IMPROVING THE POLICIES AND LAWS SYSTEM TO PROMOTE INTERNATIONAL TRADE FINANCE IN VIETNAM’S COMMERCIAL BANKS

MASTER THESIS IMPROVING THE POLICIES AND LAWS SYSTEM TO PROMOTE INTERNATIONAL TRADE FINANCE IN VIETNAM’S COMMERCIAL BANKS Major: International Trade Policy and Law Student: Hoang Thi

MASTER THESIS

IMPROVING THE POLICIES AND LAWS SYSTEM

TO PROMOTE INTERNATIONAL TRADE FINANCE IN VIETNAM’S

COMMERCIAL BANKS

Major: International Trade Policy and Law

Student: Hoang Thi Thu Phuong

Instructor: Associate Professor, Dr Dang Thi Nhan

Hanoi - 2016

LIST OF TABLES

LIST OF FIGURE

ABBREVITION LIST

PREFACE 1

CHAPTER 1: GENERAL THEORY OF POLICY AND LAW IN THE INTERNATIONAL TRADE FINANCE OF COMMERCIAL BANKS 5

1.1 International trade finance 5

1.1.1 International trade 5

1.1.2 International trade finance 7

1.1.3 The entities involved in international trade finance 8

1.2 International trade finance of commercial banks 9

1.2.1 Definition 9

1.2.2 Main types of international trade finance of commercial banks 10

1.2.3 Role of international trade finance of commercial banks 30

1.3 Applicable laws and policies system on international trade finance in commercial banks 31

1.3.1 Applicable laws system on international trade finance in commercial banks 32

1.3.2 Applicable policies on international trade finance in commercial banks 40 CHAPTER 2: REALITY OF APPLICABLE POLICIES AND LAWS SYSTEM IN TRADE FINANCE OF VIETNAM COMMERCIAL BANKS 43

2.1 International trade finance of the Vietnam commercial banks system 43

2.1.1 Reality of international trade finance at Vietnam Commercial Banks 43

2.1.2 Assessment of international trade finance of Vietnam‟s commercial bank system 49

2.2 Reality of policies and laws system on International Trade Finance of Commercial Banks in Vietnam 52

2.2.2 Reality of Applicable policies system in International Trade Finance of

Vietnam Commercial Banks 83

CHAPTER 3: ORIENTATION AND SOLUTION TO IMPROVE THE LEGAL SYSTEM AND POLICY IN ORDER TO PROPEL THE INTERNATIONAL TRADE FINANCE ACTIVITY IN VIETNAM’S COMMERCIAL BANKS 90

3.1 The need of improving law and policy in order to propel the international trade finance in Vietnam’s Commercial Banks 90

3.2 Orientation and viewpoint to improve laws and policies system to propel the international trade finance 92

3.2.1 Orientation and viewpoint to improve laws system to propel the international trade finance 92

3.2.2 Orientation and viewpoint to improve regulations system to propel the international trade finance 97

3.2.3 Orientation and viewpoint to improve policies system (interest rate policy and exchange rate policy) to propel the international trade finance 99

3.3 Solutions to improve the law system and policies to promote the International Trade Finance in Vietnam Commercial Banks 101

3.3.1 Solutions to improve the law system to promote the international trade finance in Vietnam commercial banks 101

3.3.2 Solutions to improve the regulations system to promote the international trade finance in Vietnam commercial banks 108

3.3.3 Solutions to improve the policies system (interest rate policy and exchange rate policy) to promote the international trade finance in Vietnam commercial banks 117

3.3.4 Providing specific regulations and guidance for new issues 118

CONCLUSION 120

REFERENCE 122

I plight that this thesis is my own study and there is no information used with unauthorized data from study of other authors All secondary information used in

my thesis has clearly sources and be downright noted I respond to accuracy of my own thesis absolutely

Due to limited time and knowledge, this thesis certainly faces flaws I therefore look forward to receiving the contributing ideas to complete this research

To complete this thesis I would like to sincerely thank Associate Professor, Doctor Dang Thi Nhan, who enthusiastically guided me under the process of conducting this thesis

Hanoi, December, 2016

Student: Hoang Thi Thu Phuong

LIST OF TABLES

Table 1: Total Factoring Volume by country in the last 7 years (in million euros) 64

Table 2: Interest rate of interbank market (value date: 28/11/2016) 84

Table 3: Interest rate of SBV 84

Table 4: Central exchange rate of SBV, value date 01/12/2016 86

Table 5: International trade finance fees at Techcombank 88

LIST OF FIGURE Figure 1: Rate of finance working capital loans for SME enterprises 45

Figure 2: Rate of finance working capital loans of Wholesale banking enterprises 45 Figure 3: Fees/charge collected from international trade finance services with SME enterprises 48

Figure 4: Fees/charge collected from international trade finance services with Wholesale banking enterprises 48

ABBREVITION LIST

AMLOCK : Anti-money laundering

BEA : Bill of Exchange Act

D/A : Against Document acceptance - D/A

D/P : Document Against payment -D/P

D/TC : Document Against other terms and conditions-D/TC

DBB : Draft buy back letter of credit

EUR : Currency of European Union

FCI : Factors Chain International

GATS : General Agreement on Trade in Services

ICC : International Chamber of Commercial

ISBP 745 : International Standard banking practice for the examination of

documents under documentary credits subject to UCP600 ISP 98 : International Standby Practices 1998

JPY : Japanese Yen

L/C : Letter of credit

L/G : Letter of Guarantee

MFN : Most Favoured Nation

SBV : State Bank of Vietnam

SME : Small and medium enterprises

UCC : Uniform Commerce Code

UCP 600 : The Uniform customs and Practice for Documentary Credits, 2007

Revision, ICC Publication No.600 ULB : Uniform Law for Bills of Exchange

UNCITRAL: United Nations Commission on International Trade Law

UPAS : Usance Payable At Sight Letter of credit

URC 522 : Uniform Rules for Collection 522

URDG : Uniform Rules for Demand Guarantee

USD : United State dollar

VND : Vietnam Dong

WTO : World Trade Organization

PREFACE

1 Rationale of study

Vietnam is on the path of deeper integration into the world economy In recent years, Vietnam has achieved a lot of success in the integration process leading the growth in Vietnam economy Obviously, opportunities and benefits of integration are tremendous However, the challenge is still significant Vietnam joyfully raised the victory wine when becoming the 150th member of The World Trade Organization („‟WTO‟‟) However, behind that joy is an enormous challenge posed

to both Vietnam economy in general and banking sector in particular According to statistics, banking sector is one of the most intensely competitive sectors after joining WTO The commercial banks have to compete not only with each other but more importantly, to compete with competitors which are the foreign banks with strong financial power and professional banking services Moreover, after joining WTO, both domestic and international trade have become ever more active Thanks

to that, Vietnam commercial banks have increasingly been focusing further on the development of international trade finance which is a traditional activity and brings

a great benefit to the bank, in order to meet the needs and inevitable development trend of the market In order to promote the international trade finance in Vietnam commercial banks, in addition to the efforts to improve the service quality of the commercial banks themselves, it is necessary to complete the system of policies and laws to create a clear legal framework for the international trade finance in Vietnam

commercial banks Therefore, I choose to research the topic "Improving policies

and laws system to promote the international trade finance in Vietnam’s commercial banks " in order to systematize the theoretical issues about policies and

laws in international trade finance, to assess the reality of policy and law of the international trade finance of Vietnam commercial banks in the current context, to give the orientation and views to complete the policy and law of international trade finance; and to subsequently propose solutions to promote and enhance international trade finance of Vietnam commercial banks

2 The purpose of the study

The general objective of the thesis is analysis the characteristic of policy and law of Vietnam on international trade finance in commercial banks, provide assessments include positive points and negative points, then to offer suggestions for Vietnam policy and law development To achieve this overall aim, there are specific tasks that the thesis needs to solve:

 Interpreting of basic theoretical issues of international trade finance, policy and law relate to international trade finance

 Analysing the situation of international trade finance at commercial banks, impact of policy and law on international trade finance services

 Assessing the overall situation of Vietnam policy and law on international trade finance, identifying the deficiencies that restrict international trade finance services at commercial banks

 Providing some suggestions for improvement of policy and law systems

to promote international trade finance in Vietnam commercial banks

3 Literature review

In recent years, with an increasingly important role in determining competitiveness, international trade finance has attracted the attention of researchers Studies of laws and policies system on international trade finance are also focused, out of which these following researches are typical:

The group of authors J F Hornbeck, Coordinator - Specialist in International Trade and Finance and Mary A Irace, Coordinator - Section Research Manager in

their paper „‟ International Trade and Finance: Key Policy Issues for the 113th Congress‟‟ (April 15, 2013) analysis policy issues cover such areas as: U.S trade

negotiations; tariffs; nontariff barriers; worker dislocation from trade liberalization, trade remedy laws; import and export policies; international investment, economic sanctions; and the trade policy functions of the federal government Congress also has an important role in international finance It has the authority over U.S financial commitments to international financial institutions and oversight responsibilities for trade- and finance-related agencies of the U.S Government

Other researches mentioned mostly about international trade law such as

„‟International economic law‟‟ of Jean M Wenger or about international trade finance such as „‟New challenges for State-backed International Trade Finance‟‟ of

Erdal Yalcin - (19th January 2015)

In Vietnam, before this thesis, there is just only study about international trade finance in commerce banks or study one law or policy relevant to international trade

finance such as „„Law on negotiable instruments the need to enact and some basic legal issues‟‟ of Doan Son Thai, „‟Circular 07/2015/TT-NHNN and 9 points to unlock the guarantee‟‟ of Ninh Giang and especially, textbook „‟Legal environment

in international trade finance‟‟ of Dr Dang Thi Nhan (2015)

In comparison with recent researches on the relevant topic, the thesis provides some new contributions:

 Analysing the current status of Vietnam‟s laws and policies system on international trade finance, compare with relevant international laws and policies

 Giving the overall assessment on compatibility of current laws and policies system on international trade finance in Vietnam commerce banks

Suggest solutions for improvement of policies and laws system to promote international trade finance in Vietnam commercial banks

4 The scope of the study

The studying object of the thesis is the status of laws and policies system on international trade finance and it is impact to international trade finance in commercial banks

The thesis mainly analyses the impact of laws and policies systems on international trade finance services in Vietnam commercial banks within the period

of recent 5 years Therefrom the thesis give recommendations for development of Vietnam‟s laws and policies system on international trade finance, promote international trade finance in commercial banks

5 Research methodology

The thesis uses qualitative research method: observe phenomena, analysis situations

and therefrom give appraisal about objective „‟laws and policies system on international trade finance‟‟

With the aforementioned research topic, this thesis is divided into three chapters:

Chapter 1 General theory of policy and law in the international trade finance activity of commercial banks

Chapter 2: Reality of policy and law in the trade finance activity of Vietnam commercial banks

Chapter 3: Orientation and solution to complete of policy and law system to promote the trade finance activity of Vietnam commercial banks

CHAPTER 1: GENERAL THEORY OF POLICY AND LAW IN THE INTERNATIONAL TRADE FINANCE OF COMMERCIAL BANKS

1.1 International trade finance

1.1.1 International trade

International trade can be simply understood as a transnational trafficking,

whether it is cross-border sale or spot trade with foreigners For example: Vietnam

exports rice to South Africa; Japan imports labors from Malaysia, US enterprises outsource the Vietnam companies for garments processing

Goods in international trade can be divided into 3 categories:

a The tangible goods, such as: materials, machinery, food, consumer goods of

all kinds

This is a key component and plays important role in the economic development of each country The activity of purchasing and saling of such

commodities is called “trade in goods”

b The intangible goods, such as: the technological know-how, patents,

inventions, computer software, technical designs, assembling services of equipment and machinery, tourism services These are components that their proportions are increasing in line with the explosion of scientific and technological revolution and the development of the service sector in the economy The trading activity of such

objects is called “trade in services”

c International processing: this type is necessary in the development of the

international division of labor and because of the differences in reproductive conditions between countries There are 2 main types of processing:

c1) Processing for oversea party: when the level of development of a country

is low, due to the lack of capital, technology, and market, enterprises often process for foreign party

c2) Outsourcing the oversea processing party: when a country has reached a

certain level of development, it will apply this method

One problem posed to international trade is that how the payment is made when parties trade with each other Indeed, the value of each deal is in a certain

currency, but it will be in a foreign currency for at least one of the trading parties For example, Indonesia imports oil from Venezuela and will pay for it in US dollars In this deal, the payment currency (US dollars) is foreign currency for both the buyer and seller In another case, a Japanese enterprise exports automobile to Vietnam and receives payments in Japanese Yen, then the payment currency is the domestic currency for Japanese enterprise but is the foreign currency for Vietnam Obviously, the party receiving payment in foreign currency needs to convert the foreign currency into local currency for domestic consumption expenditure purpose

In contrast, importer needs to exchange the local currency into foreign currency for payment Thus, international trade is inevitably accompanied by the currency exchange This exchange takes place in a market known as forex market But not every currency is possibly involved in international trade In order to be accepted as

a payment currency in cross-border transactions, such currency must be able to be easily converted and often must be backed by a strong economy such as the United State dollar of US, Japanese Yen of Japan or EUR of the European Union

Accordingly, international trade is not just the pure exchange of goods and services between countries but also involves in the exchange of currency as the payment currency is usually the foreign currency for at least one of the parties Hereby, we are able to draw a number of key characteristics of international trade as follows:

a Large-scale, rapid growth: the exchange of goods, services or processing is

no longer confined within a country and is constantly developed along with the growth in the opening up of world-wide‟s economy

b The industrialized countries maintain the dominant roles in international trade

c The position of the developing countries is also becoming more important

d International trade is growing more complex, demonstrated by the

appearance of new business methods such as e-commerce, buying and selling commercial debt, and leasing and more closely linked, but also more aggressively competitive

e Many controversial issues: trade protectionism, discrimination … (causing

damage to poor countries)

f The diversity of multilateral trade negotiation - the trend of globalization

and regionalization is irreversible

1.1.2 International trade finance

Commercial activity has always been a highly competitive field and very attractive, in which international trade is becoming more vibrant, derived from the growth in productivity, from the development of the means of communication This requires the simplicity and convenience in the procedure, the faster circulation of cash flow, and the faster circulation of the goods flow

The competition is derived from the deeper economic liberalization, the increase in the number of partners both domestically and externally Suppliers of products and services have been constantly seeking strategies to meet client's needs which are very demanding and diverse Moreover, clients are also very demanding

on the incentives regarding price and payment period Thus, the flexible terms of payment has become a fundamental part of any commercial transaction

Besides, risk is a factor that enterprises involved in trade must inevitably face, and especially in international trade with a multitude of risks derived from geographical distance, currency, the abnormal fluctuations in commodity prices, the differences in laws and business practices,… Therefore, trade finance has become

an indispensable part of international trade, and when trade finance is mentioned, it

is often referred to international trade finance

As such, when participating in commercial activities, businesses always desire

to get the multiple support to improve their competitiveness Therefore, the launching of international trade finance is an objective necessity to meet the market's development needs

Definition: International trade finance is a set of measures and forms of financial assistance, directly or indirectly, to businesses units in the commercial sector in the stages of the investment process, production, consumption, or provision of services

Considering the form of financing, the international trade finance is categorized into two forms: direct international trade finance and indirect international trade finance

- Direct international trade finance: is a set of measures or forms of financial support which has a direct impact on the business operations and usually carried out through making short, medium and long term loans to finance for importing and exporting of materials and consumer goods, changing the technology, assembling chain, and machinery or is carried out through the provision of monetary services, credit and banking, such as international payment services (letter of credit and collection), guarantees, factoring, forfaiting, and leasing

- Indirect international trade finance : is a set of effective measures or forms to create a favorable business environment for enterprises, such as interest rate policies

on import and export; exchange rate policy; stable legal environment which is in line with commercial practice; fees for collection; fees for using prestige; …

In summary: International Trade Finance includes the well preparation of the

financial means and the financial replacement (credit) to fulfill the payment obligations and the production in the external relations as well as the guarantee for the related payment process Basically, sponsored by commercial banks is the credit granted by banks However, commercial banks just sponsor a certain portion of capital per the total fund needed for the project or business, the remaining portion

must be the enterprise's owner‟s equity However, compared with the lending

function, financing by commercial banks also includes the distinguish characteristics, such as the responsibility of the financing recipient is higher than the borrower as in addition to the funding from banks, they must have a certain percentage of capital involved and the financed objects are the projects or businesses, thus, the financing objects can only be the legal entities with business registering

1.1.3 The entities involved in international trade finance

As mentioned in the definition section, international trade finance is basically the financial supports to promote the international commercial activity to be carried

out quickly and efficiently This is also the goal of many politicians, economic planners, financial and credit financial institutions Participating in international

trade finance includes the following subjects:

a Government

Planning and controlling of macroeconomic policies to finance the commercial activities with the desire to promote the development of domestic trade, create favorable environment for the business of domestic enterprises, protect for domestic enterprises participating in international trade activities

b Central bank

Central bank implements the financing activities in various forms such as loan refinancing, re-discounted, state guarantees and also the subject who makes the indirect trade finance policy of the State such as: pricing policies, interest rates, the exchange offers, currency devaluation With such an important role, the central bank becomes a major object of trade finance of each country

c The credit institutions (in this thesis scope, I focus on commercial banks)

The credit institutions, especially commercial banks, often carry out the international trade finance in the forms of loans, guarantees, discounting, factoring, leasing, documentary letter of credit, documentary collection, demand draft

d Enterprises

Enterprises also involve in trade finance activities under the forms of deferred payment, payment book, red clause letter of credit, advance payment The typical characteristic of this form is that enterprises provide short-term loans to partners

1.2 International trade finance of commercial banks

1.2.1 Definition

International trade finance of commercial banks is a set of measures and forms of financial assistance of commercial banks, directly or indirectly, to businesses units in the commercial sector in the stages of the investment process, production, consumption, or provision of services

1.2.2 Main types of international trade finance of commercial banks

1.2.2.1 Directly international trade finance

Definition 1 : Direct international trade finance: is a set of measures or forms

of financial support which has a direct impact on the business operations and usually carried out through making short, medium and long term loans to finance for importing and exporting of goods/services such as factoring, import-export loans, secured credit, discounting, forfaiting, leasing, …

a Factoring:

a1) Definition:

Factoring is a contract signed between the suppliers (exporters) and the sponsor (the Factor, factoring organizations), under which the providers can and will assign (sell) for sponsor organizations of receivables arising from export contracts

Sponsor organizations perform at least 2 of the following functions:

- Financing for suppliers, including loans and cash advances

- Providing records management services and debt collection related to accounts receivable

- Accept the risk of non-payment by the debtor

From a financing perspective, it is understood that factoring is a form of financing by the acquisition of short-term receivables from exporters With such functions and features, factoring can help exporter to receive the payment immediately after delivery, not worry about the risk of payment from the buyer as well as reducing the bookkeeping workload and foreign debt collection Factor will have the right to claim payment from the importer with the cost and risk that the two sides have agreed in advance

Factoring transactions usually include three main subjects: the exporter; the sponsor in export country (the export factorer); and foreign importers

1 Professor Trinh Dinh Xuan: International payment and trade finance, Publisher of Statistics, 2012

a2) The main types of factoring:

In reality, there are 3 main types of factoring: tenor factoring; ordinary factoring; tenor recourse factoring:

- Tenor factoring: The export factorer does not make the payment to the exporter at the time of purchasing of receivables Instead, the two sides agree the average payment period (term) for accounts receivables

- Ordinary factoring: In addition to 2 functions of managing and undertaking the payment risk in ordinary factoring, the Factor of export also performs the functions of advance financing for exporters a certain portion of account receivables

in accordance with a certain percentage (75% - 85%) The interest of this advanced financing amount is calculated based on the actual number of days with the interest rate usually being higher than the market interest rates After an agreed period, the Factor will return the remaining, after deducting financing costs and interest

- Tenor recourse factoring: This type of financing is identical to receivables financing of commercial banks Accordingly, the Factor of export does not completely buy the receivables but only bases on that for financing for exporters with recourse conditions, for example: the exporter shall repay the loan for Factor if

it fails in collecting the revenue Thus, the export Factor perform 2 functions, which are financing and providing the debt collection service for exporters

a3) Basic functions of factoring:

- The function of monitoring and collecting debts for goods: Organizations sponsored Modular factoring keep records of the exporter sales; the entire service charge Claiming importers with costs and risks borne importers; processing invoices and track payments for goods when due The liquidation of this Factoring grants negotiated by the two parties

- Pure financing function: Immediately after receiving the bill of exporters, donors will immediately pay factoring exporters a percentage of the invoice value (typically from 75% -85%) The rest will be funded organizations committed to pay after a certain period (after deduction of expenses, interest and commissions)

a4) Scope of application of factoring financing

- Overall, factoring financing is particularly suitable for the application of exporting transactions applying the book payment method that allows the buyer to

be entitled to supply credit or facing difficulty in collecting debts or payments from overseas buyers

- Factoring financing also contains risks: due to the commitment of factoring, all risks of non-payment from the importers are borne by the Factor, so factoring interest rates are usually higher than market rates

b Import-export loans

The practice of direct lending to exporting and importing enterprises is the traditional service of banks Banks often provide direct credit in local currency or in foreign currency for enterprises implementing export and import activities as a means of financial support to import and export materials, machines, equipment, consumer goods In terms of maturity, loans can be classified into 2 categories: short-term loans with the maturity less than 1 year; medium and long term loans with the maturity from 1 to 10 years In terms of lending purpose, there are 2 kinds:

b1) Import Credit: Banks can provide short-term or medium-term credit to

importers depending on imported objects Short-term import credit is applied in case of importing materials or consumer goods Medium-term or long-term loan is provided in case of importing machines and equipment, depending on the kind of goods Basically, the terms of loans have to be compatible with the value of the imported goods

Import credit is an important additional source of working capital for importers, because normally, the value of the contract is much larger than the working capital of the importers Import credit is needed when the importers have to pay the contract value but the goods have not arrived yet, or when the goods have arrived but have not been sold, or when machines and equipment are in the installation or testing process thus are not put into production to produce goods and generate revenue…

The advantages of import credit are: high profits, high revenue in lending

activity, increased revenue in export-import credit due to higher service fee (payment service, opening L/C) and developing more products thanks to export-import payment

However, import credit also has some drawbacks: Firstly, regarding the currency used in payment Normally, importers make payment in foreign currency but sell the goods in local currency The lending bank is therefore exposed to exchange rate risk To minimize this risk, based on the assessment of inflation and changes in the future interest rates, banks can offer loans in foreign or local currency Secondly, import credit is influenced by factors related to foreign trade and international payments, thus an import project is normally exposed to greater risks than a domestic credit contract of the same value

b2) Export credit: Depending on the nature of the goods exported, credit is

granted with different terms Export credit can be classified into 2 types, namely pre-shipment credit and post-shipment credit

+ Pre-shipment Credit: Technically, it is the activity where banks offer working capital loan for companies to purchase, produce, process goods prior to export The lending activity occurs before goods delivery Possible risks lie in the situation where the goods cannot be exported, or exported but exposed to risk in delivery or payment, or in case borrowers do not use the loan for the purpose agreed with the bank

+ Post-shipment credit: is granting credit to exporter when they have export documents After offering loans for exporter to purchase goods, banks can continue

to offer loans for exporters when they have delivery note to collect the payment for the previous loans Post-shipment loan is collected from payment of overseas export-import contract Post-shipment credit is normally conducted by banks discounting or purchasing delivery documents By this method, exporters can offset their capital contribution to continue business operation during the time from delivering goods to collecting payment The basis of this method is that banks have total control over exporting documents which can be used to claim money and the

attached bills Conditions to receive this loan are the ability to recourse exporters or the person making advance payment and a report on the exporting documents These documents have to be valid and are not allowed to transfer to the 3rd party Banks usually make agreement on credit line with their customers (exporters) for their lending purposes

The loan ratio depends on exported goods and payment ability of customers,

in which 70-80% depends on the value of the goods Per conditions of this loan, banks have the right to recourse towards exporters when it cannot collect money from importers Whether it is export or import credit, order papers or primary documents bills of lading, invoices of import goods, insurance contracts are collateral to the bank Therefore all valuable documents must have fraudulent transfer clause or a clause for advanced transfer payment to the bank providing credit If these documents do not allowed transferring, the borrower has to use other forms of collateral

Discounting commercial papers is a type of short-term funding that bank offers to the beneficiary of the commercial paper This is conducted by the beneficiary transferring the ownership of the commercial paper (which has not reached maturity) to the bank and receive an amount equivalent to the face value of the commercial paper minus the interest rate and the commission fee In international trade, the beneficiary is normally the exporter

Advantages: This type of financing enables exporters to collect capital quickly

for daily business activity instead of waiting for the commercial paper matured Financing commercial paper discount in international trade is normally applied for export-import activities in which payment is made by open account or collection method

The technique of discounting commercial paper is simple The bank will buy the right to receive value of the commercial paper from the legitimate beneficiary prescribed on the commercial paper The money used to buy this right is the financing discount and is calculated by the remaining value of the commercial paper after subtracted by interests and commission

e Forfaiting

Forfaiting is a buying debt or payment liability of exporter when the debt is not paid at maturity by the debtor or the guarantor Essentially, forfaiting is using open market fund to grant credits to goods suppliers with a fixed interest rate This method is to finance for projects or the export of material with time of payment in the future There are normally 4 parties in forfaiting transaction: exporter, importer, guaranteeing bank which is normally in the importer‟s country and forfaitor The importer make payment to the exporter by debentures with terms from 5 to 7 years which have been guaranteed for payment by the importer‟s bank This guarantee is irrevocable, unconditional and transferable The exporter sell these debentures to the forfaitor, which will ask the guaranteeing bank to collect payment from the importer

In case the importer do not make payment, it will force payment from the guaranteeing bank The forfaitor can sell these debentures in secondary credit market

Advantages: forfaitors issue this type of credit on the basis of irrevocability Hence, the exporters do not bear payment risks but transfer them to forfaitor even when importers or guaranteeing banks go bankrupt Forfaiting is a kind of financing which have greatest advantage for exporters as they can avoid:

- Credit risk of non-payment by guaranteeing banks or importers

- Political risk (war, coup) causing guaranteeing banks or importers to lose payment ability

- Risks in transferring money when the government in the importing country imposes limit on transferring money overseas

However, forfaiting has certain disadvantages such as: the forfaiting rate can

be very high (possibly 7-10%/year), importers have to pay high fee for the guaranteeing bank (2-3%/year) and make deposit of at least 10% during the life of the debenture

f Leasing

Leasing is a form of financing in which the property‟s owner (the lessor) permits another person (the lessee) to use his/her property in a certain amount of time (term of the lease) following prescribed regulations that both parties have previously agreed in the lease, and the lessee has to pay the lessor a certain amount, called rent

Leasing is an international industry and any tangible properties that can be traded can become leasing objects Properties that are commonly used for leasing include: transportation vehicles, machinery and equipment, real estate… The lessors are usually manufacturers, banks, or financial leasing companies Regarding financing in the form of leasing, international financial leasing is the most developed International financial lease is a contractual agreement that allows one party (the lessee) to use the property owned by the leasing company (the lessor) and make periodic payments that are specified The lessee can rent from local leasing company, with this company importing leasing objects from foreign manufacturers,

or can rent directly from foreign leasing company

The crux of the international financial leasing contract is that the legal ownership of such property (of the leasing company) is separated from the economic use of such property (held by the lessee) The leasing company focuses

on considering the capability of the lessee in generating revenues sufficient to pay rent, not based on credit history, asset or capital of the lessee This type of agreement is very suitable for small and medium business that are newly established and have not had financial statements for several years

In summary, financial leasing business brings a lot of benefits for the economy, the lessors and the lessees comparing to the traditional credit business:

- For the economy:

This is a medium and long term source of fund for the economy in creating basic sources of investment, whether it is a small business or an aircraft manufacturer that needs a huge capital This business contributed a lot in providing information about capital markets and is a very efficient means of allocating limited capital for new investments in capital construction Leasing business supports for the modernization of industry and small businesses

- For the lessor:

 Property ownership gives the lessor a solid guarantee In countries where ineffective mortgage laws interfere with the lending of banks, the leasing business provides the advantage of not requiring any collaterals other than the property itself rentals and the procedure of asset recovery is also simpler because property ownership remains in the hands of the lessor

 Use the capital for the right purpose, because the lessor purchase the equipment directly from the supplier, there should be no loopholes to the lessee to use the capital for other purposes

 The relatively simple system of documentation helps to reduce transaction costs and allows leasing companies to achieve higher rental revenues effectively

- For the lessee:

 The mortgage method is simpler and requirements for the balance sheet are less stringent, which means that small and medium enterprises are more likely to receive financial support through leasing rather than bank loans

 Low transaction costs because there is no need for collateral, the collateral

is the leasing property itself

 Just need a small amount of money to counterpart Lease purchase can finance for machinery costs at a higher rate than bank loans, often only require a small deposit

 The leasing contracts can be established in accordance with the financial needs of the lessee

 The tax incentives In many countries, the lessee may charge the full amount of tax payable on the taxable expense compared to just charge banks interest on expenses In addition, the lessor can transfer the tax benefits associated with their depreciation to the lessee through the reduction of financing costs Governments allow leasing business to be granted the tax incentives because governments are aware that leasing allows small and medium-sized companies to access to investment

1.2.2.2 Indirectly international trade finance

Definition 2 : Indirect international trade finance : is a set of effective measures

or forms to create a favorable business environment for enterprises, such as interest rate policies on import and export; exchange rate policy; stable legal environment which is in line with commercial practice; fees for collection; fees for using prestige; …

a2) Involving parties:

- Party requesting to remit (Applicant):

- The Payer: importer, drawee, payer of cost of services, payer of dividends, coupons, bank interest, payer of fines and compensations

- The Remitter: investors, oversea nationals sending money back home, person transferring operational funds for non-governmental and foreign non-governmental organizations, person transferring remittance arising from factor income

- The Beneficiary: is the recipient, assigned by the Applicant

- The Remitting Bank: is a bank in the country assigned by the Applicant

- The Intermediary Bank, also known as the Paying Bank: the correspondent banks of the Remitting Bank in the Beneficiary‟s country

a3) Case of application:

Legal documents adjusting the remittance method: currently there is no international law as well as international practices of the ICC that adjust this payment method The transfer of money, of course, will be governed by the national laws of the remitter countries and the correspondent agreement between the Bank and the country, if any

Remittance method is a part of other payment methods, usually the end of the other methods such as the method of collection, recording, bank guarantee, documentary credit, standby credit, letter of authority for purchase However, this method is also applied independently

As an independent payment method, this method is often applied in commercial payments:

non Transfer payments to service providers abroad,

- Transfer of remittances, money for students abroad,

- Transfer money for investment abroad,

- Transfer funds for activities of governmental and non-governmental organizations abroad,

- Transfer money arising from factor income,

- Transfer bank loan interest, dividends, coupon abroad,

- Transfer fines and compensations abroad

The remittance time must be specified in the treaties, contract or other agreements There are two types of property remittance:

- Remittance before the beneficiary or payee fulfill the obligations specified in the treaties, contracts or other agreements, for example:

+ Transfer of deposits to ensure implementation of import contracts, bid security, construction contracts

+ Transfer advance payments to exporters before shipment This type of remittance is regarded as a credit that the importer provides to the exporter

+ Remittance of partial prepayment before the exporter delivers the goods to pay for trial production, design

- Remittance after the beneficiary or payee has fulfilled all obligations stipulated in the treaties, contracts or other agreements

In terms of commercial finance, the method of remittance is a fundamental, first-step service in financing commercial activities The method of remittance helps business payments become fast, secure and convenient In some cases, such as transferring advance payment to the exporter before delivery, is considered a credit that the importer gains from the exporter

In international trade, remittance method only benefits importers, because only after the importer has received the goods that he/she has to transfer payment to the exporter Therefore, the exporter needs to find solutions to prevent risks of not paying or late, insufficient payment

a4) Scope of application:

As stated above, the remittance method only benefits the importer, therefore only in business ventures that both parties have a good, prestigious, long-term business relationships, or one party wants to give credit to the other, businesses should adopt remittance payment method In addition, remittance method can also apply on international non-commercial payments, because the characteristic of non-commercial transactions is that, only after there is the result of the completion of the non-commercial transaction that there are figures to specify the amount of pay

b Collection

b1) Clean collection

Clean collection is a payment method in which people have some receivables from the payment instruments but cannot collect themselves, so to entrust to the bank to collect money inscribed on such payment instruments, does not include the condition of transferring documents

The parties participating in the collection method include:

- Principal: The party requesting for collection

- Remitting bank: The bank based in trustor‟s country, the bank accept for the trusty to transfer the collection instruments to its agent bank at oversea to collect payment

- Collecting bank/Presenting bank: the agent bank of remitting bank and also the bank that present the payment instruments to claim payment

Clean collection is usually applicable in the following cases

- Beneficiaries and the payer must trust each other, because the payment can

be made or not entirely depends on the willingness of payer Bank is only an intermediary collection

Bank plays only an intermediary role in collecting money for customers The possibility of successfully collecting money, fully collecting money, timely collecting money, is not the bank's responsibility Therefore, this method contains many risks for the principals

- Clean collection method is not well applied in may trade settlement, because

it does not guarantee for the exporters' interests, because the receipt of goods

completely separates from the payment process, so the consignee can receive goods but does not pay or delay to pay

- To limit the risk when applying this method, principals need to have sanction clauses prescribed in the underlying contracts, collecting order and collecting mail, such as: in an underlying contract, both parties need to agree a specific time to pay

or accept to pay when the bank presents payment instruments If payment is deferred, payer shall be subject to late payment interest In collecting order and collecting mail, similar sanction is also need to be stipulated

b2) Documentary collection

Documentary collection is a payment method in which people have some receivables from the payment instruments but cannot collect themselves, so to entrust to the bank to collect money inscribed on such payment instruments with the condition that the bank will give documents if the drawee makes payment, or accepts payments or performs other prescribed conditions

documentary collection is a method which is primarily applicable in international trade payment since this method is limited, preventable and risk avoidable compared to the the clean payment method Exporters entrust banks to control their documentation on their behalf in the condition that Document Against payment -D/P, or Against Document acceptance - D/A or Document Against other terms and conditions-D/TC

The parties participating in documentary collection include:

- Principal: Beneficiary,

- Remitting bank: The bank based in trustor‟s country, the bank accept for the trusty to transfer the collection instruments to its agent bank at oversea to collect payment,

- Collecting bank/Presenting bank: the agent bank of remitting bank and also the bank that present the payment instruments to claim payment,

- Drawee: Payer

Financing basis: Both methods of Clean- collection and Documentary

collection that banks offer trade finance for businesses on the following basis:

- In the clean collection: Basically, exporters provide credit to importers for goods as the payment is made later than the time of delivery With the provision of collection services, banks have supported in the granting and receiving credit between the exporters and the importers

- In the documentary collection, the bank helps exporters to manage the risks

of that payment is not made, not fully made, or not timely made that the remittance or clean collection are not avoidable

c Letter of credit (L/C):

Documentary credit is an agreement in which a bank (the bank issuing L/C) in accordance with the client's request (person requesting for the issue of letters of credit) shall pay a certain amount to another person (beneficiary of letters of credit's amount) or accept the draft signed by this person in the range of that amount when this person present to the bank a payment documentation which is fully comply with

the provisions and conditions set out in the letter of credit

In the documentary letter of credit, there are 4 main parties participating:

- Party asking to issue letter of credit (Applicant): is importer

- Party who is beneficial from letter of credit (Beneficiary): is exporter

- Issuing bank hay Opening bank of letter of credit: is the bank issuing LC as requested by importer This is bank representing for importer and is responsible for making payment to exporter

- Notifying bank (Advising bank): the bank is responsible for notifying and sending the original version of letter of credit together with the amendments of L/C

to the exporter This bank is usually the agent bank or branch of issuing bank, based

in exporter's country

Features of L/C

- Documentary letter of credit involves in two independent contractual relationship: the relationship between people opening letters of credit and he issuing bank and the relationship between the issuing bank and the exporter

- The documentary letter of credit method has two basic principles:

First, the independence principle of the letter of credit: letter of credit is totally

independent with commercial contracts or any other underlying agreement for letters of credit, even when L/C refers to these contracts

Second, the principle of strict compliance of documentation: when banks check the presented documents, the banks shall only pay for the beneficiary when such documents strictly follow the requirements of the L/C Any deviation from this principle may impose risks for banks

- The parties participating in the transactions purely base on the documents other than goods Presented documents is the only basis for the bank to decide to pay or refuse to make payment to beneficiaries of letters of credit, is also the only basis for the importer to refund or refuse to pay for the bank

- Documentary letter of credit relatively ensures the interests of the seller and the buyer in the international trading contract In the trading relationship, buyers always want to receive the goods before payment In contrast, resellers want to immediately receive payment after delivery Document in L/C is the most reliable evidence When the sellers succeeds in preparing the document, they are deemed to have fulfilled their obligations of goods delivery When the buyer successfully receive the documents, they can be assured that the goods have been successfully delivered

Basic functions:

Documentary letter of credit is the most common method of trade finance in Vietnam as well as in the world With the provision of L/C service, Vietnamese commercial banks do not merely support the enterprises in implementing common payment transactions, but also assist businesses in controlling payment risk effectively The banks are responsible for checking the validity of the presented documents before making the payment Moreover, to serve the interests of the business and operation, banks also consult their client (enterprises) for or not for catching error of the presented documents before making payment

Payment by L/C helps commercial activities to carry out quickly and smoothly In the event that goods arrive to port but the documents still have not been presented by the exporter and the buyer (importer) therefore does not have

documents to receive goods, bank will quickly issue a guarantee for buyers to quickly receive goods

Advantages:

Payment by L/C is an effective method and can ensure the interests of both importer and exporter The importer is always afraid of not receiving the goods but payment has already been made Meanwhile, exporter is afraid of not getting payment when goods has been delivered This issue can be easily dealt with by means of documentary credit L/C is a letter in which the issuing bank is committed

to pay for the exporter when he fully receives a set of validated documents Thus, documentary credit or payment by L/C enables parties to easily trust each other, promotes international trade to flourish, create the basis for foreign trade to accelerate sharply This is really a platform for international trade

d Letter of Guarantee - L/G

L/G is a method of modern banking services, appeared in the mid-60s in the

US domestic market After that, in the early 70, guarantees started being used in international trade transactions Since then, with the wide applicable in various types of transactions (financial and non-financial, commercial or noncommercial), the position of the L/G is more and more firmly strengthened

It can be asserted that most of the big deals domestically as well as internationally are supported by bank guarantees Sales of this service has amazingly increased in almost every country in the world

Bank guarantee is a written commitment by the credit institution (the guarantor) on the implementation of financial obligations on behalf of the client (the guaranteed) when the customer fails to perform or improperly perform the obligation which is committed to the guarantee Customers must receive and repay debts to credit institutions with the amount which was previously paid

This is a method of international trade finance in order to eliminate the losses

of the guarantee beneficiaries due to the breach of obligations of the relevant partners

Bank guarantee has the following features:

- Is the interdependent relationship

In a bank guaranty, there is generally a combination of independent contracts: The contract between the principals and the guarantee, the contract between the guarantee and the guarantor, and the contract between the principals and the guarantor

 Guarantor: is the party issuing the Letter of guarantee - L/G committing to compensate to beneficiary if the guaranteed fails to fulfill their obligations stipulated in the L/G

Guarantors typically include commercial banks, investment and development banks, policy banks, central banks, ministries of finance, the State Treasury, credit institutions, intermediary financial institutions such as insurance companies, finance companies, factoring companies, forfaiting companies ,

 Principal or party requesting the L/G: Customer is obliged to make payment, including:

+ Exporters require the guarantor to issue: L/G to perform the export contracts, L/G to refund the advanced money, L/G to refund the deposit, L/G for warranty of machinery

+ The importer requires the guarantor to issue: L/G to make payment for import contract, L/G to receive the goods without receiving the original bill of lading, LG import tariffs

+ Borrowers require the guarantor to issue L/G

+ Bidder require the guarantor to issue LG to commit to bidding participating

 The beneficiary of the guarantee, also known as the principals: are organizations and individuals at home and abroad have the right to benefit from the guarantee commitment of the credit institutions

- Bank guarantee is dependent to the contract:

Although the purpose of bank guarantee is to reimburse for the beneficiary the losses generating from not performing the contracts of the principals in the contractual relationship, but the payment in the guarantee just purely bases on the terms and conditions prescribed in the guarantee contract

- The compliment of the guarantee:

When the beneficiary requests the credit institutions to make payment, credit institutions are responsible for checking the documents presented by the beneficiary Credit institutions have the right to refuse to make payment if the documents are not valid or the conditions of the guarantee are not complied

Guaranteed customer must meet the following conditions:

- Having full civil legal capacity, civil act capacity and civil responsible capacity and civil responsible capacity in accordance with law

- The purpose of requesting the credit institution to guarantee is legitimate

- There are legitimate collateral for guaranteed obligations

Types of collateral for guarantee include: deposit, pledge assets, mortgage assets, guaranteed by the third parties' assets and other collateral measures in accordance with regulation

Basis of trade finance

- Guarantee is really a financially funding tool for beneficiary In many cases, through the guarantee that the beneficiaries are not required to make deposit, fast capital recovery Therefore, even banks do not directly fund, but with the provision of a guarantee, banks helped customers to enjoy the advantages of fund as when they make a true loan

- Guaranty Bank also has the function of promoting the implementation of the contract Since exporter is the objects of requesting to open guarantee, so that if he violates the contract, he must compensate losses to the importer, thus, bank guarantee has forced exporters to perform the contract seriously in order not to be required to compensate On the other hand, due to the responsibility of the commitment for compensation, issuing bank should also regularly check and supervise

to make a pressure to perform the contract, reduce violations from exporters

- With the form of a bank guarantee, the banks do not help enterprises to carry out payment transactions or provide loans to enterprises However, in these cases,

by the bank‟s prestige, banks guarantee for the beneficiary a guarantee of performing contract, making payments, or doing a certain obligation This enables

enterprises to build confidence in the partner, the parties feel assured to implement the deals

e Stand-by L/C

According to International Standby Practices-ISP 98, stand by L/C is defined

as “is an irrevocable, independent, documentary, and binding undertaking when issued…” ; “…issuer undertakes to the beneficiary to honour a presentation that appears on its face to comply with the terms and conditions of the standby in accordance with rules supplemented by standard standby practice…” and “issuer honours a complying presentation made to it by paying the amount demanded of it

at sight, unless the standby provides for honour: (i) by acceptance of a draft drawn

by the beneficiary on the issuer, in which case the issuer honours by: (a) timely accepting the draft; and (b) thereafter paying the holder of the draft on presentation

of the accepted draft on or after its maturity ; (ii) by deferred payment of a demand made by the beneficiary on the issuer, in which case the issuer honours by: (a) timely incurring a deferred payment obligation; and (b) thereafter paying at maturity; iii by negotiation, in which case the issuer honours by paying the amount

demanded at sight without recourse”

Types of stand-by L/C

- Performance stand-by: A type of stand-by L/C which is issued to ensure the obligation to perform the contract other than the obligation to make payment, covering the losses incurred by the violation of the party requesting to open the letter of credit during the performance of underlying contract

- Advance payment standby: Ensure the responsibility of the advanced payment that beneficiary has granted for party requesting for opening L/C

- Bid Bond/Tender Bond standby: ensure the responsibility of performing the contract of party requesting stand by letter of credit when he won the bid

- Counter standby: This L/C can issue a separate L/C or other commitments of the beneficiaries specified in the counter stand-by L/C

- Financial standby: A type of stand-by L/C guarantee for the responsibility of returning the borrowed amount

- Direct-pay standby: A type of stand-by L/C guarantee for the payment responsibility when the payment obligations in the underlying contract is due Its feature is quite similar to financial stand by, but regardless of occur violate or not This type of stand by L/C still has not corresponding bank's guarantee

- Insurance standby: A method of stand by L/C making guarantee for obligations of insurance or reinsurance of party requesting the issue of L/C This is the issuing bank's commitment to pay the insurance premium should the party requesting the L/C fail to pay insurance or reinsurance premiums timely Thanks to this stand-by L/C, the party requesting the issue of L/C can temporarily not yet pay premiums, so can able to use this capital into the business That will have a great meaning if the premium is huge (in international trade, insurance premium normally accounts for 10% of goods value)

- Redundant commercial Credit (Commercial standby): A type certified mail backup credit guarantees are issued in order for the person responsible for opening the Letter of credit to pay for goods or services in case of non-stick accounting estimates by the coal no other payment modalities

Scope of stand-by L/C

- Stand-by L/C can be used as a guarantee of the issuing bank to ensure the implementation of commercial contracts, outsourcing contracts, joint venture contract or cooperation or guarantee for the participation of bid

- In addition, stand-by LC is often provided to guarantee the loans of domestic loan contracts such as in the construction or international loans contracts such as trade finance for importers or to ensure the repayment of the advance payment

- In some cases, stand-by LC plays the role as a commercial letter of credit in guarantee the payment- capacity The use of certified mail backup credit often proves the business partners can trust each other wall, the standby credit payment is only reluctantly and for increased safety Therefore, certified mail backup credit very promising development as a tool to guarantee payment when doing business relationship between the parties has grown to a certain extent

Besides, it is the fact that stand-by LC is used together with other guarantees and payment methods For example: A deal in which the seller and the buyer agreed

to make payment by a sight LC However, two parties can also agree that the seller requests to issue the stand-by LC to the buyer to ensure on-time delivery and the goods quality as specified in the contract…

- In the leasing contracts, the lessor also requires the lessee to have a stand-by

LC issued by the issuing bank ensuring the rent payment is made timely Stand by

LC can also be used to guarantee the financial obligations in accordance with award

1.2.3 Role of international trade finance of commercial banks

a For the economy

- Promoting the development of the entire national economy, paving the way for the development of international trade Thanks to trade finance, import and export goods in accordance with the market‟s need is transferred regularly and continuously leading the increase of the economy‟s dynamism, stabilizing the market Because it does not only support businesses in term of capital to import machine and equipment for production but also the consumer goods necessary for living, meeting the increasing needs of domestic consumers

- Contributing to the modernization of the national economy from promoting the import of technological lines, modern machinery and equipment, creating conditions for enterprises to increase their production scales, increasing productivity, increasing competitiveness, reducing product costs

- Aligning the national market with the international market

b For the enterprises

b1) For the exporter

Exporters need the fund for producing as per orders, trading for export, and financing for other expenses: advertising cost, promotion, delivery costs Financing services before delivery have an important role in the success of businesses In addition, exporters need reputation in trading with foreign partners, such as the ability to complete the transaction, the ability to supply goods and

construction on time, the quality of goods the bank guarantee, therefore, is necessary to help businesses to assert their business reputation

b2) For the importer

- Banks will lend businesses to import modern equipment and machinery, change innovative technical equipment, production lines, processing of export goods with advanced technology in order to improve the quality of products, decrease the product costs, create the competitive ability with imported goods and

be profitable business

- The Bank provides a range of different financing methods for importers such

as issuing letters of credit, financing loans for import, financing for intermediaries purchase, payment guarantee, bill of lading guarantee ….which subsequently help importers to ensure the payment capacity to the exports, improve the efficiency in carrying out deals and gradually businesses strengthen their positions, building a firm trust in customers and foreign partners

1.3 Applicable laws and policies system on international trade finance in commercial banks

The law system 3 is the overall legal norm have the intrinsic unity relationship with each other, are classified into the legal institutions, the legal profession and is expressed in the legal text promulgate by the State or International Organization The law system on international trade finance include international law that Vietnam accept to apply or Vietnam is a contracting party of that treaty; domestic law and regulations

The policy system 4 is a set of policies and actions of the government that it covers the objectives that the government wants to achieve and how to accomplish those goals These targets include the comprehensive development in the fields of economy - culture - society - environment The policies system on international trade finance include interest rate policy; exchange rate policy and fees/charges policy

1.3.1 Applicable laws system on international trade finance in commercial banks

a International laws

a1 The WTO Agreement in financial service

The WTO framework for trade in financial services consist of: (1) General rules common to all services sectors (GATS); (2) Two special annexes concerning the financial sector; and (3) national schedules of market access and national treatment commitments and lists of MFN exemptions

The main immediate importance of financial services agreement is systemic and political It reinforces the multilateral system and will form a basis for further and continued multilateral liberalization in the sector Multilateral binding of financial sector liberalization should ensure that the countries will not backtrack on commitments without due consultation with their trading partners

Vietnam is a member of WTO; therefore, financial services in general and international trade finance in particular must comply with the rules of the GATS According to annex of financial service of GATS, banking activities of financial service including:

„‟…(v) Acceptance of deposits and other repayable funds from the public; (vi) Lending of all types, including consumer credit, mortgage credit, factoring and financing of commercial transaction;

(vii) Financial leasing;

(viii) All payment and money transmission services, including credit, charge and debit cards, travellers cheques and bankers drafts;

(ix) Guarantees and commitments;

(x) Trading for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise, the following:

(A) money market instruments (including cheques, bills, certificates of deposits) ;

(B) foreign exchange;

(C) derivative products including, but not limited to, futures and options;

(D) exchange rate and interest rate instruments, including products such as swaps, forward rate agreements;

(E) transferable securities;

(F) other negotiable instruments and financial assets, including bullion

(xi) Participation in issues of all kinds of securities, including underwriting and placement as agent (whether publicly or privately) and provision of services related to such issues;

(xii) Money broking;

(xiii) Asset management, such as cash or portfolio management, all forms of collective investment management, pension fund management, custodial, depository and trust services;

(xiv) Settlement and clearing services for financial assets, including securities, derivative products, and other negotiable instruments;

(xv) Provision and transfer of financial information, and financial data processing and related software by suppliers of other financial services;

(xvi) Advisory, intermediation and other auxiliary financial services on all the activities listed in subparagraphs (v) through (xv) , including credit reference and analysis, investment and portfolio research and advice, advice on acquisitions and

on corporate restructuring and strategy

5 Source: Annex of financial services of GATS

a3 Convention Providing a Uniform Law for Bill of exchange and Promissory Note (ULB 1930)

Uniform law for bill of exchange and promissory note (ULB) was be applied

at France on 1930 Vietnam was French colony at that time, therefore, ULB is also

be applied in our country from 1937 up to now Today, ULB be applied for all European countries (except the United Kingdom) Many other countries, although not party to the Geneva Convention, but still build their draft law is compatible with the ULB 1930

b Domestic laws

b1 Popular domestic laws

Uniform Commerce Code (UCC 1995/1962) - United State of America

Today, the Uniform Commercial Code (UCC) was adopted in all 50 states of United State of America (although the state of Louisiana, a state law gave people, has not adopted the terms of sale) UCC includes the basic terms of sale, leasing, transferable documents, bank deposits and bank collection, Telegraphic transfers, letters of credit, high volume sales, investment securities, and secured transactions

Bill of Exchange Act (BEA 1882) - United Kingdom

Bill of Exchange Act (BEA 1882) applies for United Kingdom and its colony Besides ULB 1930, BEA 1882 is also a famous domestic laws and has extensive sphere of influence

b2 Vietnamese laws

Law on credit institutions

Law on credit institutions 2010 (valid 01/01/2011) provides the establishment, organization, operation, special control, reorganization and dissolution of credit institutions; and the establishment, organization and operation of foreign bank branches and representative offices of foreign credit institutions and other foreign institutions engaged in banking operations

Law on Negotiable Instruments

Law on Negotiable Instruments issued on 29/11/2005, valid on 01/07/2006 This Ordinance regulates negotiable instrument relationships with respect to