other assets can all be held in escrow

It is often suggested as a replacement for a certified or cashier's check

Escrow is a process used when two parties are in the process of completing

a transaction, and there is uncertainty over whether one party or another will be

able to fulfill their obligations Contexts that use escrow include Internet transactions, banking, intellectual property, real estate, mergers and acquisitions, and law, and many more

Types of deposit:

There are 3 most common types of deposit that are commonly seen as L/C Open Margin, Guarantee deposit for contract execution, Margin for multi- industry business purposes.

Due to the nature of international dealings, including factors such as distance, differing laws in each country, and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade

L/C is made by the bank and is valid as a letter at the mutual request of the parties Contents of L/C are agreements and commitments to pay goods to the

exporter

b) Guarantee deposit for contract execution:

This form is often applied to large-scale construction works with huge costs The deposit will be agreed between the investor and the contractor Usually, the owner will be forced to deposit with the bank to ensure that the project is done with the nght quality and on schedule During the construction process, if there is a problem that is not self-resolved, the investor will use this deposit to fix and compensate for the damage to the work

This 1s a fairly secure form of deposit for both the investor and the project This is a safe transaction for both parties to ensure that all issues are followed in

a predictable order

co) Margin for multi-industry business purposes:

A formal technique to secure business and in case of disruption or

production in some fields and other industries

The reason for this escrow format is because throughout the business

process, the investor must ensure to maintain the minimum amount.

1.4 Conditions when opening Escrow L/C? Notes when depositing to open LC?

Condition:

- Ensure sufficient capital to pay the LC open fund: Ensure that the LC open fund

can be paid and meet the requirements of the bank:

- In case the Customer does not need to sign 100% or is required to waive or

reduce the deposit, you need to contact the credit side for approval and approval

by an authorized person

- Open-ended fund LC is issued with loan capital of the bank For this request, the customer must also contact the credit appraisal department

Provide complete information in the application file for opening LC: The

application form for opening LC includes:

- Application for opening LC

- For businesses using the service for the first time, it is necessary to provide a

business establishment decision

- Business license

- Import and export registration number

- Original foreign trade contract (In case the contract is signed via FAX, it is

necessary to sign and stamp on the photocopy)

- Import entrustment contract (if any)

- Import license from the Ministry of Trade (For imported items under the

management list specified in the Prime Minister's annual import and export management decision).

- Commitment to implementation and payment, credit contract (in case of loan),

official letter approving the opening of the bank's deferred payment LC fund

- Foreign currency transaction contract (if any)

- An explanation for opening LC made by the credit department of the bank branch and approved by the authorized director (For the case of deposit under

+ Foreign currency trading contract

+ Application for opening LC of the importing side

the bank must have a value much larger than the scope of the obligation required

to perform Ifthe customer does not perform the obligations properly, the value

of this account will only be used to solve the arising problems The remaining amount will be applied to calculate interest after performing the remaining

obligations

- Carrying out escrow measures:

This method of depositing escrow proves the existence of an intermediary

in a legal relationship.In which, the bank is an intermediary to protect the

interests of the exporter and importer In addition, the bank 1s also the place where each party 1s required to strictly comply with the contractual agreement and is entitled to collect a service fee from the escrow subject to open the LC 1.5 The process of depositing funds

A letter of credit ( L/C ) is a legal document issued by a financial institution (usually a bank) to provide a guarantee of payment to a beneficiary or accepts draft drawn by him to the extent that it is on the basis that the beneficiary must meet the terms of the letter of credit

And if you are a domestic Importer, you must be interested in learning about how to open a letter of credit to a foreign exporter In this article, I will

detail the steps in practice for you to successfully open LC right from the first

transaction with the bank

In fact, the process of opening L/C is very simple with only three steps:

Step 1: Apply open L/C

Step 2: The main bank accepts the application and opens a letter of credit for the business

Step 3: The banking system operates, transferring letters of credit to partners and beneficiaries

Although there are only three simple steps, it is not easy to open an L/C in both business and banking positions Why is that? To understand that we will go deeper into the above steps

It should be noted that:

1 Each bank has its own, different credit opening application form Enterprises

wishing to open letters of credit must first select the bank they want to open L/C

with That bank may be a very familiar bank and have transacted with businesses

many times, or it may be a strange bank At that time, the procedure for applying

to open a business may be very different Therefore, businesses must carefully study the application form of the selected bank, and carefully read the procedures

and regulations that the bank has prescribed

2 Application for opening letter of credit must be in writing at least 2 copies

After the Bank stamps and returns to the unit a copy

3 It is necessary to pay attention to the type of letter of credit that the business

needs and wants to open Banks will have different ways of providing L/C

services Most banks have deferred L/C, L/C at sight Besides, there are also types of L/C backup, transferable, back-to-back, cyclical, reciprocal Therefore, businesses need to carefully select and complete them in accordance with the requirements, procedures and documents of the bank

4 Be careful and consider carefully when setting out the conditions binding on

the exporting party

Avoid conflicts with the terms signed in the contract “Because the bank opens L/C at the request of the importer, so you should carefully review the contract content to ensure that there are no conflicts when putting it in the L/C.”

5 The application for credit is the legal basis for settling disputes between the applicant for the letter of credit and the issuing bank and the basis for the opening bank to send the credit to the exporter

6 In addition, when conducting registration to open L/C, businesses need to pay attention to their bank's requirements on deposit, guarantee, authorization Step 1: Apply for a letter of credit (L/C)

Based on the foreign trade contract (or offer invoice), the tmporting

organization shall actively write an application for opening a letter of credit and

send it to the serving bank Profiles usually include: