Model of Factors Affecting GDP Development in Commercial Banks

Relative stability makes derivatives services less attractive. In fact, countries that had to deal with the 1997 Asian crisis such as Thailand, Malaysia, and the Philippines are countries with strongly developed derivatives markets in the region with strong financial risk prevention systems.

Besides, the condition for developing CCPS is to have a derivatives exchange, but in Vietnam there is only one futures exchange, Saigon Thuong Tin Commodity Exchange (Sacom-STE), which officially operated in early December 2009. It is still quite new to Vietnamese enterprises and does not really have a reputation in the international market .

In addition, the market lacks investors who understand the benefits and techniques of using NVPS, leading to this transaction not being widely known.

+ Incomplete legal environment

The State's policies and legal regulations on the application of these types of derivative contracts are not really complete, are pilot and individual. Currently, the documents only regulate foreign currency futures contracts, foreign currency futures contracts; interest rate swap transactions (Decision No. 15/2015/TT - SBV, dated October 2, 2015). There are no legal documents guiding commercial banks to implement other interest rate NVPS such as deposit term (FFD), interest rate term (FRA), options such as CAP, FLOORS, COLLAR, ... In addition, the issue of taxation on swap transactions between two currencies, as well as taxation on income from advertising contract fees, is not clearly regulated and still has many shortcomings. Many countries advocate not taxing SPPS because they consider it a risk prevention tool for enterprises, not a business channel for banks. In Vietnam, there are no specific written regulations on the above taxes. Another typical problem is the way to calculate taxes on the results obtained from the use of futures contracts. Profits from futures contracts transactions are taxable, while losses from these transactions are not deductible from taxable income.

In addition, when banks want to do SPPS business, they must ask for permission from the State Bank and are only allowed to conduct transactions when they receive written permission from the State Bank. This causes commercial banks to face many difficulties in implementing new types of products because legal procedures will take up more or less waiting time for banks and businesses, as well as " reduce the initiative of banks in accessing modern products in the world".

+ Ineffective advertising and propaganda work

In order for customers to know about CCPS " as well as its role in risk prevention or profitable business, propaganda and advertising work of commercial banks is an indispensable task. However, most banks only stop at the stage of responding

meet the needs of customers to buy and sell CCPS but have not proactively introduced their products to businesses. This leads to businesses having almost no information or understanding of the technical use and benefits of CCPS.

+ Lack of understanding of SPPS by Vietnamese enterprises

Vietnamese enterprises “ still do not fully understand the nature and benefits that GDPS brings to the enterprises themselves. Many enterprises' knowledge about GDPS and the issue of preventing interest rate and exchange rate risks, etc. is still too low. The understanding of techniques to prevent interest rate risks and exchange rate risks using GDPS is even more unfamiliar. On the other hand, 90% of Vietnamese import-export enterprises use USD in payment. Meanwhile, the USD/VND exchange rate always tends to be stable, the State Bank often allows the USD/VND exchange rate to increase by only about 1% annually. Such fluctuations are insignificant compared to the fluctuations of other currencies such as EUR, GBP, JPY or AUD (which can increase or decrease by 1% in 1-2 days). Understanding the fluctuations in the USD/VND exchange rate, for many years, enterprises have often only used spot foreign currency transactions without paying attention to CCPS to hedge exchange rate risks. Besides the fact that businesses prefer to use USD in international trade, Vietnamese businesses still do not have the habit or, more precisely, do not care about risk prevention for foreign currency credit activities .

+ Complex transaction conditions and high fees

The transaction conditions and “ fees applied by banks to GDPS are also issues that many businesses are hesitant about. Businesses calculate that it is not beneficial so they do not use it. Not to mention that the derivative contract templates at each bank are drafted according to a separate criterion, making it difficult and time-consuming for businesses to learn about the types of GDPS at banks to find the right contract for them. ”

CONCLUSION OF CHAPTER 3

In this chapter, the thesis delves into the following contents:

Firstly, analyze and evaluate the current status of GDPS at Vietnamese commercial banks through the following contents: transaction turnover, revenue, costs and profits of GDPS. After many years of implementing GDPS with modest turnover and the contribution ratio of profits from GDPS to the total profits of commercial banks. Most profits from GDPS account for less than 8% of total profits.

Second, build a model of factors affecting GDPS turnover at Vietnamese commercial banks in the period of 2006-2015. Overview of studies on factors affecting GDPS turnover, build research hypotheses, and relationship signs. The thesis uses a one-equation multivariate regression model analysis technique to analyze the impact of factors: Bank size, Bank liquidity, Interest rate fluctuations, Exchange rate fluctuations on GDPS turnover at Vietnamese commercial banks in the period of 2006-2015. The data source used is secondary data from financial reports of 8 Vietnamese commercial banks and synthesizes exchange rate and interest rate movements in Vietnam over a period of 10 years.

Through the model of analyzing factors affecting DGPS sales with secondary data collected by the author, the four variables of liquidity, bank size, exchange rate volatility, and interest rate volatility are all significant at a confidence level greater than 95% (P>/z/ < 0.005) and the regression coefficients all have the expected signs as initially predicted. That means that all four independent variables have a fairly close influence on the dependent variable (GDPS sales). The linear regression equation based on the results of multiple linear regression analysis is as follows:

LN(TRD) = - 4.0320 + (- 5.3566)LIQ + 1.1294 SIZE + 10.4373 abs(EXR) + 3.7113 abs(IRT)

Among the four independent variables of the model, the Exchange Rate Volatility variable has the greatest impact on Derivative Sales, followed by the Liquidity variable, the Interest Rate Volatility variable, and finally the Bank Size variable. The Liquidity variable is the only variable that has an inverse relationship with Derivative Sales, the remaining three variables are Bank Size, Exchange Rate Volatility, and Interest Rate Volatility, which have a positive relationship with Derivative Sales. This is consistent with previous studies that we presented in Chapter 1.

CHAPTER 4

FACTORS AFFECTING THE DEVELOPMENT OF DERIVATIVE TRADING AT VIETNAMESE COMMERCIAL BANKS

4.1. Model of factors affecting GDPS development at commercial banks

4.1.1. Some studies on factors affecting GDPS development at commercial banks

Normally, people classify factors affecting the business activities of commercial banks into subjective factors and objective factors. Subjective factors are factors that belong to the commercial bank itself, which the commercial bank can control or adjust. Objective factors are factors that the commercial bank cannot adjust or control.

Objective factors: These are factors that commercial banks cannot control, they continuously affect the business activities of commercial banks in different directions, both creating opportunities and limiting the ability to achieve the goals of commercial banks. Business activities require constant understanding of these factors, operating trends and the impact of these factors on the entire business activities of commercial banks. Objective factors include political, legal, cultural, social, technological, technical, economic, natural conditions, infrastructure and economic relations, customer factors, competitors... these are factors that commercial banks cannot control and at the same time have a general impact on all commercial banks in the market. Commercial banks study these factors not to control them according to their own opinions but to create the best adaptability to their own trends.

Subjective factors: Are all factors within the potential of a commercial bank that the commercial bank can control to some extent and use to exploit business opportunities. Potential reflects the strength of the bank in the market, correctly assessing the potential allows the bank to build the right business strategy and plan and at the same time take advantage of business opportunities to bring high efficiency.

Factors of commercial banks' potential include: financial strength, human potential, intangible assets, management organization level, technological equipment level, infrastructure, correctness of business goals and ability to "control" in the process of goal implementation....

Table 4.1.Summary of factors affecting GDPS development at commercial banks

Influencing factors

Author, year	Termites relationship	Content
	1.	1. Chiara Oldani, 2008	+	Environmental factors "policies and laws strongly affect the
	Main	2. Chuang-Chang Chang,		Forming and exploiting business opportunities and achieving business goals. Stable
	books and	Keng-Yu Ho and Yu-Jen Hsiao		Political stability is an important prerequisite for business activities, changes in
	onion	(2012)		Politics can have a beneficial influence on this group of businesses or hinder their development.
CORE	legal	3. Coerrad Vrolijk (1997) 4. Jinan Yan (2010) 5. Satoru Hagino (2010).		development of other enterprises. A complete legal system and strict enforcement of the law will create a healthy competitive environment for business entities, avoiding the situation of "fraud"... a complete legal framework will help define the development of derivatives markets and continues to affect the stability of
		6. Randall, D. & Jones, S. G. (2007)		their definition and effectiveness.
FACTORY	2. Lips	1. Chiara Oldani, 2008	+	Can create “favorable conditions for market penetration and expansion.
	school	2. Chuang-Chang Chang,		economic factors that affect changes in demand or development trends of
GUEST	economy	Keng-Yu Ho and Yu-Jen Hsiao (2012)		new business, economic factors include: + Foreign trade activities: The opening and closing trend of the economy has an impact
MANDARIN		3. Coerrad Vrolijk (1997) 4. Jinan Yan (2010)		Business development opportunities, competitive conditions, ability to use national advantages in technology and capital.
		5. Satoru Hagino (2010).		+ The development of the financial market affects the supply and demand of capital, interest rates, and ability to investment, accumulation of the economy.
				+ Changes in economic structure affect the position, role and development trends.
				The development of economic sectors leads to changes in the development direction of enterprises.

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Influencing factors

Author, year	Relationship system	Content
				+ Economic growth rate: Shows the general development trend of the economy related to the ability to expand or narrow the scale of business. each enterprise.”
	3. KH	1. Chiara Oldani, 2008	+	Customers are people who have the need and ability to pay for goods and services.
		2. Chuang-Chang Chang,		that the business entity provides. Is the subject of consumption and use of goods.
		Keng-Yu Ho and Yu-Jen Hsiao		Service. Customer is the important factor deciding the success or failure of commercial banks in
		(2012)		market economy. Customers have very diverse and different needs depending on
		3. Coerrad Vrolijk (1997)		each object: individual, enterprise. Each customer group has its own characteristics that reflect
		4. Jinan Yan (2010) 5. Satoru Hagino (2010).		their service usage process. Therefore, commercial banks must have policies to meet the needs of each group appropriately.”
	4. For	1. Ana Lozano-Vivas, Fotios	+	Including “commercial banks trading in products with the ability to be substituted. Competitors
	goalkeeper	Pasiouras (2006),		Competition has a great impact on banks. Only when commercial banks can compete can they have the ability to compete.
	edge	3. Brewer, Elijah III, Jackson,		The ability to survive will be pushed out of the market. Competition helps commercial banks
	painting	William E. III and Moser,		can improve their operations to better serve customers, improve the quality
		James T. (2001)		dynamic but always in a state of being pushed back.”
		4. Chiara Oldani, (2008)
		5. Satoru Hagino (2010).
	5. Subjective	1. Ana Lozano-Vivas, Fotios Pasiouras (2006),	+	+ “Financial strength is reflected in the total capital (including equity and mobilized capital) that the bank can mobilize for business and management ability.

Influencing factors

Author, year	Relationship system	Content
	(financial potential)	2. Andres Rivas, Teofilo Ozuna, Felice Policastro (2006)	effective use of capital in business. Financial strength is shown in short-term and long-term debt repayment capacity, profitability ratios of commercial banks...
	main,	3. Brewer, Elijah III, Jackson,	+ Human potential: Shown in knowledge, experience and ability
	Source	William E. III and Moser,	highly meet the requirements of the Bank, excellently complete assigned tasks, team
CORE	core	James T. (3Q/2001)	Loyal commercial bank staff always turn to banks with professional capabilities.
	force,	4. Chiara Oldani, 2008	highly educated, able to unite, dynamic, able to take advantage of and exploit opportunities
FACTORY		5. Satoru Hagino (2010).	business… the capacity of the bank's leaders and employees + Intangible potential: Factors that create the bank's power in the market, potential
			Invisible force manifests itself in the ability to influence choice, acceptance and decision making.
OWNER			customer's decision to use the service. In a commercial relationship, the factor
			Intangible resources have facilitated product development.
MANDARIN			new services, creating resources and competitiveness to attract customers, expanding markets Business school…The invisible potential of the bank can be the prestigious image of the
			That bank in the market or the level of popularity of the brand, technology, strategy
			business strategy and new product development.”