Methods of International payment of Vietcombank Real situation and Solution

Group: 1.Nguyen Thi To Quyen 2.Doan Thi Thu Hien 3.Nguyen Hoai Thu 4.Hoang Dang An Hanh

Contents

1 2

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT

II. METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK

3 3
4

III. REAL SITUATIONS

IV. SOLUTIONS

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT 1. Introduction of Bank for Foreign Trade of Vietnam. 1.1 History

1
-Vietcombank was established on 1/4/1963 from the Foreign Exchange Bureau of the State Bank of Vietnam

2
-During the period from September 81964 end of 1976, Vietcombank is a legal entity with the centralapparatus, not including the system of domestic and foreign branches

3
-The position of the VCB Vietnam has been building since the early days of establishment and growth, both in breadth and depth gradually confirmed the reputation ofVCB

4
VCB officially came into operation on 02/06/2008 after successfully implementing the privatization plan through IPO conducted on 26/12/2007

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT 1.2 Organization structure

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT

Business activity results in recent years:

Over the last year, Vietcombank expanded its network to 357 branches and transaction offices, ensured safety and efficiency in operation and enhanced quality in corporate governance and management activities

Vietcombank successfully raised its chartered capital to 17,588 billion dong through 2 phases

Total assets reached more than 307 thousand billion dong, up 23% compared to 2009. Security ratios were ensured, NPLs ratio (according to qualitative classification) stood at 2.83%

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT -Profit before tax was 5,479 billion dong, increased by 9.5% compared to previous year after making provision 1,501 billion dong

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT

In 2010, fund mobilisation from population gained special result with total of VND 98,880 billion equivalent, increased by 28.5% against 2009. The bank also recorded VND 108,172 billion mobilised from organisations, increased by 16.3% in comparison with the previous year, and VND 69,600 billion mobilised from interbank market, or 13.3% higher than 2009

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT

Vietcombanks lending always plays important role in funding the economy, contributing to the development of many regions and locations nationwide

- In 2011 Vietcombank continues to adopt its strategies Speed - Safety - Quality - Efficiency to accomplish a breakthrough in retail business along with strengthening wholesale activities, improving fund mobilization, credit and treasury activities as well as developing services

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT 2, The role of the Bank for Foreign Trade in the field of international payments
-Traditional business of Bank for Foreign Trade of Vietnam is the international payment operations -On payment of foreign currency, Bank for Foreign Trade is still regarded as a central clearing of credit institutions in Vietnam
T trng (%)

40.0 30.0 20.0 10.0 0.0 2000 2002 2004 2010

29.2 30.0 28.1 27.0 22.4 20.1 20.0

Bank for Foreign Trade is the major banks in the field of international payments with the current high market share, 20% in 2010, maintaining the level of market share has proved so ability of international payment activities of foreign trade bank

II. METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK

Cash Against Document (C.A.D)

Remittance

METHODS OF INTERNATIONAL PAYMENT

Collections

Documentary credit

II. METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK

1.Cash Against Document (C.A.D)

Payment: C.A.D at sight after documents required. + The buyer must pay 100% of invoice value to the sellers account, No: at Vietcombank Ho Chi Minh city branch Payment documents: + signed Commercial invoice in triplicate. + 3/3 (full set) of originals clean B/L on board marked FREIGHT PREPAID + one original and two copies certificate of quantity, weight and quality issued by vinacontrol. + one original and two copies certificate of origin issued by the Vietnam chamber of commerce and Industry, Ho Chi Minh city branch. + one original and two copies phytosanitary certificate issued by plant protection department Vietnam + one original and two copies certificate of fumigation issued by Vietnam fumigation company + packing list in triplicate + Two originals and two copies Insurance Policy of Bao Viet Insurance Company and endorsed in blank (CIF)

II. METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK

2. Remittance
Payment: TTR at sight after receipt of payment documents. + The buyer must pay 100% of invoice value to the sellers account, No: at Vietcombank Ho Chi Minh city branch + Three days after the presentation of the payment documents, if the buyer fails to do the payment on due time, the buyer has to bear interest rate of 0.02% per day. Payment documents: + signed Commercial invoice in triplicate. + 3/3 (full set) of originals clean B/L on board marked FREIGHT PREPAID + one original and two copies certificate of quantity, weight and quality issued by vinacontrol. + one original and two copies certificate of origin issued by the Vietnam chamber of commerce and Industry, Ho Chi Minh city branch. + one original and two copies phytosanitary certificate issued by plant protection department Vietnam + one original and two copies certificate of fumigation issued by Vietnam fumigation company + packing list in triplicate

II. METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK

3. Documentary credit
Payment: by Irrevocable L/C at sight 100% of invoice value to the sellers account, No. at vietcombank Ho Chi Minh city branch. + Issuing bank: Ukraine Eximbank. + Advising Bank: Vietcombank, Ho chi Minh City Branch. + Date of issue: Within 7 days from the signing date of this contract + Date and place of expiry : April 29th 2006 in Ukraine. + Period for presentation: within 21 days after B/L date but within the validity of the credit. Payment documents + signed Commercial invoice in triplicate. + 3/3 (full set) of originals clean B/L on board marked FREIGHT PREPAID + one original and two copies certificate of quantity, weight and quality issued by vinacontrol. + one original and two copies certificate of origin issued by the Vietnam chamber of commerce and Industry, Ho Chi Minh city branch. + one original and two copies phytosanitary certificate issued by plant protection department Vietnam + one original and two copies certificate of fumigation issued by Vietnam fumigation company + packing list in triplicate + bill of exchange + Two originals and two copies Insurance Policy of Bao Viet Insurance Company and endorsed in blank (CIF) + certificate of vessels. Hatch cleanliness issued by vinacontrol + beneficcitarys certificate that one full set of non-negotiable shipping documents have sent by DHL the buyer

II. METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK

4. Collections
Payment: D/P at sight after documents required: + The buyer must pay 100% of invoice value to the sellers account, No: at Vietcombank Ho Chi Minh City branch Payment documents: + signed Commercial invoice in triplicate. + 3/3 (full set) of originals clean B/L on board marked FREIGHT PREPAID + one original and two copies certificate of quantity, weight and quality issued by vinacontrol. + one original and two copies certificate of origin issued by the Vietnam chamber of commerce and Industry, Ho Chi Minh city branch. + one original and two copies phytosanitary certificate issued by plant protection department Vietnam + one original and two copies certificate of fumigation issued by Vietnam fumigation company + packing list in triplicate + bill of axchange. + Two originals and two copies Insurance Policy of Bao Viet Insurance Company and endorsed in blank (CIF)

III. REAL SITUATIONS OF USING INTERNATIONAL PAYMENT OF VIETCOMBANK Import-export turnover of Vietcombank (compared to the total export value)
Year Total importexport turnover Import and Export through Vietcombank Total turnover Proportion (%) 29,16 30 28,1 27 22,43 20,1 0,84 -1,9 -1,1 -4,57 -2,33 Proportion (%)

2005 2006 2007 2008 2009 2010

30120 31247 36452 45405 58457 69104

8782 9389 10243 12253 13110 13897

Source: Annual Report Vietcombank 2005 2010

III. REAL SITUATIONS OF USING INTERNATIONAL PAYMENT OF VIETCOMBANK Sales of other countries in the export payment

Source: Business Report on activities of the Vietcombank 2002 - 2005

III. REAL SITUATIONS OF USING INTERNATIONAL PAYMENT OF VIETCOMBANK Market share of import payments through the Vietcombank
Year Import through Vietcombank Turn-over ( Million USD) 2001 2002 2003 2004 2005 4867 5557 6533 6925 7271 Proportion of Vietcombank / whole country (%) 30 28,14 25,87 21,67 19,71

Source: Business Report on activities of the Bank for Foreign Trade of Vietnam 2002 2005

III. REAL SITUATIONS OF USING INTERNATIONAL PAYMENT OF VIETCOMBANK 1.

Operation of L / C methods

In the operation of import and export payments of Vietcombank, letter of credit method is used more commonly (accounting for more than 84% of payment transactions, both import and export) In this mode, the VCB played role as advising bank, producing bank, or discounting bank discount (payment for export) and the banks open L / C (for payment of imports). Payment by L / C is very active, the number of customers using this method is increasing. In 2005, only in export activity was 17 429 L / C is opened with the number of payment L / C sight is 22 163 and 1544 deferred L / C, also have some L / C transfer Payment by means of import documentary credit at the Vietcombank
Year 2002 2003 2004 2005 The number of open L/C 14170 15236 16383 17429 The number of L/C payment 19273 20724 22284 23707

Source: Business Report on activities of the Bank for Foreign Trade of Vietnam2002 2005

III. REAL SITUATIONS OF USING INTERNATIONAL PAYMENT OF VIETCOMBANK 2. Payment collection activities
Collection methods are characterized not to guarantee the benefit of the sellers. It should generally only be applied when the parties really trust each other. At present the import and export business done through the VCB collection is declining, still account for only a very small part because most of the partnerships have enough mutual trust often turn to money transfer method, for details cost, and simple, fast payment ... so turn-over is increasingly miniature collection, so far no form of D / A and only very little of the form D/P

3. Money transfer operation

-Vietcombank always involved in technological innovation as the international SWIFT network participants, Money Gram program, to proceed to the banking system built according to international standards, modern equipment, with high automation to serve customers fast, convenient and safe

Together with a network of agents worldwide, foreign trade bank has assisted banks are many partners in the international payment operations
It can easily be seen, money transfer business in Vietcombank will be increasingly developed and in the right direction, an objective reasons of customer demand is increasingly, but the reason is a key innovation Vietcombank has appropriate technical requirement, facilities

IV. EVALUATE METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK 1.Problems in Documentary credit (Letter of Credit)

The payment base is the shipping documents, but there is not still an agreement between banks about a complete and suitable shipping document

There are many problems in L/C, the reason is the rule of its own:

L/C is only based on documents, not on goods. The separation between goods and documents encourages some frauds

L/C is a flexible transaction that includes many other transactions

IV. EVALUATE METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK

2. Problems in Collections
At VCB, there are customer using payments by collection because they do have a relationship before
+Eg: the Tay Ninh porcelain company sign export contracts with customers in Belgium worth $ 60,000. Customers moved a cash checks at CITIBANK to the company. Payment conditions are the original documents sent directly to the customer, the copy with CITIBANK checks sent for collection. After collection procedures, CITIBANK reported that they are fake checks and they cant get money.Fortunately, VCB did not send original documents directly to the client that sent collection at CITIBANK. So customers can not get goods, but the company has to find ways to release the shipment and still suffer loss. Recently, collecting payments is declining and seem to have no longer apply

III. SOLUTION FOR IMPROVING THE QUALITY OF INTERNATIONAL PAYMENT IN VIETCOMBANK

General solution for Vietcombank stands and promotes strong international payments

Focus on development of two key factors that is people and techniques to improve and enhance service quality

External and internaltional relations should be expanded and developedalong with maintaining good relationships with old bank agent

Promote research domestic and foreign market

Seek customers actively is a very important task when VCB is now increasingly subject to intense competition of other banks in the same system as well as foreign banks

Improving the service quality of officers and employees, creating the trust for customers with a sense of responsibility and caring

III. SOLUTION FOR IMPROVING THE QUALITY OF INTERNATIONAL PAYMENT IN VIETCOMBANK Some solutions to enhance effectively usage for the methods of international payment in vietcombank

Investment in advanced technologies

For Bank

Increasing the quality of payment specialist

Develop risk management department

Adequate equipment about customer Information network

Combining Bank operations

III. SOLUTION FOR IMPROVING THE QUALITY OF INTERNATIONAL PAYMENT IN VIETCOMBANK

For customers

Choose cautiously the right partner that is always a prerequisite for successful transactions and banks always advise clients follow that way

Raising the foreign trade

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