Deposit Mobilization Activities of Commercial Banks

As equity capital plays a decisive role in establishing a bank, after going into operation, mobilized capital plays an important role, deciding the profit, scale and reputation of the bank. Therefore, during the operation, commercial banks must always pay attention to increasing capital in a sustainable and stable manner.

1.2. Deposit mobilization activities of commercial banks

1.2.1. Mobilizing deposit capital

Deposits are money that businesses and individuals deposit into commercial banks for safekeeping and payment. Within the allowable balance, payment needs are all carried out by the bank and all receipts in that money can be entered into payment deposits upon request.

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Capital mobilization of commercial banks is the process by which banks use appropriate tools, methods and measures to attract financial resources in society (individuals, businesses, economic organizations) through the forms of mobilization, issuance of valuable papers, mobilization of savings deposits, payment deposits, borrowing... to create capital for the bank's business activities.

Commercial banks operate in the financial and monetary sector with the main function of mobilizing capital sources for business (lending, investing, etc.) to bring profits to the bank. Mobilized capital is the basis for credit, investment, and service provision activities of banks, which is why banks must always find ways to increase mobilization to serve business activities. Therefore, capital mobilization is a basic operation, of great significance in creating regular capital sources for commercial banks to carry out business activities.

Capital mobilization of commercial banks is the process by which banks use appropriate tools, methods and measures to attract financial resources in society. Thus, capital mobilization is the activity of attracting idle money from the economy (individuals, businesses, economic organizations) through the forms of mobilization, issuance of valuable papers, mobilization of savings deposits, payment deposits, borrowing... to create capital for the bank's business activities.

1.2.2. The role of deposit mobilization

The assets of a bank are formed from capital sources, in which deposits account for more than 80% of total capital. For large banks with the ability to quickly rotate capital, this ratio accounts for up to 90% of the total capital of the bank. Thus, deposits are the main component that creates the assets of the bank. The ability to mobilize deposits with reasonable interest rates is also an important indicator to evaluate the effectiveness of bank management. In addition, the bank also collects a certain fee when customers use additional utility services of the bank.

Role in banking business activities: Capital mobilization creates the main source of capital for banking business activities, in which savings deposits are the traditional mobilization channel, often accounting for a relative proportion of customer deposits in the commercial banking system. From the mobilized capital source is the basis for banks to carry out their other business goals.

The bank's mobilized capital determines the scale, scope and ability to expand the bank's business.

Capital determines the bank's solvency and reputation in the market.

Savings deposits are closely linked to the development of the bank. The larger the mobilized deposits, the greater the people's trust in that bank in the market and vice versa, thus determining the bank's competitiveness.

In addition, for individual depositors, it is a safe channel for saving and investing capital, helping to accumulate idle money and access convenient banking services. For the economy, it helps to regulate capital among economic entities, thereby promoting production and business activities.

The bank's capital mobilization aims to attract a sufficient amount of money to meet the needs of business activities with a reasonable capital scale and capital structure, suitable for the needs of use to ensure control of risks, reduce operating costs, and ensure service quality in accordance with the business strategy and operational goals of each period of the bank. Therefore, capital mobilization must achieve the following goals:

Firstly, building and maintaining the stability of mobilized capital to ensure sufficient capital for the bank's business needs. For capital mobilization activities, this is the most important goal of each bank.

Second, ensuring the scale of capital sources must go hand in hand with a reasonable capital structure, meeting the bank's liquidity needs, suitable to usage needs and market context, contributing to enhancing the bank's internal capacity.

Third, capital mobilization must diversify sources of mobilization, thereby increasing stable capital sources to meet the needs of banking business activities.

Fourth, capital mobilization costs must be controlled and minimized, in accordance with the market context, contributing to improving the efficiency of banking operations.

1.2.3. Forms of capital mobilization from deposits

To increase deposits in a competitive environment, banks have introduced and implemented many diverse forms of mobilization depending on classification criteria and management requirements. People can classify deposits into many different forms.

* Classification by term:

- Non-term deposit: This is a deposit with an unspecified deposit period, the depositor has the right to withdraw at any time, so the interest rate is usually low. The purpose of customers with this type of money is to enjoy payment convenience when there is a need to pay for production, business and consumption activities. This form is mainly open to businesses.

- Term deposit: is a type of deposit with an agreement between the depositor and the bank on the amount, term, and interest rate of the deposit. Usually, the longer the deposit, the higher the interest rate. The principle of this deposit is that the depositor can only withdraw money when the agreed term is reached.

* Classification by deposit type:

- Domestic currency deposits: are the source of mobilization of Vietnamese Dong, this currency often accounts for a high proportion of total savings deposits.

- Foreign currency deposits: are deposits in the form of foreign currency, mainly strong foreign currencies such as

USD, EUR, JPY, GBP, FRF... These foreign currencies are also very necessary in banking operations such as domestic foreign currency trading, import-export financing, international payments... Commercial banks that tend to expand foreign business often have large foreign currency capital.

* Classification by deposit object:

- Resident deposits: deposits of individuals into banks for the purpose of enjoying payment services through banks, to ensure safety or to earn interest.

- Deposits of enterprises and social organizations: Enterprises and organizations meet payment needs and conduct production and business activities, so these units often deposit a large amount of money in banks to enjoy payment convenience or interest.

* By deposit purpose

- Payment deposits: Payment deposits are money that businesses, organizations and individuals deposit in banks for the bank to hold and make payments on their behalf.

- Term deposits of enterprises and social organizations: Many enterprises and social organizations have activities of collecting and disbursing money according to certain cycles, or deposit money to earn interest.

- Savings deposits: Savings deposits are deposits in banks for the purpose of storing money safely and earning interest on that money. Savings deposits are divided into two types: non-term savings and term savings.

- Deposits from other banks: This is a source of deposits that is usually small in scale. Banks always have deposits from each other to ensure quick payment for their customers.

* By fundraising channel

- Direct capital mobilization at branch headquarters and transaction offices: is a traditional transaction channel, available at all banks.

- Mobilizing capital through electronic transaction channels: along with the development of technology, banks have used the form of mobilization via internet banking, this form has the advantage of being very fast and convenient for customers and banks.

1.3. Management of capital mobilization of commercial banks

1.3.1. Concept of deposit mobilization management

Management is the process of planning, organizing, leading and controlling the activities of members in the organization and using all other resources of the organization to achieve the set goals. According to the above understanding, it can be defined that: Deposit mobilization management is the process of planning, organizing, implementing and controlling the deposit mobilization activities of commercial banks to achieve the set goals of deposit mobilization.

Deposit mobilization capital management for commercial banks is understood as the ability to achieve the bank's business goals based on establishing, organizing and operating strategies, policies, and capital mobilization programs to ensure that commercial banks always have enough capital to maintain and develop business activities at reasonable costs and achieve the highest efficiency. That is the ability to meet capital needs in a timely, complete, safe, and effective manner based on a reasonable capital mobilization structure with the lowest possible costs and risks while satisfying the interests of related parties, including the interests of customers and the economy.

In order to ensure safety in business, the management of deposit mobilization plays a very important role in helping to fully and promptly meet the capital needs of commercial banks on the basis of deposit mobilization growth, creating a continuous rotation between capital mobilization and capital use; proactively meeting payment needs when any withdrawal needs occur; maintaining the prestige and image of the bank. Management of deposit mobilization also helps banks ensure safety in capital mobilization, which is also related to determining a valid capital balance, creating a suitable term for deposits and loans.

1.3.2. Content of deposit mobilization management

Effective management of deposit mobilization capital for commercial banks is the ability to achieve the bank's business goals based on establishing, organizing and operating strategies, policies and capital mobilization programs. That is the ability to meet capital needs in a timely, complete, safe and effective manner based on the capital mobilization structure.

reasonable with the lowest possible cost and risk while satisfying the interests of stakeholders including the interests of customers and the economy.

For commercial banks, mobilized deposits are the largest source of capital, the basis for commercial banking activities, but also the most volatile due to their dependence on the needs of depositors. Therefore, in order to ensure safety in business, the management of mobilized deposits plays a very important role in helping to fully and promptly meet the capital needs of commercial banks operating under the method of borrowing to lend, meeting the needs of increasing the scale and lending structure of banks on the basis of increasing mobilized deposits, creating a continuous rotation between mobilized capital and capital use; proactively meeting payment needs when any withdrawal needs occur; maintaining the prestige and image of the bank. Mobilized deposit management also helps banks ensure safety in capital mobilization, which is also related to determining a valid capital balance, creating a suitable deposit and loan term.

For customers, they are the main partners of the bank in business activities. The bank's business plans and strategies are only feasible when linked to the interests of customers. For depositors, the goal of deposit activities is to ensure income or benefits for customers when depositing money, customers will receive a certain amount of income when depositing money according to the term they choose, satisfying the needs of principal and interest and the safety of customers' assets.

Whether the management of mobilized capital for each related entity is effective or not depends on the harmonious combination of interests of the parties depending on the specific conditions and the importance of each factor. That is:

* strategy, policy and plan for deposit mobilization

Capital mobilization strategy of commercial banks is an industry competitive strategy to attract customers in capital mobilization.

- The bank's capital mobilization strategy, also known as customer strategy, plays a decisive role in the operations of any bank in a competitive market mechanism. It determines the sustainable development and operational efficiency of the bank.

Funding strategy is the most important component of capital management.

- The capital mobilization strategy of a commercial bank includes strategic goals and basic methods to achieve the capital mobilization goal for the bank over a long period of time, usually from 3 to 5 years. The strategic goal is usually the growth rate of mobilized capital during the strategic period. The method to achieve the strategic goal is usually one, two or a combination of competitive methods: Competition by price, competition by quality, competition by differentiation and competition by customer relationships.

- The process of forming a capital mobilization strategy of a commercial bank is the process of analyzing the external and internal environment of the bank to determine strengths, weaknesses as well as opportunities and challenges to determine strategic goals and solutions.

- Building a capital mobilization strategy is not an easy and costly process, but the benefits for the bank are enormous and vital to the bank's survival.

Unlike strategy, capital mobilization policy affects capital activities in a different, shorter-term and more specific way. Capital mobilization policy is the way to handle a certain problem in the process of capital mobilization. It can be price, quality or scale...

The policy system that directly impacts capital mobilization includes:

- What is the scale, structure, term, interest rate of capital mobilization, and how is capital mobilization and use appropriate?

- Policies related to bank deposit products and services. This group of policies aims to evaluate the types of products and services provided and the quality of products and services that are suitable to market needs while expanding and developing new services.

- Policies on prices, deposit interest rates, commission rates and service charges are considered as prices of financial products and services, banks use the deposit interest rate system as an important tool in mobilizing deposits and changing

capital scale. To maintain and attract more capital, banks need to set competitive interest rates and offer price incentives to large and traditional customers.

Furthermore, the interest rate system needs to be flexible, suitable to the scale and structure of capital sources. The scale and structure of capital sources are also influenced by the prices of other services such as money transfer costs, payment service fees, and treasury fees.

- Policies on network organization and banking technology: These are policies and measures to attract capital, create a favorable and simple environment in customer relations. Including appropriate network arrangement and planning, perfecting banking technology to ensure speed, safety and accuracy.

- Customer care policies: These policies are of great interest to commercial banks in order to create and strengthen their reputation in the market, to bond with traditional customers and to attract new customers. In the current difficult conditions of maintaining product and price differentiation, service quality becomes an extremely important competitive tool to attract capital. Friendly and attentive service attitude, and a scientific payment system are essential to retain existing and new customers.

Capital mobilization policy is a tool to implement the bank's capital mobilization strategy or plan, and is a method to achieve the goals of the capital mobilization strategy or plan.

Annual deposit mobilization plan

- Is a type of operational plan for capital mobilization, determining the specific quantity of capital to be mobilized within a certain period, year, quarter; by term: Short-term capital, long-term capital; by target customer group: Customers are individuals, organizations...

- The annual deposit mobilization plan provides specific figures on scale for a year and can be divided into quarterly and periodic progress... making it easy to organize, implement and control.

- The annual deposit mobilization plan is built on the basis of balance.

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