VCB

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

I.OVERVIEW OF VIETCOMBANK - POWER BANK IN THE FIELD OF INTERNATIONAL PAYMENT 1

II. METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK2

III. REAL SITUATIONS3

IV. SOLUTIONS4

1

3

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

4

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

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

2-During the period from September 8-1964 end of 1976, Vietcombank is a legal entity withthe centralapparatus, not including the system of domestic and foreign branches


1.2 Organization structure


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

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

Total assets reached more than 307 thousand billion dong, up23% compared to 2009. Security ratios were ensured, NPLs ratio (according to qualitative classification) stood at 2.83%

Business activity results in recent

years:


-Profit before tax was 5,479 billion dong, increased by 9.5% compared to previous yearafter making provision 1,501 billion dong


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


Vietcombank’s 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


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

29.2 30.0 28.1 27.022.4 20.1 20.0

0.0

10.0

20.030.0

40.0

2000 2002 2004 2010

Tỷ trọng (%)

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

METHODS OF INTERNATIONAL

PAYMENT

RemittanceCash Against Document (C.A.D)

Documentary credit Collections


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 seller’s account, No:…… atVietcombank Ho Chi Minh city branchPayment 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 byvinacontrol.+ one original and two copies certificate of origin issued by the Vietnam chamber ofcommerce and Industry, Ho Chi Minh city branch.+ one original and two copies phytosanitary certificate issued by plant protectiondepartment – Vietnam+ one original and two copies certificate of fumigation issued by Vietnamfumigation company+ packing list in triplicate+ Two originals and two copies Insurance Policy of Bao Viet Insurance Company andendorsed in blank (CIF)


2. Remittance Payment: TTR at sight after receipt of payment documents.+ The buyer must pay 100% of invoice value to the seller’s account, No:…… atVietcombank Ho Chi Minh city branch+ Three days after the presentation of the payment documents, if the buyer fails to dothe 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 ofcommerce and Industry, Ho Chi Minh city branch. + one original and two copies phytosanitary certificate issued by plant protectiondepartment – Vietnam+ one original and two copies certificate of fumigation issued by Vietnamfumigation company+ packing list in triplicate


3. Documentary creditPayment: by Irrevocable L/C at sight 100% of invoice value to the seller’s account, No…. at vietcombank HoChi 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 Vietnamfumigation 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 vessel’s. Hatch cleanliness issued by vinacontrol+ beneficcitary’s certificate that one full set of non-negotiable shipping documents have sent by DHL the buyer


4. Collections Payment: D/P at sight after documents required:+ The buyer must pay 100% of invoice value to the seller’s account, No:… atVietcombank Ho Chi Minh City branchPayment 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 ofcommerce 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 Vietnamfumigation 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 INTERNATIONALPAYMENT OF VIETCOMBANK

Import-export turnover of Vietcombank (compared to the total export value)

Year Total import-export turnover

Import and Export through Vietcombank

Total turnover Proportion (%)

± Proportion (%)

2005 30120 8782 29,16

2006 31247 9389 30 0,84

2007 36452 10243 28,1 -1,9

2008 45405 12253 27 -1,1

2009 58457 13110 22,43 -4,57

2010 69104 13897 20,1 -2,33

Source: Annual Report Vietcombank 2005 – 2010


Sales of other countries in the export payment

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


Market share of import payments through the Vietcombank

Year Import through Vietcombank

Turn-over ( Million USD) Proportion of Vietcombank / whole country (%)

2001 4867 30

2002 5557 28,14

2003 6533 25,87

2004 6925 21,67

2005 7271 19,71

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


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 The number of open L/C

The number of L/C payment

2002 14170 19273

2003 15236 20724

2004 16383 22284

2005 17429 23707

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


2. Payment collection activities

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…

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

IV. EVALUATE METHODS OF INTERNATIONAL PAYMENT OF VIETCOMBANK

1.Problems in Documentary credit (Letter of Credit)

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

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

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 dohave 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 can’t 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 nowincreasingly

subject to intensecompetition 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

Investment in advanced technologies


Increasing the quality of payment specialist

Develop risk management department

Adequate equipment about customer Information network

Combining Bank operations

For For BankBank

Some solutions to enhance effectively usage for the methods of international payment in vietcombank


Choose cautiously the right partner

that is always a prerequisite for

successful transactionsand banks

always advise clients follow that

way

For customers

Raising the foreign

trade

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