Current Status of Capital Mobilization Efficiency at Vietnam International Commercial Joint Stock Bank

Liquidity is entirely possible, especially during periods of tightening monetary policy by the State Bank.

The State Bank said that the interests of depositors are guaranteed by the State, the rights of shareholders are maintained, and the responsibilities and obligations of the merged banks are transferred in accordance with the provisions of law. Therefore, the number of customers withdrawing money due to concerns about the liquidity situation of the merged banks has not occurred, and the operations of the merged banks are still operating normally.

The issue of concern is that, when analyzing these three banks based on their financial statements and annual reports in 2010, the financial indicators are all at a good to very good level compared to other banks in the same system. Especially for First Commercial Joint Stock Bank, the figures on operational safety ratios are all at or even much better than the regulations under Circular 13/2010/TT-NHNN.

Table 1.4. Operational safety ratios of First Commercial Joint Stock Bank in 2010

Some operational safety indicators

Proportion	Standard
CAR	43.54%	>=9%
Affordability ratio	20.38%	>=15%
Credit to deposit ratio	22.4%	<=80%
Ratio of short-term capital used for medium and long-term loans	0%	<=30%

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According to the report of the Board of Supervisors of First Commercial Joint Stock Bank in 2010

In fact, in just one year of 2011, the financial situation and liquidity of these banks have decreased sharply, leading to temporary loss of liquidity, which is worth considering. In addition to objective reasons from the economy, the biggest reason is the weak management capacity of the bank, especially risk management, or the unreliable data provided by this bank. The above is a typical case of capital mobilization efficiency of Vietnamese commercial banks in recent times.

According to the Vietnam Banking Association, inflation is still high, total capital mobilized in the banking sector is increasing, but medium and long-term capital is still limited, over 90% of the capital proportion of banks is currently short-term capital, causing difficulties for commercial banks in capital management, difficult to ensure term balance. The average term of capital mobilization tends to shorten while the average lending term is mainly medium and long-term, creating risks of term and interest rate risks.

Recently, although the capital mobilization interest rate is high, people and businesses still do not deposit their savings in banks. The amount of mobilized capital increases slowly and is unstable, causing many difficulties for banks. In fact, the capital mobilization situation shows that some commercial banks have advantages in network, brand, and strong increase in mobilized capital, some small-scale commercial banks have difficulty mobilizing capital in market 1, some others have weak liquidity risk management, mobilized capital depends heavily on market 2, hold few valuable papers, and compete to avoid mobilizing capital with high interest rates, which has affected the operations of other credit institutions, causing instability in the monetary market.

From the fact that banks mobilize and use capital ineffectively leading to loss of liquidity, to ensure development, improve capacity and operational ability as mentioned above, with the goal of ensuring safety and efficiency in business operations of each commercial bank in particular and the entire system in general, each commercial bank and the State Bank need to have specific solutions as follows:

For the State Bank:

The State Bank of Vietnam shall strengthen supervision of capital mobilization activities of commercial banks, prevent unhealthy competition on interest rates among banks, and promptly detect and handle organizations and individuals who illegally mobilize capital.

The State Bank still needs to support liquidity for commercial banks through monetary policy management tools. In the context of implementing tight monetary and credit policies to control inflation. For large commercial banks with many qualified valuable papers, liquidity support will be provided through open market operations at

SBV. For small commercial banks that do not have enough valuable papers or are not able to compete in the open market, SBV provides support through refinancing tools. This support from SBV is very short-term and commercial banks are required to adjust their source structure and use sources appropriately, minimizing liquidity risks.

For commercial banks:

Restructuring liabilities and assets appropriately. This is a very important task to manage liquidity risks of commercial banks. Banks need to review the structure of their liability and asset portfolios appropriately to minimize possible risks, which is restructuring mobilized capital and lending in the market; restructuring outstanding short-term loans with medium-term loans, between short-term mobilized capital used for medium- and long-term loans.

Implement good management of interest rate risks and interest rate gaps: It is necessary to complete regulations related to mobilization and lending (especially medium and long-term mobilization and lending) according to market interest rates; there must be a scientific solution to avoid the situation where depositors withdraw money before maturity when market interest rates increase or when other competitors offer higher interest rates, more attractive to customers.

Implementing good maturity risk management: The imbalance in maturity between the bank's liabilities and assets is an important reason for banks' liquidity difficulties in recent times. The problem of using short-term capital to lend medium and long-term with a large proportion or both short-term and medium and long-term but with different specific terms (for example, mobilizing medium and long-term for two years but lending medium and long-term for three years) also makes it difficult for banks to control their cash inflows and outflows.

CONCLUSION OF CHAPTER 1

Chapter 1 helps us have a more general view of the capital mobilization efficiency of commercial banks. Specifically: The concept of capital mobilization and capital mobilization efficiency. Thereby, we can see the types of capital mobilized by banks, the factors affecting the scale of mobilized capital as well as the methods of analyzing and controlling mobilized capital, the ability to manage and maximize the use of mobilized capital, thereby drawing experience in evaluating the capital mobilization efficiency of commercial banks.

Based on the general theory of capital mobilization, managers can easily plan, organize, implement and control the mobilization of capital sources in a way that is appropriate to capital needs and suitable to the business environment to achieve the goals of minimizing costs to increase profits and minimize risks in the capital mobilization process.

CHAPTER 2: CURRENT STATE OF CAPITAL MOBILIZATION EFFICIENCY AT VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK

2.1. Overview of Vietnam International Commercial Joint Stock Bank

2.1.1. Formation and development process

On September 18, 1996, Vietnam International Commercial Joint Stock Bank, abbreviated as International Bank (VIB) began operations with an initial charter capital of VND 50 billion and 23 employees. The first headquarters was located at 5 Le Thanh Tong, Hanoi. After 13 years of operation, International Bank (VIB Bank) has become one of the top 5 banks in Vietnam.

2009:

 Signed a comprehensive cooperation agreement with Commonwealth Bank of Australia (CBA).

 Officially launch the new Brand Repositioning project.

 Increase charter capital to 3,000 billion VND.

 Implementing the business strategy for the period 2009 - 2013, with the goal of becoming the most customer-oriented bank in Vietnam by 2013. Implementing many strategic projects to serve the new business strategy: Retail space design project, Human resource management and work efficiency system development project, Technology strategy project, Branch system transformation program.

2010:

 Commonwealth Bank of Australia (CBA) - Australia's leading bank has officially become a strategic shareholder of VIB with an initial share ownership ratio of 15%.

 Increase charter capital to 4,000 billion VND.

 Business network reaches over 130 units in 27 provinces and cities nationwide.

2011:

 On October 20, 2011, Vietnam International Bank (VIB) and Commonwealth Bank of Australia (CBA) officially announced the increase in capital of strategic shareholder CBA at VIB. CBA has completed the additional investment of VND 1,150 billion in VIB to strengthen the capital base, capital adequacy ratio, expand business opportunities and scale of operations for VIB. Accordingly, CBA's share ownership ratio at VIB has increased from 15% to 20% of VIB's charter capital. Currently, VIB has also increased its equity to over VND 8,200 billion.

 After 15 years of operation, VIB has become one of the leading joint stock commercial banks in Vietnam with total assets of over 100 trillion VND (equivalent to over 5 billion USD). VIB currently has over 4,000 employees serving over 1 million customers at 165 branches and transaction offices in over 27 key provinces/cities nationwide. VIB is one of the banks that chooses the motto of safe operation and sustainable development with a capital adequacy ratio (CAR) of approximately 14% compared to 9% prescribed by the State Bank. With the vision of "Becoming the most innovative and customer-oriented bank in Vietnam", VIB has consistently applied solutions in its business models to bring the best experience to customers.

2.1.2. Organizational structure

COO

Block Director

KHDN

Block Management

credit management

Director of Banking Block

Partnership

Managers

Department of Education and Training

region

Regional Director

KHDN

Regional Director

NHBL

City of Education

region

Director of Sales

KHDN

Director of NHBL

Big CN

fit

Head of Department of Education

team

❶ CN

small



small

Se.Ex.RM

Se.RM RM KHDN

Customer Service

Se.Ex.RM

Se.RM

Retail RM

KS KSV

Mobile sales

force/VIP clients

GDTD

ARM

Expert

about the industry

KHDN

ARM

retail

GDTD

GDV

Industry and product experts from Head Office will support Branches as required depending on the market

Head

Fund

Product Specialist

Regional Sales Assistant (KD)

Regional Assistant Director (DV)

Regional Sales Assistant (KD)

Regional Assistant Director (DV)

fit

Regional Reassessment

Regional support functions: IT, HR, Administration, TCKT,

Marcom

, BTR…

Human Resources at HO

Staff at Regional Office Staff at Regional Education Department Staff at Branch

❶ Small branch under large branch Small branch under medium branch

WB team: Corporate Customer Service Department at medium branch or Corporate Customer Service Department at small branch

2.1.3. Functions and tasks of departments

The banking system is divided into functional blocks:

Corporate Clients:

 Manage the operations of the Corporate Client Division and participate in developing the Bank's overall business strategy.

 Organize, develop and operate the functions of the Corporate Banking Division to ensure high specialization, suitable to the scale and characteristics of the bank in each period and ensure compliance with the direction of the business strategy.

 Plan, direct and execute the implementation of the Corporate Clients business strategy to achieve set goals and maximize profits within the permitted risk limit.

 Implement business plans of branches in accordance with strategic direction.

 Organize and supervise the development of new products and services for corporate customers to ensure that the bank's products and services are competitive, appropriately marketed and develop distribution channels for Corporate Banking products.

Retail banking block:

 Develop strategies and manage the operations of the Retail Banking Division. Organize and supervise the development of new products and services for individual customers to ensure that banking products and services are competitive and appropriately marketed.

 Implement retail banking business strategy (NHBL) to achieve set goals and maximize profits within allowable risk limits.

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