Enhancing fund mobilization at lien viet post bank ninh binh province branch

Lunghwa Universityof Scienceand Technology Department of Business Administration Thesis for a Master’s Degree Enhancing fund mobilization at Lien Viet Post Bank – Ninh Binh Province B

Lunghwa Universityof Scienceand Technology

Department of Business Administration

Thesis for a Master’s Degree

Enhancing fund mobilization at Lien Viet Post Bank – Ninh Binh Province

Branch

Researcher : Tran Quynh Hoa

Supervisor 1 : Ass Pro PhD Nguyen Van Dinh Supervisor 2 : Assistant Professor Tseng Kuo-An

December 2018

Lunghwa University of Science and Technology

Approval Certificate of Master's Degree Examination Board

This is to certify that the Master’s Degree Examinations Board has approved the thesis Enhancing fund mobilization at Lien Viet Post Bank – Ninh Binh Province Branchpublished by Ms.Tran Quynh Hoa in the Master Program of Graduate School of Department of Business Administration

Master’s Degree Examination Board

Board Members：Mr Tsan ChiaChi

Mr Dao Tung

Mrs Nguyen Thi Hong Hanh

Chair： Assistant Professor Tseng, Kuo-An

Date： 2018 ／12／12

ABSTRACT

Thesis Title：Enhancing fund mobilization at Lien Viet Post Bank – Ninh Binh

Province Branch

University：Lunghwa University of Science and Technology

Graduate School：Department of Business Administration

Researcher：Tran Quynh Hoa Advisor：Nguyen Van Dinh

Keywords:fund mobilization, degree of development …

Based on actual requirements, theoretical basis, documents and research on the development of commercial banking in general and the development of capital mobilization at commercial banks in particular, I have chosen thesis for my thesis:

“Enhancing fund mobilization at Lien Viet Post Bank – Ninh Binh Province Branch” In this thesis, I use secondary sources from reports of Lien Viet Post Bank – Ninh Binh Province Branchto analyze and compare the development ofLien Viet Post Bank services and those of other local banks

In thesis, the author simultaneously use the main data sources collected from the customer surveys to study the satisfaction of customer service quality At the same time, the factors that test the author belong to the customer affect the development of commercial bank services

Research methods: During the course of this project, I have used the following research methods:

Desk research, Data collection, Data processing method Therefore, the thesis leads

to a general view of the development of the bank for Lien Viet Post Bank- Ninh Binh Province Branch in the period 2015-2017 In addition, the analysis of the data also shows some degree of development of bank capital mobilization at branches and offers advantages and shows the existing disadvantages Investigative analysts point to the

causes of these problems and firstly point out the limitations that exist not only from external factors but also from internal factors of banks

The thesis concludes wwith the introduction of service-oriented development at banks and offers solutions for futher development Therefore, I believe that my research will not only give the bank a more general view of the current development of capital mobilization but also find some good solutions for this work at the branch

ACKNOWLEDGMENTS

During the study of this thesis, the author has received enthusiastic support from agencies, organizations and individuals The author would like to express the deepest thanks to all the collectives and individuals who have facilitated the author during research process of this thesis

First of all, I would like to express my sincere thanks to the School Management Board of Lunghwa University - Vietnam National University, Hanoi, the Department of Training and Postgraduate of the University, and the teachers, who have provided knowledge to the author during the learning process

The author sincerely thanks to the teacher of Scientific Instructor Associate Professor PhD Nguyen Van Dinh, who has enthusiastically instructed, guided and made great contributions to the author to complete this thesis

The author also sincerely thanks the Board of Directors and the employees at Lien Viet Post Bank - Ninh Binh Province Branch for facilitating and assisting the author in the process of collecting data, documents and spending time to answer the interview, respond by inquiry to help the author complete the thesis

Although the author has tried in the research process; due to limited conditions, the thesis will have inevitable defects, so the author looks forward to receiving comments and feedback to continue to improve

Thank you !

Author

Tran Quynh Hoa

TABLE OF CONTENTS

ABSTRACT Error! Bookmark not defined

ACKNOWLEDGEMENT iii

TABLE OF CONTENTS ivv

LIST OF TABLES vi

LIST OF ABBREVIATIONS……….vii

LIST OF FIGURE……… viii

1 INTRODUCTION 1

1.1 Rationale 1

1.2 Research objectives 1

1.3 Objects and scope of the thesis 2

1.4 Research methodology 2

1.5 Thesis structure 3

2 THEORETICAL BASIS AND LITERATURE REVIEW 4

2.1 Theoretical basis 4

2.1.1 Introduction to commercial banks 4

2.1.2 Fund mobilization of commercial banks 9

2.1.3 Factors affecting fund mobilization of commercial banks 20

2.2 Literature review 24

3 RESEARCH METHODOLOGY 31

3.1 Data collection 31

3.1.1 Primary data collection 31

3.1.2 Secondary data collection 31

3.2 Data processing 31

4 CURRENT SITUATION OF FUND MOBILIZATION AT LIEN VIET POST BANK – NINH BINH PROVINCE BRANCH 35

4.1 Introduction to Lien Viet Post Commercial Joint Stock Bank (Lien Viet Post Bank) - Ninh Binh Branch 35

4.1.1 Overview of the Bank 35

4.1.2 Business situation of Lien Viet Post Bank - Ninh Binh Province Branch 36

4.2 Fund mobilization at Lien Viet Post Bank - Ninh Binh Province 40

4.2.1 Fund mobilization function and structure 41

4.2.2 Fund mobilization policy 41

4.2.3 Fund mobilization methods applied 42

4.2.4 Fund mobilization results 45

4.3 Assessment of fund mobilization at Lien Viet Post Bank - Ninh Binh Province Branch 57

4.3.1 Achievements 58

4.3.2 Limitations and reasons 59

5 PROPSED SOLUTIONS TO INPROVE FUND MOBILIZATIIONFOR LIEN VIET POST BANK – NINH BINH PROVINCE BRANCH 65

5.1 Development orientation of Vietnam Lien Viet Post Bank in 2018 and the following years 65

5.1.1 General orientation 65

5.1.2 Orientations for fund mobilization 65

5.2 Opportunities and challenges for Lien Viet Post Bank – Ninh Binh Province Branch in the current context 66

5.3 Solution to improve the mobilization of capital at NHLPB NB 66

5.3.1 To improve product quality, simplify procedures and reduce transaction processing time………

66 5.3.2 To develop banking services for capital mobilization support 67

5.3.3 Human resources 69

5.3.4 To plan and implement capital mobilization strategies 70

5.3.5 Interest rate policy 73

5.3.6 Marketing policy 73

5.3.7 Technology policy 77

5.3.8 To strengthen the management, administration and internal supervision 78

6 CONCLUSION 812

REFERENCES 823

LIST OF TABLES

Table 2.1 Advantages and disadvantages of the form of fund mobilization through

deposits 12

Table 2.2 Advantages and disadvantages of fund mobilization by issuing debt instruments 16

Table 4.1 Some main performane indicators of the Lien Viet Post Bank Ninh Binh Branch 2015 -2017 36

Table 4.2 Business results in 2015 - 2017 39

Table 4.3 Size and growth of capital mobilization 46

Table 4.4 Structure of mobilized fund in the form ofLien Viet Post Bank - Ninh Binh Province Branch 48

Table 4.5 Structure of fund mobilized by the term ofLien Viet Post Bank - Ninh Binh Province Branch 50

Table 4.6 Bank’s lending 52

Table 4.7 Balance of fund mobilization and use 54

Table 4.8: The balance between fund mobilization and use of short-term fund 55

Table 4.9: Fund mobilization interest rates, average short-term loans in VND 56

Table 4.10 Fund mobilization interest rates, average short-term loans in USD 57

LIST OF ABBREVIATIONS

G CNH- HĐH Industrialization - modernization

L NHLPB NB Lien Viet Post Bank - Ninh Binh Province Branch

LIST OF FIGURES

Figure 1 Structure of Lien Viet Post Commercial Joint Stock Bank ( Lien Viet Post Bank - Ninh Binh Branch ) 36

1 INTRODUCTION

1.1 Rationale

Fund mobilization is one of the basic activities of commercial banks (including fund mobilization, lending and investment, and provision of other banking services) Successful fund mobilization is the key to the success of the bank Especially, in the context of increasing competition, regulations of the law on increasing charter capital

In Vietnam, this issue is becoming increasingly important, with the ratio of assets

on equity of the banks at 10-12/1; the trading competition has become increasingly fierce when there is the participation of the major banks in the world Therefore, the requirement on maximum exploitation of potential sources of fund in economic organizations and people in order to have a rich fund with the optimal fund structure to meet the development demands of the society and of the commercial banks, financial institutions in the country is always a big challenge

As one l of large commercial banks in Vietnam, with a nationwide network of operations, since its inception, Lien Viet Post Bank has been carrying out multi-purpose and effective business activities in the field of construction and development of national economy Lien Viet Post Bank has defined the common goal of maintaining and promoting the role of leading commercial banks, as the mainstay of fund investment for the national economy and the main force in the financial market

Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) - Ninh Binh Branch was inaugurated and put into operation in 2011 Since its inception, the Board of Directors has determined the business direction of the branch Branches must be sustainable, safe and effective growth, first of all focused on raising capital mobilization Starting from the important position of the fund source for the economic development and operation of commercial banks in general and the operation of Lien

Viet Post Bank in particular, the topic: “Enhancing fund mobilization at Lien Viet Post Bank – Ninh Binh Province Branch” was selected to study the thesis

1.2 Research objectives

The thesis aims to:

- Synthesize and generalize some general theoretical issues on fund mobilization

of commercial banks

- Ana lyse situation of fund mobilization of Lien Viet Post Bank – Ninh Binh Province Branch during the period of 2015 – 2017

- Proposing some solutions to increase fund mobilization in Lien Viet Post Bank – Ninh Binh Province Branch

1.3 Objects and scope of the thesis

- Study the basics of external fund mobilization of Lien Viet Post Bank – Ninh Binh Province Branch

- Analyze the situation of fund mobilization of Lien Viet Post Bank – Ninh Binh Province Branch through 2016, 2017 and 2016 in the following aspects: scale, structure, stability, cost of fund and suitability for use of fund

Data collection

For data collection, I focused on interviewing methods and document copying methods This method is used to collect the necessary information on the bank's short-term fund mobilization activities, as well as to collect the necessary data for the research topic The most commonly used method of collecting information is direct interview

technique combined with copying documents of bank documents

Data processing method

I have used a number of statistical analysis methods such as descriptive statistics, comparative methods, structural analysis methods, trend analysis and index analytical methods for analyzing and evaluating short-term fund mobilization of the bank

2 THEORETICAL BASIS AND LITERATURE

REVIEW

2.1 Theoretical basis

2.1.1 Introduction to commercial banks

2.1.1.1 The definition, importance and function of commercial banks

Definition

The bank is one of the most important financial institutions in the economy Banks can be defined by the functions, services or roles which they perform in the economy However, these factors are constantly changing In fact, many financial institutions, including securities companies, securities brokers, support funds and leading insurance companies, are all trying to provide financial services of the bank In contrast, the bank

is also expanding its coverage of service supply such as real estate, brokerage, insurance and other new services Therefore, giving accurate definition of commercial banks is not easy

According to Peter S.Rose ( 2008 ) in "Managing Commercial Banks," the Bank is

a financial institution that provides a broad portfolio of financial services, particularly credit, saving and payment service - and performs most financial functions compared to any other business organization in the economy (Quote: Managing Commercial Bank, Peter S.Rose, 2008)

According to the World Bank, A bank is a financial institution that accepts deposits primarily in demand or withdrawals with a short-term notice (non-term deposits, term deposits and savings) (Quote: Journal of Development Economics 2003 -2004-2005)

US law says that "Any organization that provides a deposit account which allows customers to send money on demand and lend to business or commercial lending will

be considered as a bank." (Quote: Journal of Banking 2003 - 2004 - 2005 - 2006)

According to Law 6-41 of French, "enterprises or establishments regularly receiving public funds in the form of deposits or other forms of money used for discount, credit or financial operations will be considered as a Bank " (Quote: Bui Thi Thuy, Phan Thi Dieu Huong, Experiences of Restructuring Commercial Banks in Some Southeast Asian Countries, Workshop Documents on Restructure of SOCBs , SBV

, Hanoi 2005)

According to the Law on Credit Institutions in Vietnam, No: 47/2010/ QH12 issued

by the National Assembly on June 16, 2010 in Clause 3, Article 4- Interpretation of terms, Chapter I - General provisions, then: "A commercial bank is a type of bank that carries out all banking activities and other business activities in accordance with this Law for the purpose of profitability." (Quote: Clause 3, Article 4, Chapter I, in accordance with the Law on Credit Institutions in Vietnam, No.: 47/2010/QH12)

In fact, many financial institutions, including securities companies, securities brokers, support funds and leading insurance companies, are all trying to provide financial services of the bank In contrast, the banks also deal with competitors (non-bank financial institutions, microfinance institutions and people's credit funds) by expanding the scope of service offerings, targeting real estate and securities brokerage, participating in insurance, investing in mutual funds and performing many other new services

From the definitions above, it can be withdrawn that Commercial banks are monetary trading organizations operating mainly and regularly deposits from customers with the responsibility to repay and use that money for borrowing, performing discount operations and acting as a means of payment Commercial banks are one of the financial institutions that typically provide diversified financial services with basic operations such as receiving deposits, lending and providing payment services In addition, commercial banks also provide other services to satisfy the maximum demand for service products of the social

Under Section 2- Operations of Commercial Banks, Law on Credit Institutions in Vietnam, No: 47/2010 / QH12 issued by the National Assembly on June 16, 2010; the commercial banks have three main functions: (Quote: Section 2, Law on Credit Institutions in Vietnam, No.: 47/2010/QH12, 12th National Assembly)

+ Financial intermediation function

Financial intermediation is considered as the most important function of commercial banks When acting as a financial intermediary, commercial banks act as a bridge between people with surplus fund and those who need fund With this function, commercial banks play the role of borrowers, lenders and profit takers, the difference between interest rates and lending rates and contributes to the benefits of all participants: depositors and borrowers Through this transfer, commercial banks play an important role in promoting economic growth, increasing employment, improving living standards and stabilizing government revenue and expenditure At the same time, this function also plays an important role in regulating monetary circulation and curbing inflation Loans are always the most important activity of commercial banks, it brings the greatest profit for commercial banks

+ Intermediary payment function

The commercial bank acts as a treasurer for businesses and individuals, making payments at the request of customers such as deducting money from their deposit accounts to pay for goods or services or to enter into accounts with customer deposits, collecting sales proceeds and other revenues under their orders

Commercial banks provide customers with convenient payment facilities such as checks, money orders, collection orders, debit cards, payment cards, credit cards Depending on the needs, customers can choose the appropriate payment method As a result, economic operators do not have to keep their money in their pockets, bring their money to meet creditors, and meet with payers, whether nearby or far away, they can use a certain method to make payments Therefore, economic operators will save a lot

of money, time and ensure safe payment This invisible function has accelerated the flow of goods, accelerated the pace of payments, and the speed of fund flows, thereby contributing to economic development

+ Money creation function

Money creation is an important function, reflecting the nature of commercial banks With the goal of finding profit as a key requirement for its survival and development, commercial banks with their specific business characteristics have invisibly been functioning to generate money for the economy

The function of money creation is implemented on the basis of two other functions

of commercial banks as financial function and payment function Through financial

intermediation functions, the bank uses the mobilized fund to lend, the amount of loans used by customers to buy goods, payment of services; while the balance on the payment deposit account of customer is still considered as a part of the transaction money, which they use to purchase goods, pay for services With this function, the commercial bank system has increased the total payment means in the economy, meeting the needs of payment of the society A commercial bank create money depending on the required reserve ratio of the SBV applied to commercial banks Thus, the SBV can increase this ratio when the money supply into the economy is large

2.1.1.2 Main activities of commercial banks

Any country with developed economy, developing economy, even not developed, then banking activities also have a great impact on the operation of the economy In the market economy, the activities of the bank are as follows:

First: A commercial bank is a place of focusing temporarily idle fund in society to

supply the needs of the economy, thereby transferring money to fund to invest in production development and increase the efficiency of fund operation In society, there

is always an excess of fund and lack of fund in temporary period Individuals and organization with temporary idle money want to keep the money in the safest and most effective way Meanwhile, individuals and organizations with fund needs want to borrow fund to serve their business Therefore, the commercial bank is the best financial intermediary to perform the function of bridge between supply and demand The bank is the best place where people with surplus fund can deposit money safely and effectively and vice versa, it is also a place to meet the fund needs of individuals and businesses

Secondly: The operation of commercial banks contributes to enhance the efficiency

of production and business of enterprises, thereby contributing to the development of the economy The commercial bank, as a financial intermediary, functions as a bridge between the supply and demand of fund in the monetary market, contributing to speeding up the operation of the economy, facilitating the operation of individuals and organizations Individuals and organizations have reduced the costs of seeking investment fund for their business and can also use the services provided by the bank to their clients to accelerate their operations The loans from the bank of businesses have urged enterprises to have optimal production plan and economic efficiency to be able to pay interest and fund for the bank The optimal production plan set by the enterprise

must be through the thorough inspection and evaluation of the bank to minimize the risk that may occur

In contrast, the excess individuals and organizations can safely deposit money into the bank as bank is an address that can preserve money in the safest and most effective way Customers can be assured of the safety and profitability of their fund and can withdraw their money whenever they want It is possible that the interest rate that banks pay to customers is lower than the investment fund in areas such as: buying stocks, investing in business but the deposit into bank has the highest safety factor In addition, services provided by the bank to customers include: money transfer, alternative payment, consulting services will create more convenience for customers

in their business

All of bank's activities are the basis for enhancing the performance of enterprises in particular and the economy in general

Thirdly: Commercial banks through their activities contribute to the

implementation of the objectives of national monetary policy such as: stabilizing the financial market, foreign exchange market, stabilizing and growing the economy With the tools that the SBV uses to implement monetary policy: Discount policy; required reserve ratio of the State Bank of Vietnam for commercial banks: credit interest rates or free market operations Banks play an important role in the implementation of national monetary policy Commercial banks can change the amount of money in circulation by changing the interest rate of credit or through the open market operations, thereby contributing to anti-inflation and stabilizing purchasing power of the domestic currency

Fourthly: The commercial bank, by its own activities, implements the allocation of

funds between regions, thereby facilitating equal economic development between different regions within a country Different economic zones have different development The phenomenon of fund surplus or temporary fund shortage between regions occurs frequently Therefore, the issue is how to best implement the mobilization effect of fund and the internal transfer of fund within the bank has done well this problem

Fifthly: The commercial bank is a bridge between the economies of the countries

and the world, facilitating the integration of the domestic economy with the economy in the region and the world economy With the globalization of the economy in the region and the world economy along with the policy of expanding the international cooperation

on socio-economic of countries in the world, activities of commercial banks are opened and promoted the expansion of economic activities of domestic enterprises With their widespread operation, banks are capable of receiving fund from individuals and foreign organizations, contributing to securing fund for the domestic economy, creating conditions for domestic enterprises to expand their operations abroad in an easier, more efficient way thanks to international payment, guarantee

It is from the expansion of international relations that the domestic economy has penetrated into the international market and enhanced its competitiveness with other countries in the world

In general, along with the growth of the economy, commercial banks are increasingly positioned more important role in promoting the production process, circulation of goods, speeding up rotation fund in the economy, contributing to the stability and development of the whole economy of a country Vietnamese commercial bank system during the past 20 years of reform has played an important role in repelling and curbing inflation, gradually stabilizing the value of the currency and exchange rate, contributing to promote investment activities, develop production and business, shift the economic structure towards industrialization and modernization

2.1.2 Fund mobilization of commercial banks

2.1.2.1 Definition, role of fund mobilization

b, Role

The commercial bank is the financial intermediary with the basic function of borrowing for lending In any form, commercial banks always put their profits first To achieve that, the essential tool that banks must have is fund However, a bank can not operate well if its business operations depend entirely on borrowings In contrast, a bank with abundant mobilized fund will be completely self-determined in its business

activities, captured business opportunities Abundant fund mobilization also helps banks

to diversify their business activities in order to disperse risks and earn high profits for the purpose of safety and efficiency That fund is the basis for bank to create the initiative in business

Fund mobilization in commercial banks has the following main roles:

- Fund mobilization is the basis for the bank organizing all business operations

For banks, fund is a basis for commercial banks to organize all business activities With the characteristics of bank activities, which are not only the main business means but also the main business objects of commercial banks Bank is a trading organization

of special commodities in the market, which is currency So it can be said: fund is the first point in the business cycle of bank Therefore, banks have to take care of fund growth during their operations

- Fund mobilization determines credit scale and other activities

Depending on the size and structure of mobilized fund, banks will decide the size and structure of investment With large fund mobilization, banks are able to expand the scope and volume of lending not only in the domestic market but also in lending beyond the territory of a country (lending in the international market ) In contrast, due to the limited fund capacity, small banks do not react quickly to the fluctuation of interest rates, affecting the ability to attract investment fund In general, a bank with abundant fund will meet the demand for loans, easily expand the credit market, increase solvency and other services of the bank

- Fund mobilization determines payment capacity anden sure the prestige of banks in the financial market

In the market economy, in order to survive and expand the scale of its operations, the bank must have a good reputation in the market That credibility must first be expressed in the willingness to pay when the customer requests The higher the solvency of the bank is, the greater the available fund of the bank is In order to satisfy the above conditions, the banks must have a fund source satisfying simultaneously both requirements: quality and volume Therefore, in order to mobilize fund to use effectively, then in the business, the banks need to expand the scale of credit and improve the quality of credit

- Fund mobilization is one of the keys to competitiveness of banks

Large fund is a favorable condition for the bank to expand credit relations with

economic sectors in terms of size, volume, time and duration of lending Especially today, the appearance of a series of credit institutions has made the competition between banks become more severe With an abundant fund, bank will actively offer reasonable interest rates to attract customers With strong financial capacity, banks will actively mobilize fund with the lowest interest rates, but lending with the highest interest rates can maximize profits but still ensure attracting customers to their banks

2.1.2.2 Forms of fund mobilization (sources of fund)

Fund mobilized from banks include:

- Equity

- Deposits

- Borrowing from other credit institutions

- Mobilize fund by issuing debt instruments

Details of fund sources and fund mobilization are as follows:

a, Deposit

- Definition

Fund mobilized from the deposit is the fund mobilized from the economic organizations and individuals by the banks in the society through the process of performing credit operations, payment of other business operations and fund to business Fund mobilized from deposits includes fund mobilized from deposits and fund mobilized from savings deposits

- Role

The purpose of this type of deposit is to secure the assets, make payments in production, business, consumption, convenience in paying in cash For banks, type of payment deposit is often in large fluctuations, so the Bank only apply a certain percentage for lending, therefore, the banks often apply at low interest rates

- Characteristics

The nature of the mobilized fund is the property from different owners, the bank only has the right to use without ownership and takes responsible for repayment of both principal and interest on term (for term deposits ), or when they have the need to withdraw funds to pay (for non-term deposits), mobilized fund plays a very important role in all business activities of the bank

Mobilized fund is always fluctuating, so the bank is not allowed to use all fund in business but have to reserve with a reasonable rate to ensure solvency

- Advantages and disadvantages of the form of fund mobilization through deposits

Table 2.1 Advantages and disadvantages of fund mobilization through deposits

on withdrawal terms

For the banks, term deposit has an appointment to a certain day which will be returned to the depositor, this will help the bank to mobilize fund in the periods to make plans for lending, therefore, the use of this source for lending is very effective

The interest rate for mobilizing this fund

is high and depending on the deposit period and the amount

deposited by the customers

Non-term

deposits

Non-term deposits are types of deposits deposited in banks without prior agreement on withdrawal time

This type of deposit has low interest rates, which reduces the bank's cost of fund mobilization

Because this type of deposit is are very volatile, customers can withdraw at any time, so the bank does not actively use this amount, the bank must reserve a guaranteed amount

to be able to pay immediately when the customer needs Savings

Term savings

deposit

Term savings deposit

is the deposit agreed

This is a stable source

of fund and the ratio is

The purpose of this type of deposit is to

on term and withdrawal term,

quite high, the Bank does not have to provide services to customers

keep the interest rate high

Non-term

savings

deposit

Non-term savings deposit is the deposit which can be

withdrawn at any time but not used in

payment instruments

to pay for other people

( Source: Apex Management Training Center Website: www.apex.edu.vn )

b, Borrowings from other credit institutions

- Definition

Borrowings of the State Bank:

This is a loan that addresses the urgent need of commercial banks In the case of a shortfall, commercial banks often borrow from the State Bank The main form of lending by the state bank is rediscounting (or refinancing) Normally, the State Bank shall only discount for quality notes (short maturity, high repayment capacity) and in accordance with the objectives of the State Bank in each period In the absence of notes, the State Bank shall lend to the commercial banks in the form of refinancing according

to a certain credit line

Borrowings from commercial banks and other credit institutions

This is a source of inter-bank borrowing and loans from other credit institutions in the interbank market Banks that have excess reserves will probably be willing to lend

to other banks for higher interest rates In contrast, banks are short of reserves that need immediate borrowing to ensure liquidity So, the source of borrowing from other banks

is to meet the need for reserves and urgent payments and in many case, it supplements

or replaces borrowings from the State Bank

Other sources

Apart from the above sources, the bank also mobilizes fund through sources of trust, sources of payment, other sources Commercial banks carry out entrusted services such as entrusted lending, entrusted investment, entrusted allocation, entrusted disbursement and collection These activities create trusts at the bank In addition,

non-cash payment activities may form a source of payment (check during payment, deposit to open L/C .) Other debts, such as unpaid taxes, unpaid wages, also contributed to raising mobilization fund in commercial banks

Banks are responsible for many debts

c, Fund mobilization by issuing debt instruments

- Definition

Debt instruments are certificates issued by commercial banks to mobilize fund, which determines the obligation to pay a sum of money in a certain period of time, conditions for payment of interests and other commitments between the commercial bank and the buyer Issuance of valuable documents consists of two forms: Bank bills and bonds

- Role

By fund mobilization, credit institutes are able to concentrate large amounts of fund

in a short time This form of fund mobilization is usually used after the credit institution has received large loan projects, with the specific disbursement time of the customer For fund mobilization in the form of issuing debt instruments, credit institutes often have to pay higher interest rates than the deposit interest rates Therefore, this operation

is only carried out when the credit institutes is short of fund In case of fund mobilization in this form, credit institutions must base themselves on their output ability

to decide on the mobilized fund volume, interest rate, term and method of fund

mobilization Together with the mobilized fund from the deposit, the fund mobilized from the issuance of debt instruments also holds an important position, occupying a large proportion in the total fund of the credit institutes This is a source of fund that has

a great impact on the cost and business expansion of credit institutes This fund is tended to increase in line with the trend of economic growth and stability, with the improvement and enhancement of service quality of credit institutions, with increasing demand for payment of customers

- Characteristics

Fund mobilization through the issuance of debt instruments means that the credit institutions borrow fund from organizations and individuals through the issuance of debt instruments with the approval of the State Bank or the Commission State Securities Commission

This transaction has the following characteristics:

Firstly, the legal nature of the issuance of debt instruments by credit institutions to the public is actually an act of borrowing money from customers rather than the act of

"selling" debt instruments to customers This is because, in this transaction, the credit institution has no ownership of the debt instruments it intends to issue, so it can not play the role of seller On the other hand, before the debt instruments transferred to the customer by the credit institution as a certificate confirming the creditor's rights and the credit institution has not yet received the funds transferred by the client; these certificates are of no practical value, meaning that they can not be exchanged for money

or other assets with a value equivalent to the amount written on the face value of the certificate It shows that only when the customer accepts the exchange of the certificate with the credit institution by the amount equivalent to the face value of the certificate, then the certificate is really valuable and reflects its names called as "valuable paper" or

"false fund"

Secondly, on the subject of the transaction; although the name of the transaction is

"the issuance of debt instruments", the subject of this transaction is not debt instruments issued by the credit institution, it is the funds which the customer agrees to transfer the ownership to the credit institution provided that the credit institution must repay to the customer after a certain period of time, together with the interest agreed upon by the parties Theoretically, although it is not the subject of the transaction, these certificates are considered as the legal form of the transaction, as well as evidence to prove the legal

rights and obligations of the parties in the transaction On the other hand, from an economic point of view, these certificates are also considered as a kind of "bank money", but it is not money issued by the central bank, but money created by a credit institution in the process of fund mobilization, through the function of "making money"

of credit institutions In practice, debt instruments issued by a credit institution to the public may be short-term debt securities with a maturity of less than one year, for example short-term deposits; bank notes or bills of credit, or long-term debt securities (with a repayment term of one year or longer, for example, long-term deposit certificates or bank bonds) The distinction between these two types of debt certificates

is primarily intended to determine how they are issued and circulated after they have been issued on the market by the credit institution (to whom it is issued and sold, where and how ? )

Thirdly, on the legal status, when issuing debt instruments for borrowing of customers, the credit institution is the borrower or the debtor and the customer "buys" the debt instruments as a lender or creditor of a credit institution In spite of being a lender, however, since this transaction is established by a credit institution and its customers through a fixed-term loan agreement, in principle, the lender can’t withdraw fund in advance of term as in case of term deposit at a credit institution (subject to penalty interest rate applicable to credit institutions receiving deposit) If you want to withdraw money before the maturity, the only way is that the owner of debt instruments (the lender) must sign a contract to transfer the certificate to another person (for example, can "sell" to the commercial bank by discounting or selling to other organizations and individuals on a regular basis in the monetary market or securities market

- Advantages and disadvantages in the form of fund mobilization by issuing debt instruments

Table 2.2 Advantages and disadvantages of fund mobilization by issuing debt

instruments

Issuance of debt instruments

Bank Bank bills are debt Fast mobilization Shorter term and

bills/notes instruments issued by banks

to mobilize savings in society for the purpose of business in a certain period

The term of the bill depends

on the bank's mobilization policy, which may be: 3 months, 6 months, 12 months, over 12 months

time, large amount

of money

higher interest rates on savings deposits

Bank bonds

Bank bonds are medium and long-term instruments for fund mobilization into the bank It is a kind of securities that can be used for trading on the stock market In our country, bonds have term of more than one year When the Bank issues bonds, the Bank aims to use such fund to invest in long-term projects such as: invest in projects, joint venture projects, long-term loans

For customers, bank bonds are an investment that brings a stable and less risky income compared to corporate shares

For the bank, fund raised from bonds with low interest rates and stable for

Due to low interest rates and long time, it is difficult to attract customers Interest rates of this type are usually higher than other deposits

( Source: Apex Management Training Center Website: www.apex.edu.vn )

2.1.2.3 Fund mobilization assessement criteria

Fund mobilization of the bank is assessed through the following main criteria:

- Size and structure of fund sources

- Cost of fund mobilization

- Ability to meet fund needs

a) Size and structure of fund sources

Fund mobilization can not be effective when the mobilized fund has not reached a certain scale according to the bank's mobilization plan or does not meet the demand for fund for business; The fund structure of banks is not reasonable between short-term, medium-term and long-term deposits, between foreign currency and local currency For banks, because each fund has its own strengths and weaknesses in exploiting and mobilizing, so the fund changing structure will lead to a change in the output structure: loans, investments, guarantees and the change in profits, risks in business The structure

of mobilized fund depends not only on a part of the bank's plan but also on the external factors that require banks to regularly research market access

The volume of mobilized fund reflects the size of fund The size of the fund will enable the bank to expand its business In total fund of the bank, the size of fund mobilization is the proportion of the highest and the most important role Having raised

a large amount of fund, what the bank needs to focus on is its steady growth rate as it may now be large scale, but it will be difficult for banks to give the decision on loan or investment if the bank does not control, it can not predict the trend of cash flow-in and cash flow-out

Mobilized fund of the bank must have stable growth in quantity to satisfy the bank's demand for credit, payment and other business activities If banks mobilize a large amount of fund, but not stable, often having large cash flow being withdrawn, then the amount of fund for investment and loans will not be large, effective mobilization of fund is not high, then it often must face the liquidity problem

This index is evaluated by: the increase and decrease of mobilized fund and the amount of fund mobilized from term deposits fund increased steadily over the years, increasing steadily, reaching the target fund is a stable source of fund growth

Specifically, this index is the comparison of Credit Surplus of total fund source, forms of mobilization and growth of the next year compared with the previous year b) Cost of fund mobilization

Mobilization interest rates are always the top concern of economic operators Depositors want a high interest rate, borrowers want low interest rates As intermediaries acting as the bridge between the two objects, the bank must find ways to adjust the interest rates so that it is most reasonable for the parties, which is important to ensure the interests of the bank Therefore, in fund mobilization, each bank tries to

apply every possible means to find the fund, so that the average cost of fund mobilization is minimal and use that fund to lend to minimum interest rates which are acceptable in the market The mobilization cost is assessed through the system of average deposit interest rates index (calculated by weighted average of interest rates by sources by volume of each source), mobilizing interest rate of each source and competitive interest rate

On the other hand, with an average cost of interest, diversification in interest rates for each type of fund mobilization is necessary The diversification of interest rates makes the effectiveness of the interest rate policy that banks offer If the interest rate policy is appropriate and effective, the bank will minimize the costs while still finalize the fund plan

fund cost management is a frequent and important activity of every bank, as each change in fund structure or interest rate can change the cost of interest, which in turn affects net income of the bank

- Average fund mobilization interest rate (2)

Total cost of actual interest

Other costs: Besides the cost of interest, in the process of fund mobilization, the bank also bears some other costs such as: staff expenses, professional printing costs,

material costs, transaction costs, etc These costs often take account for a small share of total cost, but if saved, it also reduces the cost burden for banks

c) Ability to meet fund usage needs

In assessing the ability to meet business needs, it is often necessary to use comparable indicators of mobilized fund to meet credit, payment and other needs so that mobilized fund can be met how much, should the bank needs to borrow how much to satisfy that need To achieve this goal, the bank must have a reasonable fund structure The structure of mobilized fund here includes fund structure in short and medium term, long term, fund structure in local currency and foreign currency, according to resident deposits and corporate deposits The reasonable structure of fund can meet the maximum demand for fund, without the irrational situation between the mobilized fund and the need to use fund For example: When analyzing the fund structure to assess the ability and scale of attracting fund from the economy of commercial banks, we have the index:

- Ratio of fund mobilization/ loan turnover (3)

Loan turnover

2.1.3 Factors affecting fund mobilization of commercial banks

2.1.3.1 Objective factor

a, Political - law environment

Banking business is one of the branches subject to strict supervision of the law and the authorities of the government Banking activities are strictly regulated by the law The legal environment gives bank a variety of opportunities and challenges For example, the removal of restrictions on fund mobilization and local currency deposits will pave the way for foreign banks to develop products to mobilize local currency deposits and local currency lending products

In addition, the banks are subject to many laws: civil law, law of credit institutions, SBV law, regulations of the government Therefore, fund mobilization of the Bank is affected by the State's policies and policies, such as: monetary policy, interest rate,

finance, credit The change of these policies will affect the ability to attract fund and quality of the source of commercial banks

b, Economic environment

Economic environment is very important, it affects the ability of income, expenditure, payment and demand for fund and deposits of residents and greatly affect the mobilization of the bank

Dynamics of the economy is the first basis for depositors to give the decision on deposit money into the bank, hoarding gold, dollars or purchasing other assets Under conditions of unstable economy, prices and purchasing power of currency are fluctuated, people tend to hoard gold, dollars or other types of assets instead of bringing the money to deposit at commercial banks In contrast, a stable economy with reasonable inflation rates will make people have a better look and the trend of deposits

in commercial banks will be increased The change of factors: economic growth rate, inflation rate, per capita income change, investment policy, government savings will affect the consumption and saving of the population and from that, it will affect the ability to attract fund of commercial banks For example, as per capita income increases, consumption and savings increase and people send money to the bank will increase and vice versa

c, Population environment

Population environment is very important because it not only creates demand and structure of population demand for bank products & services, but also forms the basis of bank's distribution system At the same time, the population environment is the basis for building and regulating fund mobilization of the bank Population environment has a great impact on the bank's fund operation Therefore, the bank must carefully study the population environment before launching the fund mobilization strategy in order to mobilize fund in line with bank's demands, quality, quantity and duration

d, Geographic environment

The geographic environment is defined by international regulations to form the country and define each country in the formation of provinces, districts, communes, cities, rural areas depending on the geographical area, the bank will decide to place more or less points of fund mobilization and decide on mobilization strategies in each area because each region has different population and conditions

In crowded residential areas, large cities with many business and economic

development, commercial banks can mobilize faster and more than the underdeveloped regions Especially in the exciting markets with high sensitivity to interest rates and other utilities due to the fund mobilization of commercial banks, the expansion and supplement of fund of commercial banks will be more favorable than the rural or mountainous regions

e, Environmental technology

Technological change has a powerful impact on the economy and society The banking activities are one of the activities subject to the strong impact of technology, banking activities are inseparable from the development of technology, especially information technology

Technology has a great impact on the development of bank, it gives bank many opportunities but also brings a series of new challenges New technology allows bank to innovate business processes, distribution methods, develop new products thanks to technology that fund mobilization activities are improved, developed, shorten time of trading and performing accurate business from which, it helps the bank to gain the ability to attract more fund, more customers and increase the income and prestige of the bank

f, Socio-cultural environment

Each country has its own culture, which is the factor that makes the identity of the peoples such as: habits, psychology For banks, fund mobilization activities are influenced by the cultural environment Specifically in developed countries, people have the habit of depositing money into banks for the benefit of paying interest and in their subconscious mind, the bank is an indispensable and essential part of the economy Therefore, it is not difficult for banks to mobilize idle fund from residents and economic organizations In contrast, in developing countries like Vietnam, fund mobilization of the bank is very difficult because people in Vietnam are not used to using banking services On the other hand, the bank has not really created the confidence of people after a series of events such as: Money exchange of 1985 1986, inflation rate of 600-700% caused many people lost all money, a series of other events related to banks: Textile Nam Dinh, Minh Phung EPCO made the bank suffered great damage The bank

is not focused on marketing, advertising people are not aware of the policy of the State, bank's activities; therefore, people still have a lot of money, but they do not want

to deposit in the bank because people do not know what procedures, afraid of losing

time due to cumbersome procedures …

2.1.3.2 Subjective factors

a, Business strategy of commercial banks

The Bank has to build a proper business strategy In the business strategy, the bank must decide whether to expand or reduce the scale of fund mobilization, change the proportion of fund sources in total fund and fund mobilization interest rates If the business strategy is right, the bank will exploit the fund to meet the needs and achieve high efficiency

b, Competitive interest rate policy

Competitive interest rate policy includes competitive interest rates and competitive lending rates which is an important policy of the bank Maintaining competitive interest rates is particularly important when market interest rates are relatively high Commercial banks are not only competing for fund but also competing with savings and issuers of different instruments in the fund market Especially in a time of currency scarcity, a relatively small difference in interest rates will motivate savers and investors

to transfer fund from their current instruments to savings and investment or from this savings organization to another savings organization

c, Customer policy

In the customer work, the bank often divides customers into groups to have a consistent service For example, with long-time customers, regular transactions, large deposit balance, to be trusted with the bank, the bank will have appropriate policies on terms and interest rates

d, Forms of fund mobilization of the bank

This is also one of the factors that have a great impact on the bank's fund mobilization The more diversified and flexible forms of fund mobilization are, the greater the ability to attract fund from the economy is This is due to the difference in demand and psychology of the population The greater the variety of forms of mobilization, the easier it will be to meet the needs of the population and they will find

a safe and suitable deposit Therefore, commercial banks often consider carefully before introducing new forms of mobilization

e, Services provided by the bank

A bank with good service will obviously have more advantages than other banks In the context of market economy, the banks must strive to improve the quality of services

and diversify it to meet the needs of customers and increase the bank's income Unlike competitive interest rates, competition in banking services is not limited so this is the strong point for banks to rise in the competition Additional services, utility for customers are considered as plus points when customers choose bank to send money

f, Service policy, advertising

In today's tough competitive environment, it is difficult to maintain product and price differentiation, so advertising and serving strategies are extremely important to attract customers Attentive, friendly service is the conditions to attract customers, suitable advertising strategy will help bank to gain many new customers Therefore, in order to have prestige in the market, to maintain the relationship with traditional customers and attract more new customers, bank must constantly improve the quality of service, have a reasonable advertising strategy so that many people know the bank and products and services provided by the bank

2.2 Literature review

In recent years in Vietnam, the issue of fund mobilization has been widely explored, and research articles on this issue are approaching in different scales and perspectives There have been many studies on fund mobilization of commercial banks Some of the works include:

- Phung Thi Loan, Faculty of Finance and Banking, University of Economics and Business - VNU, Master thesis "Mobilizing capital at Vietnam Bank for Agriculture and Rural Development - Bac Kan Branch" 2016

+ Objectives: To study and study the theoretical basis on the mobilization of capital, from which to analyze the actual situation of capital mobilization and propose some solutions to enhance the mobilization of capital at the Bank Agribank branch Bac Kan + Subjects: Limitations in research, evaluate the situation and propose some solutions to accelerate capital mobilization at Agribank branch in Bac Kan (Headquarters)

+ Scope and duration of the study:

About Spatial: The research space was concentrated at the head office of Agribank branch in Bac Kan province

About Time: The overview of capital mobilization at Agribank branch in Bac Kan province was collected from documents published between 2011 - 2014 and the first 9 months of 2015

- Author Dinh Thi Quynh Nhu, National Academy of Public Administration, Master of Economics: "Mobilizing capital at Vietnam Bank for Agriculture and Rural Development - Ly Thuong Kiet Branch, Quang Binh, 2017

+ Objectives: To study and study the theoretical basis on the mobilization of capital, from analyze the current state of capital mobilization and propose some solutions to increase capital mobilization activities at Vietnam Bank for Agriculture and Rural Development - Ly Thuong Kiet branch in Quang Binh province

+ Subjects: Limitations in the research, assessment of the status and proposals some measures to boost capital mobilization at Vietnam Bank for Agriculture and Rural Development - Ly Thuong Kiet branch in Quang Binh province

+ Scope and duration of research:

About Space: Study space Bank for Agriculture and Rural Development - Ly Thuong Kiet branch in Quang Binh on mobilizing capital

About Time: The overview of capital mobilization at Vietnam Bank for Agriculture and Rural Development - Ly Thuong Kiet, Quang Binh Branch was collected from published documents from 2015 to 2017

+ Results achieved:

The subject has systematized the basic theoretical issues of fund mobilization of commercial banks To assess the advantages and disadvantages of fund mobilization at the Vietnam Bank for Agriculture and Rural Development - Ly Thuong Kiet branch in Quang Binh and propose solutions and proposals to raise fund mobilization efficiency

of Vietnam Bank for Agriculture and Rural Development - Ly Thuong Kiet branch in Quang Binh

- Economic master thesis: "Raising the efficiency of fund mobilization at Ba Ria - Vung Tau VietinBank" by Tu Thi Duc (2009), Economics and Management - Hanoi University of Science and Technology

+ Objectives: To study and study the theoretical basis on the mobilization of capital, from which to analyze the actual situation of capital mobilization and propose some solutions to enhance the mobilization of capital at the Bank Ba Ria - Vung Tau Trade and Industry Joint Stock Company

+ Subjects: limited topic in researching and evaluating the current situation and proposing some solutions to boost capital mobilization at Ba Ria - Vung Tau Commercial Joint Stock Bank

+ Scope and duration of research:

About Space: Research area of Ba Ria - Vung Tau Commercial Joint Stock Bank for capital mobilization

About Time: The overview of capital mobilization at Ba Ria - Vung Tau Commercial Joint Stock Bank was collected from documents published between 2007 and 2009

+ Result:

Studying the most common theories on capital mobilization of banks, the characteristics and role of the forms of capital mobilization, analyzing and assessing the causes and causes affecting the mobilization of capital at Ba Ria-Vung Tau Industrial and Commercial Joint Stock Bank From there, the solutions and recommendations to enhance the mobilization of capital at Ba Ria - Vung Tau Commercial Joint Stock Bank

- Author Pham Thi Hong Nhung, Faculty of Business Administration - Economics,

Ba Ria-Vung Tau University, Master of Economics: "Raising the efficiency of deposit mobilization at the Joint Stock Commercial Bank for Investment and Development Vietnam - Phu My Branch ", the year of protection 2010

+ Objectives: The project is aimed at raising the efficiency of capital mobilization, effectively tapping capital from customers in the locality, expanding the scale and gaining market share, affirming the position of the Investment Bank and Phu My branch development

+ Subjects: Limitations in the research, assessment of the current situation and proposed some solutions to promote capital mobilization at Bank for Investment and Development of Phu My branch

+ Scope and duration of research:

About Space: Research area Bank for Investment and Development of Phu My branch for capital mobilization

About Time: The overview documents on capital mobilization at Bank for Investment and Development of Phu My Branch was collected from documents published between 2008 and 2010

+ Result:

The author has studied, systematized the theoretical bases on capital mobilization, the criteria for measuring the efficiency of capital mobilization Collect data on business results in general and specific criteria on capital mobilization in particular of BIDV Phu

My, other BIDV branches in BRVT province and some other banks in the area Tan Thanh district Based on the collected data, analysis of capital mobilization and capital mobilization efficiency at Phu My BIDV branches from 2012 to 2016 It then identifies the achievements, constraints and causes of its capital mobilization Based on the results

of the analysis of deposit mobilization efficiency at BIDV Phu My branch, Evaluation

of the survey results of the customer, the author proposed solutions and recommendations to promote strengths available, overcoming the remaining difficulties and constraints contributed to helping Phu My BIDV improve the efficiency of capital mobilization, to expand its market share, to grow and develop sustainably, to take the leading position in the capital mobilization market

- Author Nguyen Bich Thuy, Faculty of Business Administration - Economics, Hanoi National Economics University, MA thesis: "Managing capital mobilization activities at Saigon Bank for Industry and Trade" year of protection 2015

+ Objectives: The purpose of the research topic is to clarify the issue of managing capital mobilization On the basis of assessing the current state of management of capital mobilization activities to see the results achieved and the constraints in the

management of capital mobilization activities in order to have appropriate solutions to enhance the management of operations Effective capital mobilization at Saigon

Commercial Joint Stock Bank

+ Objectives: The subject of the research is to manage capital mobilization activities at Saigon Commercial Bank

+ Scope and duration of research

About Space: Study on management of capital mobilization at Saigon Commercial Joint Stock Bank

About Time: From 2012 to 2014 and vision to 2020

+ Result: The subject has systematized the theoretical and practical issues of managing capital mobilization at commercial banks, analyzing and assessing the situation of capital mobilization and the balance between capital mobilization and capital use at Saigon Commercial Bank, propose solutions to enhance management of capital mobilization activities at Saigon commercial bank

At present, in order to attract fund, banks have used a lot of measures to increase fund attraction from both traditional and non-traditional methods This shows the importance of fund in business operations of banks, how to maintain and grow stable fund to meet the business operation needs of the banks is an urgent factor at present Because of operating in such a fierce competition environment, the banks are facing with many difficulties In fact, although the fund mobilization activities of the banks in recent years have had successes, contributed much to business results, it still has much limitations In order to continue to increase the competitiveness in a fast, strong and sustainable manner in the area, the branch has been looking for solutions to maximize the potential fund in the population and in society

The issue of raising fund mobilization efficiency in general and of commercial banks in particular has been mentioned in many documents of the Party, magazines specialized in economics, finance but it's not enough and more research is needed to raise fund mobilization efficiency of commercial banks comprehensively There are very few scientific works and theses on improving the efficiency of fund mobilization

of commercial banks in Ninh Binh province Thus, the author argues that the selected thesis is not identical with any published thesis and claims that this is an independent scientific work of the author

CONCLUSION SECTION 2

Section 2 gives an overview of the concepts, roles and functions of commercial banks and capital of commercial banks The above mentioned types of capital mobilization are popular, which are applied by commercial banks, besides the objective and subjective factors affecting the capital raising activities Finally, some basic measures generally help to raise capital mobilization activities in commercial banks Section 2 also presented the authors of the research on capital mobilization from various perspectives These works have contributed positively in building the theoretical foundations for capital mobilization and practical implementation solutions However, capital mobilization has broad scope of research and involves many different fields of activity Thus, previous studies did not cover the issues of raising capital or dissolution problems in other necessary areas Generally within the scope of material that the author has access to so far, capital mobilization issues and factors affecting the mobilization of capital are also mentioned in journals or scientific papers