Branch management at multinational banks: Experience of Mizuho Corporate Bank, Ltd and lessons for Vietnamese commercial banks

The most important aspect of corporate governance is to have a Board of Directors with sufficient capacity to direct and control the company. According to international practice, the Board of Directors is the highest authority of the enterprise, which outlines strategies and supervises the production and business activities of the enterprise. Good corporate governance will help the decisions and actions of the Board of Directors reflect the will and ensure the interests of investors, shareholders and stakeholders. In short, corporate governance is a model of balancing and restraining power among the company's stakeholders, aiming at the long-term development of the company.

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Branch Management: We have had some concepts about the issue of management in the company. Branch management is the management activity of the parent company or head office with the branch, ensuring sustainable development for the branches as well as the entire company.

To better understand the branch management activities of multinational banks, we will learn some common characteristics in the branch management of multinational banks as follows:

First , it is centralized ownership: subsidiary banks or branches around the world are all centrally owned by the parent bank, although their specific daily activities are not exactly the same and similar to the parent bank, the branches are allowed to provide specific services in countries depending on the laws of the countries.

Second , multinational bank leaders often pursue global management, operations, and business strategies. However, each multinational bank may have many specific strategies and operating techniques to suit each locality where it has branches and headquarters.

Third , in terms of international financial management or other management activities in subsidiary banks, branches of multinational banks operating in countries around the world also have many differences compared to parent banks and bank branches operating purely in the domestic market such as differences in monetary systems.

currency, differences in profit accounting basis, legal policy regulations, culture, politics...

Thus, branch management at multinational banks is the management activity of a parent bank headquartered in a country with its subsidiaries or bank branches operating in the parent bank's country and in other countries around the world, through regulations, policies, implementation plans and control activities of the parent bank with its subsidiaries or branches to ensure that the subsidiaries or branches operate according to the common development goals and orientations of the parent bank. At the same time, it ensures that the subsidiaries or bank branches operate most effectively under the impact of the international macro environment and the international industry environment.

1.1.2. Some characteristics of multinational banks

In a global operating environment, multinational banks must always pay attention to fundamental differences in their operations. These fundamental differences are:

Firstly, it is the difference in monetary systems : the issue that multinational banks pay great attention to in the process of business operations and branch management activities on a global scale is the issue of financial management between branches worldwide and the issue of financial consolidation between branches and the parent company. Because the business environment between branches and the Head Office is different, branches use different currencies, apply different accounting systems... In the issue of financial management, branches operating in countries record cash flows in and out through accounting systems according to specific regulations in the host country where the branch operates. Financial transactions arising therefrom must be accounted for using the accounting system in the host country and calculated in local currency and then converted to the unified currency of the parent bank (the unified currency is usually a strong foreign currency or the currency used by the Head Office). Thus, when analyzing the financial situation of multi-bank

Countries need to pay attention to exchange rate analysis indicators or analyze the impact of currency value fluctuations or accounting mechanisms...

Second, it is about political and economic institutions : Each country has its own economic and political model and characteristics. This difference is a very important issue in the policies of multinational banks in operating and managing their subsidiaries and branches on a worldwide scale.

Third is the difference in language : Communication ability is the top requirement in all business transactions, in which language plays a crucial role. Therefore, multinational banks that want to expand their business beyond national borders must pay attention to the foreign language ability of the host country.

Fourth is cultural differences : Each country has its own cultural identity and deeply affects business activities in society. Therefore, multinational banks that want to expand their business activities, open more branches or carry out business goals abroad need to pay special attention to this issue.

From the differences in the international business environment above, we see that multinational banks have the following characteristics:

First of all, in terms of origin, multinational banks are the product of the alliance of the most powerful capitalists. This characteristic distinguishes multinational banks in the era of financial capitalism, that is, modern multinational banks, from banks operating internationally that came into being in the era of free competition capitalism and even in the era of primitive accumulation capitalism. In the present era, when the internationalization of production is promoted, companies of developing countries, especially those of the group of newly industrialized countries, expand their international competitive markets and with the help of the state they can expand their operations internationally, even establishing branches.

branches in developed capitalist countries. Therefore, multinational banks also develop their operating networks globally rapidly.

The second characteristic of multinational banks is that they are international banks operating in an international business environment. These banks establish a system of branches abroad with the aim of increasing the rate of profit through international expansion. They carry out the international division of labor and divide the world market between capitalist companies in particular and industrial powers in general.

The third characteristic of multinational banks is that the parent bank, or Head Office, and the branches have a special connection. Multinational banks always have an organizational structure consisting of two basic parts: the parent bank or Head Office and the branches. The Head Office is usually located in the country of which the bank is a national. There is a mutual relationship between the Head Office and the branches, in which the Head Office plays a general management role, the branches are independent accounting units but comply with the charters, regulations and general development policies of the Head Office, all forming a unified entity. However, this connection is a whole but contains contradictions. In their vortex of operations, there are both centripetal and centrifugal forces. The centripetal forces link the subsidiary banks, subsidiaries, and branches into a unified international economic complex through many connections, connections and dependencies at certain levels. Centrifugal forces force subsidiaries, subsidiary banks, and branches to develop and plan their own business strategies to improve business efficiency and competitiveness in each country in the world, operating independently from the Head Office.

1.1.3. Some factors affecting branch management activities of multinational banks

From some characteristics of multinational banks in section 1.1.2, we see some important factors affecting the management activities and branch management decisions of multinational banks.

The first is the operating environment of the Bank , the Head Office and branches. The operating environment of the bank includes factors belonging to the macro environment and the industry environment. The macro environment includes the economic environment, the political environment, the legal environment, the technological environment, the socio-cultural environment. The industry environment includes competitors, customers, new substitute products and potential competitors. For multinational banks, in addition to the macro environment and the industry environment of the country where the Head Office is located, they are also affected by the macro environment and the industry environment of the countries where the branches operate, which can be understood as the international macro environment and industry environment. In the business environment with international scope and subject to the regulation of national laws and international treaties, the governance of multinational banks is a very important issue. Therefore, multinational banks, with the characteristic of being financial intermediaries performing the business function of a special commodity, namely currency, with branches operating around the world, the issue of branch management to ensure the implementation of the goals and operating principles of the entire banking system becomes even more important.

The second is in terms of management . The highlight in the management of multinational banks is the control of the parent bank over its subsidiaries, subsidiary banks or branches in its own style, by using economic levers, implementing a certain level of centralization and controlling mainly vertically from the center to the periphery. According to that management method, the role of the parent bank in guiding the strategic development of finance, technology, information and credit is very important, while the subsidiaries, subsidiary banks and branches are business units that operate relatively independently and become independent accounting units. Therefore, they are forced to be dynamic, building appropriate conditions and environments to promote dynamism.

1.2. Some basic principles in branch management of multinational banks

Strategic management plays a very important role for any business enterprise. Commercial banks are also a type of enterprise, so strategic management of commercial banks must also follow the basic contents of corporate governance. However, commercial banks are special enterprises, with their own characteristics and features, so commercial bank management has its own management principles. At the same time, the principles of branch management in multinational banks are a specific case of the principles of branch management in multinational companies or multinational corporations, so to learn about the principles of branch management in multinational banks, we will learn about the basic principles of corporate governance, branch management of multinational companies, multinational corporations, from which to propose the basic principles of branch management in multinational banks. Corporate governance requires certain principles, so branch management requires stricter and more complete principles. The principles of branch management of a multinational bank are also the principles of branch management of a commercial bank within a country or the principles of managing subsidiaries in a financial group. Studying the process of formation, existence, development, association or integration of corporations in the economic development history of many countries in the world, it can be seen that each country, depending on its economic characteristics, has its own and different management models and principles. However, it is also possible to draw some general principles that are decisive to the success of these management models.

Firstly , in the process of branch management, it is necessary to determine the operating procedures of the entire banking system , from the Head Office to the branches, ensuring consistency and tightness in the organization. It can be a clear financial management system in the case of a multinational bank with subsidiaries, banks, and branches operating in many different fields. It can also be the Head Office that manages

managing all activities of subsidiaries and branches: from issues such as strategy and development orientation of branches to daily operations of branches. In short, when managing branches, multinational banks must determine how subsidiaries, subsidiary banks and branches in the banking system will be managed and linked together.

Second, ensuring independence and autonomy in a unified entity . With this principle, it is necessary to simultaneously ensure the unity of independence and autonomy in accounting and business activities of branches, subsidiaries, and subsidiary banks with the Head Office. To do this, multinational banks must establish clear market relationships between branches in the bank, in financial management, investment capital management as well as in the management and coordination of shares.

Third, improve the competitiveness of branches, subsidiaries, and subsidiary banks to improve the competitiveness of the entire bank. One of the core points of the market and the source of development is competition. Regardless of the field of operation, the issue of improving the competitiveness of each branch, subsidiary, subsidiary bank and of the entire multinational bank is extremely important. Therefore, multinational banks always focus on establishing a mechanism to promote healthy competition between branches, subsidiaries, and subsidiary banks, thereby improving the competitiveness of the entire banking system.

In addition to complying with the basic operating principles, with the characteristics of the banking industry being the currency business and providing financial products and services, in the process of managing branches, multinational banks must comply with a number of additional principles prescribed by the Basel Committee on Banking Supervision, abbreviated as Basel. Since 1999, this Committee has made efforts to issue a new Accord to replace Basel I, and by 2004, the Basel International Capital Accord (called Basel II) was officially issued with a new approach based on three basic principles that international banks must comply with when operating:

Principle 1 : Banks must maintain a sufficient amount of capital to cover the risk-bearing activities of the entire bank, including the Head Office and all branches, including credit risk, market risk and operational risk. Accordingly, the method of calculating the cost of capital for credit risk prescribed in Basel II has a major modification compared to the regulations in Basel I and a small change for market risk but is a completely new version in operational risk.

Principle 2 : Banks need to properly assess the types of risks they are facing and ensure that supervisors can assess the adequacy of these assessments. With this principle, Basel II emphasizes the mandatory issues of review and supervision in banking business activities. Banks need to develop a process for assessing the adequacy of their capital according to their risk profile and establish appropriate strategies to maintain that capital level .

The third principle : banks must disclose information appropriately according to market principles. With this principle, Basel II provides a list of requirements that require banks to disclose and be transparent about information from information on capital structure, capital adequacy to information related to the bank's sensitivity to credit risk, market risk, operational risk and the bank's assessment process for each type of risk.

In addition to some basic principles of Basel, in the process of branch management, each multinational bank also develops specific management principles depending on the strategic management goals of that bank.

1.3. Some basic branch management models of multinational banks

1.3.1. Approach to branch management in multinational banks From the characteristics of multinational banks as studied in section 1.1.2,

We will go to the approaches to branch management in multinational banks. To understand more about multinational banks, we will learn more about the structure

Branch management at multinational banks: Experience of Mizuho Corporate Bank, Ltd and lessons for Vietnamese commercial banks - 2

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