Solutions to improve the international payment by documentary credit at sai gon thuong tin comercial joint stock bank thang long branch,graduation thesis

STATE BANK OF VIETNAM
BANKING ACADEMY
Foreign Language Faculty

GRADUATION THESIS
SOLUTIONS TO IMPROVE THE INTERNATIONAL
PAYMENT BY DOCUMENTARY CREDIT AT SAIGON
THUONG TIN COMMERCIAL JOINT STOCK BANK –
THANG LONG BRANCH
Student

: Giang Thi Nga

Class

: ATC-B

Lecturers : Nguyen Hong Ngoc, M.A
Ngo Tung Anh, M.A

6th June 2012


ACKNOWLEDGEMENTS
This thesis would not have been possibly completed without the generous help, support
and guidance from many individuals. I would like to express my sincere thanks to all of
them.
Firstly, I would like to express my warm and sincere thanks to my supervisors, Ms
Nguyen Hong Ngoc, a lecturer of Banking Faculty and Mr.Nguyen Tung Anh, the Vice
Dean of Foreign Language Faculty, Banking Academy for their continuous support of my
study and research, their great efforts to explain things clearly and simply, their

corrections, comments, criticism, suggestions during the process of report. Their guidance
helped me very much in all the time of research and writing of this report.
Secondly, I would like to express my gratitude to the leaders of Sacombank-Thang Long
branch for offering me an opportunity to do internship there. Additionally, I am greatly
indebted to all of the staff members in the International Payment sector of SacombankThang Long for providing me with a good working condition, and valuable reference
documents to complete this report.
Last but not least, I would like to give my special thanks to my family, my friends for
every valuable thing they made for me. Their love, trust and encouragement really gave
me strength to keep going on my way. Thank you for all.


TABLE OF CONTENTS
ACKNOWLEDGEMENTS
LIST OF ABBREVIATIONS
LIST OF TABLES AND FIGURES
EXECUTIVE SUMMARY
INTRODUCTION ............................................................................................................. 1
CHAPTER 1: THEORETICAL FRAMEWORK ............................................................. 3
1.1. Letter of Credit ........................................................................................................... 3
1.1.1. Definitions of L/C.................................................................................................... 3
1.1.2. Characteristics of L/C .............................................................................................. 3
1.1.3. Parties to the L/C transaction .................................................................................. 4
1.1.4. Process of L/C ......................................................................................................... 5
1.1.5. Classification of L/C ............................................................................................... 6
1.2. Norms reflecting the improvement of international payment by Documentary Credit
........................................................................................................................................... 7
1.2.1. Qualitative norms .................................................................................................... 7
1.2.2. Quantitative norms .................................................................................................. 8
1.3. Factors impacting the improvement of international payment by Documentary Credit
........................................................................................................................................... 9

1.3.1. Objective factors ...................................................................................................... 9
1.3.2. Subjective factors .................................................................................................... 9
CHAPTER 2: THE INTRODUCTION OF SAIGON THUONG TIN COMMERCIAL
BANK – THANG LONG BRANCH ................................................................................ 11
2.1. The establishment and development of Sacombank – Thang Long Branch .............. 11
2.2. The organizational structure of Sacombank – Thang Long Branch........................... 12
2.3. The result of some main operations of Sacombank – Thang Long Branch ............... 14
2.3.1. The operation of capital mobilization...................................................................... 14


2.3.2. The operation of capital financing ........................................................................... 15
2.3.3. The operation of international payment .................................................................. 15
CHAPTER 3: ANALYSES AND FINDINGS ................................................................. 17
3.1. The reality of the improvement of the international payment by documentary credit at
Sacombank - Thang Long Branch ..................................................................................... 17
3.1.1. Legal framework governing the international payment by documentary credit at
Sacombank – Thang Long Branch .................................................................................... 17
3.1.2. The reality of the improvement of international payment by documentary credit at
Sacombank - Thang Long Branch ..................................................................................... 17
3.2. Valuation of the improvement of the international payment by documentary credit at
Sacombank – Thang Long Branch .................................................................................... 22
3.2.1. The achievements and reasons ................................................................................ 22
3.2.2. The drawbacks and causes....................................................................................... 23
CHAPTER 4: SOLUTIONS TO IMPROVE THE INTERNATIONAL PAYMENT BY
DOCUMENTARY CREDIT AT SACOMBANK – THANG LONG BRANCH ............ 26
4.1. The orientation for the improvement of the international payment by Documentary
Credit at Sacombank – Thang Long Branch ..................................................................... 26
4.2. Solutions to improve the international payment by Documentary Credit at
Sacombank-Thang Long ................................................................................................... 26
4.2.1. Establishing an effective marketing strategy........................................................... 27

4.2.2. Improving the professional skills of staff ................................................................ 28
4.2.3. Strengthening technology infrastructure ................................................................. 28
4.2.4. Diversifying the products of L/C ............................................................................. 28
4.2.5. Increasing the supply of foreign currencies for international payment using L/C .
........................................................................................................................................... 29
4.2.6. Managing risks in international payment ................................................................ 29
4.3. Petitions ...................................................................................................................... 30
4.3.1. Petitions for the government ................................................................................... 30
4.3.2. Petitions for the Central Bank ................................................................................. 31


4.3.3. Petitions for the Sacombank .................................................................................... 31
4.3.4. Petitions for the exporting - importing enterprises .................................................. 32
CONCLUSION ................................................................................................................. 33
REFERENCES .................................................................................................................. 34


LIST OF ABBREVIATIONS
SacombankLong

Thang Saigon Thuong Tin Commercial Bank- Thang Long
branch

L/C

Letter of Credit

SWIFT

Society

for
Worldwide
Telecommunications

UCP

The Uniform Customs and Practices for Documentary
Credit

ICC

International Chamber of Commerce

ISBP

International Standard Banking Practices

Interbank

Financial


LIST OF TABLES AND FIGURES
Figure 2.1 : The organizational structure of Sacombank- Thang Long ............................ 13
Figure 2.2 : The result of capital mobilization 2009-2011 ................................................ 14
Figure 2.3 : The result of capital financing 2009-2011 ..................................................... 15
Figure 2.4 : The result of international payment 2009-2011 ............................................. 16
Table 3.1 : Time to open a L/C set .................................................................................. 18
Figure 3.1 : The satisfaction degree of customers in L/C operation ................................. 18
Table 3.2 : The quantity and profit of L/C transactions 2009-1011 .................................. 19

Figure 3.2 : The profit of import L/C and export L/C 2009-2011
........................................................................................................................................... 20
Figure 3.3 : The proportion of L/C profit in the total international payment operation of
the
branch
........................................................................................................................................... 21
Table 3.3 : The rate of errors in checking L/C documents ................................................
........................................................................................................................................... 22
Table 3.4 : The ratio of overdue debts in L/C payment .................................................... 22


EXECUTIVE SUMMARY
The report aims to provide understanding of the important role as well as the reality of the
Documentary Credit method for International Payment sector of Saigon Thuong Tin
Commercial Bank – Thang Long Branch. Also, the report gives some recommendations
to help the branch improve the international payment activity by L/C.
Apart from the introduction and conclusion, this report is divided into four chapters.
The first chapter mentions the theoretical framework used as basis for the research. In this
chapter, readers will have a deeper understanding of L/C including definition,
characteristics, the process of a L/C transaction, types of L/C, norms reflecting the
improvement of international payment by L/C as well as factors affecting the
improvement of L/C payment in a bank.
The second chapter, the researcher gives an overview of Sacombank – Thang Long
Branch and its results of some main operations.
The third chapter provides analysis and findings of international payment using L/C at
Thang Long branch. More specifically, this chapter points out the reality of import and
export L/C. All achievements and drawbacks of this method are also disclosed.
Finally, in the fourth chapter, the researcher makes some recommendations to help the
branch overcome the limitations and this kind of method become more effective.

INTRODUCTION
1.
Research rationale
In the trend of international economic integration, trade of goods among countries
develops rapidly, which requires the international payment operation of banks to be
complete. Nowadays, Vietnam has stepped up its international trade, as a result, its
market is expanding globally and its partners are varied as well. Along with the
development of international trade is the introduction of a range of payment methods,
which are: Advanced payment, Open account, Remittance, Collection of payment,
Documentary Credit. Documentary Credit shows as the most advantageous method,
which harmonizes the interests of both parties. Therefore, an estimated 90% of foreign
trade contracts agreed upon payment by Letter of credit. Sacombank in general and Thang
Long branch in particular are not the exception. After interning in the International
Payment Department of Sacombank – Thang Long Branch, I recognized that the
Documentary Credit method accounts for the largest proportion. The branch has gained
remarkable achievements, however , there are limitations needing to be addressed .
Therefore, I have chosen “ Solutions to improve the international payment by
Documentary Credit at Saigon Thuong Tin Commercial Joint Stock Bank-Thang
Long Branch” as the topic of my graduation thesis.
2.
Research questions
My research focuses on answering two main questions:
What is the current situation of international payment by documentary credit at
Sacombank – Thang Long Branch?
What should be done to improve L/C payment at Sacombank – Thang Long
Branch?
3.
Research methodology
To clarify the issue, I have used some methods to collect data. One of the methods was

observing daily operations of Thang Long branch, interviewing some officers.
Meanwhile I got the data through figures and facts filed in the branch, sources such as
books, magazines, newspapers and others related documents in the library of Banking
Academy. All data were analyzed and made full use to create completion for this research
paper.

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4.
Scope of the research
The research will concentrate on the reality of L/C payment at Sacombank – Thang Long
Branch by analyzing facts, figures of the branch to assess the achievements as well as
limitations. The study also provides some recommendations to address the issues.

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CHAPTER 1
THEORETICAL FRAMEWORK

1.1. Letter of Credit
1.1.1. Definitions of L/C
According Article 2, UCP 600, Letter of Credit is defined as follows: “Credit means any
arrangement, however named or described, that is irrevocable and thereby constitutes a
definite undertaking of the issuing bank to honor a complying presentation.”

Another definition which is found in “A short course in International Payments” is
(Edward, 2002) “ A documentary L/C is a bank’s commitment to pay the seller a specific
sum on behalf of the buyer under precisely defined conditions. The buyer specifies certain
documents (including a title document) from the seller before the bank is to make
payment, and the seller is assured that payment will be received after the goods are
shipped so long as the specified documents are provided”
From these definitions, it is can be seen that method of L/C reconciles the benefits and
risks between exporters and importers, which is its advantages over other international
payment methods.

Exporters know just from the beginning of the LC process that they will be paid
exact due amount without any delay as long as they comply letter of credit conditions.

Importers know that banks will not be paying to the exporters if they fail to meet
the letter of credit conditions.
1.1.2. Characteristics of L/C transactions
-L/C is an economic contract between 2 parties : the issuing bank and the beneficiary .
All requests and instructions of the applicant are performed by the issuing bank so the
official voice of the applicant is not shown in the L/C.
-L /C is independent of trade contract: L/C by its nature is a separate transaction from the
sale or other contract on which it may be based. Once L/C is opened and accepted by the
parties, the rights and obligations of the involved parties cannot be changed whether the
content of L/C is in accordance with the contract of trade or not.
-L/C is only in form of documents and paid based on documents: on the basis of
documents, the banks examine to determine whether it is a complying presentation. When
the presentation is complying, the issuing bank has to unconditionally pay the exporter
even if the goods are delivered or not right as stated on the documents.
-L/C requires a strict adherence to the documents: as the parties deal with documents and
not with goods, services or performance to which the documents relate, a strict adherence
to the documents is the basic principle of the L/C transaction.

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1.1.3. Parties to the L/C transaction
The Buyer (Applicant/Importer)
The buyer initiates the documentary credit process by applying to his bank to open a
documentary credit naming the seller as the beneficiary. The buyer, therefore, may be
called the buyer in commercial terms, the importer in economic terms, and the applicant
in banking terms. They are all one and the same.
The Issuing (Buyer's) Bank
Upon instructions from the buyer, the issuing bank (typically the buyer's regular business
bank) issues a documentary credit naming the seller as the beneficiary and sends it to the
advising bank (typically the seller's bank).
The Advising (Seller's) Bank
Upon instructions from the issuing bank and the buyer, the advising bank (typically the
seller's bank) advises the seller of the credit. The advising bank is typically the seller's
regular business bank and is in the seller's country.
The Seller (Beneficiary/Exporter)
The seller receives notification (advice) of the credit from the advising bank, complies
with the terms and conditions of the credit, and gets paid. The seller is the beneficiary of
the documentary credit. The seller, therefore, may be called the seller in commercial
terms, the exporter in economic terms, and the beneficiary in banking terms. They are all
one and the same.
Confirming Bank
The confirming bank adds its guarantee to the credit opened by another bank, thereby
undertaking the responsibility of payment/negotiation acceptance under the credit, in
additional to that of the issuing bank. The confirming bank plays an important role where

the exporter is not satisfied with the undertaking of only the issuing bank.
Negotiating Bank
The negotiating Bank is the bank who negotiates the documents submitted to them by the
beneficiary under the credit either advised through them or restricted to them for
negotiation. On negotiation of the documents they will claim the reimbursement under the
credit and makes the payment to the beneficiary provided the documents submitted are in
accordance with the terms and conditions of the letters of credit.
Reimbursing Bank
The reimbursing Bank is the bank authorized to honor the reimbursement claim in
settlement of negotiation/acceptance/payment lodged with it by the negotiating bank. It is
normally the bank with which issuing bank has an account from which payment has to be
made.

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1.1.4. Process of L/C
The process of L/C can be divided into 2 main steps, namely Documentary Credit
Application and Documentary Credit Payment.

•

Documentary Credit Application

(1)
Contract
Importer/ Applicant

L/C
application

Exporter/ Beneficiary

(2)

(4)

Advice of L/C

(3)
Issuing bank

Advising bank
L/C
(1) The buyer and the seller set out the terms and conditions of the transaction in a
contract of sales. The issuance of a documentary credit will be one of the requirements.
(2) The importer requests his bank to establish the documentary credit and must ensure
that:
• The bank has granted sufficient facilities to cover it. If the bank feels that the financial
risk is too high, it may require additional security in the form of surety; and
• The transaction complies with the relevant exchange control rulings or has a Reserve
Bank approval reference number.
(3) The issuing bank issues the documentary credit in conformity with the applicant’s
instructions and sends it to the advising bank.
(4) The advising bank hands the documentary credit to the beneficiary.

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•

Documentary Credit Payment

(5)
Importer/ Applicant

Exporter/ Beneficiary
Goods

(6)
Documents

(8a)
Issuing Bank

Documents
Payment or
Acceptance (8b)

Payment or
Acceptance

(9)
Advising Bank

Documents (7)

(5) The exporter ships goods to the buyer.
(6) The export submits the documents, which conform to the terms and conditions of the
credit, to the advising bank.
(7) The advising bank submits the documents to the issuing bank.
(8a), (8b) The issuing bank will check and confirm the compliance of the documents
against the documentary credit. If the documents meet the L/C requirements, it forwards
the documents to the buyer and pays or promises to pay the seller at maturity.
(9) The seller receives the payment or the acceptance through the advising bank.
1.1.5. Classification of L/C
In international trade, people may use many different kinds of L/C. Different experts and
authors have different ways to categorize them. However, Edward (2003) divides L/Cs
into two groups: standard L/Cs and special L/Cs.
Firstly, standard L/Cs includes revocable and irrevocable L/C, confirmed and
unconfirmed L/C; confirmed irrevocable L/C and irrevocable unconfirmed L/C.
Revocable L/C: a revocable L/C gives the buyers and/or issuing bank the ability to
amend or cancel the credit at any time right up to the moment of intended payment
without approval by, or notice to, the seller.
Irrevocable L/C: a L/C that cannot be amended, modified, or cancelled without the
agreement of all parties concerned. This is the most popular L/C used in international
payment.
Confirmed L/C: a kind of L/C in which the advising bank, on the instructions of the
issuing bank, has added a confirmation that payment will be made as long as compliant
documents are presented
Unconfirmed L/C: opposite to confirmed L/C, unconfirmed L/C is a kind of L/C
under which only the issuing bank is responsible for undertaking the payment.
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Confirmed Irrevocable L/C: a kind of Irrevocable L/C which carries the commitment
to pay of both the issuing bank and the advising banks. The advising bank adds its
undertaking to pay to that of the issuing bank, and its commitment is dependent of that of
the issuing bank.
Irrevocable unconfirmed L/C: on the contrary to Confirmed Irrevocable L/C, an
irrevocable unconfirmed L/C conveys a commitment by the issuing bank to honor draft or
documents as presented by the beneficiary of the credit.
Besides standard L/Cs, there are special ones which are standby credit, revolving credit,
red clause credit, transferable credit and back-to –back credit.
Standby L/C: an L/C which a bank issues on behalf of its customer to serve as a
guarantee to the beneficiary of the L/C that the bank's customer will perform a specified
contract with the beneficiary. If the customer defaults, the beneficiary may draw funds
against the L/C as penalties or as payments, whichever the terms of the credit provide.
Revolving L/C: is a commitment on the part of an issuing bank to restore a credit to
the original amount after it has been utilized, without the need for amendment. This kind
of credit is used in cases where a buyer want to have certain quantities of the ordered
goods delivered at specified intervals, such as in a partial/multiple delivery contract.
Red Clause L/C: a special type of L/C that permits the beneficiary to receive funds
for any purchase outlined in the L/C.
Transferable L/C: is an Irrevocable L/C that allows the Beneficiary to request the
Issuing Bank to transfer all or a part of the amount of money of the L/C to one or more
other parties.
Back to back L/C: is a new documentary credit opened in favor of another beneficiary
on the basis of an already existing, irrevocable, non-transferable L/ C. Traders use it to
make payment to the ultimate supplier.
1.2. Norms reflecting the improvement of international payment by Documentary
Credit
1.2.1. Qualitative norm
1.2.1.1. The transaction duration of a L/C payment
The duration of L/C payment is calculated from the opening an L/C for a customer to the

end when the L/C is settled to the beneficiary, including different stages, each of which
affects the effectiveness of the whole process. In terms of duration, a transaction by L/C
should be timely and quick. The bank must ensure the issuance of a L/C at the exact time
as the importer and the exporter has agreed in the commercial contract. The shorter the
time from the opening untill the end when the L/C is settled to the beneficial is, the more
effective the transaction is. The customers have opportunities to mobilize capital faster,
avoiding losses from delay; the bank saves costs, increases its productivity, contributing
to improve the quality of L/C payment.
1.2.1.2. The staff’s skills
The professional skills of the staff have a decisive impact on the duration, safety and
improvement of the L/C transaction. If the staff have good professional skills, practical
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experience as well as foreign language competence, they will be able to perform their job
well. In addition, they can provide customers with valuable advice. All these things join
in limiting risks, accelerating the process of checking documents, thereby enhancing the
documentary credit method.
1.2.1.3. The satisfaction of the customers involved
How much the customers feel satisfied will illustrate the quality degree of the bank’s
services. Normally, the bank will deliver the survey questionnaire to get customers’
opinions about this matter every one month or four months. Basing on the result, they can
evaluate the international payment quality and find the ways to improve. If the
satisfaction degree of customers increases year by year, the bank’s improvement strategy
works well.
1.2.2. Quantitative norm
1.2.2.1. The proportion of L/C payment in the total international payment operation
of the bank

The large market share of international payment by documentary credit shows the
preference of customers in the use of that banking method. This proves that the bank has
an effective improvement strategy in L/C payment activity.
1.2.2.2. The profit from L/C payment operation
The profit from L/C payment operation is the amount that a bank obtains after deducting
the expenses from the revenue of this activity. The profit from L/C payment operation is
defined as follows:
Profit from L/C payment = Revenue from L/C payment –Costs of L/C transactions
Banks are economic organizations operating for profit so this is the most important
financial norm to evaluate and reflect the improvement of documentary credit method. In
order to increase profit, the bank has to take measures making revenue go up or costs go
down. Increase or decrease in payment profit over the years reveals the scale and the
development of this operation. The higher profit shows that the bank attracts more
valuable L/C transactions, showing the good quality of this service that will create an
unparalleled reputation in customer range.
1.2.2.3. The level of risk in international payment by L/C
In terms of international payment by documentary credit, risk refers to the losses for the
banks when they cannot collect debts that have been paid to the exporter or other wasteful
expenses. The higher these losses are; the riskier the transaction is.
An effective risk management in L/C payment is performed by the accuracy of L/C
sending to the involved parties of the process, the forecast about the political and
economic situation to have appropriate methods as well as the strict and correct verifying
steps to minimize the fraud from the customers. If the bank tackles with this matter well,
lower risks, not only will it keep the customers away from losses but it also gains trust
from them and profit for itself.

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1.3. Factors impacting the improvement of international payment by
Documentary Credit
1.3.1. Objective factors
1.3.1.1. Economic situation in domestic market and in the world
Banking in a stable and developed economy will be safer and more effective. The bank
feels secure about investing its fund into the economy, developing new products and
services, and extending its activities into the international market. Moreover, international
payment using L/C is an action across borders, thus, if the economic state in a country and
in the world are positive, there will be higher demand for L/C transaction. The history
showed that every time when the world economic turned down, all of the trading
activities stagnated, as a result, it was difficult for the bank to apply as well as to boost the
international payment methods.
1.3.1.2. Legal environment and macroeconomic policies from the government
Stable environment will create favorable conditions for the economy to develop, leading
to the fast development of international payment operation. All changes in political view
as well as macroeconomic policies affect the business environment of enterprises and the
trading opportunities of investors. The more stable the political environment is, the safer
the investments are. That is the foundation for the country to attract not only domestic but
also foreign investors and expand the import- export market as well. Thus, the
international payment activities will be improved.
Moreover, any trading activities across the border will be impacted by both the domestic
and the host country’s law. Therefore, if the legal environment of a country is favorable
and in compliance with international regulations and standards, it will easily attract the
investors all over the world.
1.3.1.3. Customer factor
As for activities of international payment, customers of commercial banks are the
exporting-importing enterprises. The customers should have knowledge of foreign trade,
international law and language competence. When banks attract customers who have
financial capacity and good business, the transactions will go smoothly, which helps to

limit the risks in payment, contributing to improve the quality of documentary credit
method.
1.3.2. Subjective factors
1.3.2.1. Quality of human resources
Professional skills, language competence, and experience of the staff directly affect the
improvement of the payment by documentary credit in particular and all international
payment activities of the bank in general. If the staff are equipped with technical
knowledge, carefulness, patience and fluency in foreign languages, the working efficiency
will be higher, which attracts customers to the bank. In addition, skilled staffs who give
helpful consultancy to the customers to help them limit all risks at the highest level will
gain the trust from them as well as reduce the risk for the bank, improving the quality of
international payment methods.
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1.3.2.2. Technology and facilities
In a boom of modern technology and advancement, technology and facilities are two
important factors that lead the international payments to be made fast, accurately and
safely. These factors act as a stepping stone to boost the international payment as well as
the L/C operation of the bank. The commercial banks need to invest in a system of
modern technology and facilities to meet the diverse needs of customers.
1.3.2.3. A network of correspondent banks
The network of correspondent banks plays an important role in international payment
process because it ensures the consistence of a L/C transaction as well as the convenience
for the customers. A bank with a large network of correspondents in many countries will
do international payment more rapidly and accurately, better satisfying customers’
demands. If this network operates well, it will improve its image in the international scope
of finance and banking.

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CHAPTER 2
THE INTRODUCTION OF SAIGON THUONG TIN
COMMERCIAL BANK-THANG LONG BRANCH
2.1. The establishment and development of Sacombank – Thang Long Branch
On 21st December 1991, Sacombank was founded as a premier bank consolidated by
merging Go Vap Economic Development Bank and 3 Credit institutions, with initial
charter capital of VND 3 billion. The bank puts the target to be the first modern multipurpose retail bank at regional level.
After 20 years operating, Sacombank has become one of the biggest commercial banks
in Vietnam with great results: 146,000 billion VND of total assets; 10,740 billion VND of
charter capital, 69 branches ( 1 branch in Laos and 1 branch in Cambodia) and 408
transaction offices in Vietnam, 6180 agencies connected with 289 banks in 80 countries
and areas in the world.
Sacombank has become a pioneering bank in many business performances, such as:
•
The first bank to be listed on the Ho Chi Minh Stock Exchange in Vietnam;
•
The first bank in Vietnam to expand its network to Laos and Cambodia;
•
The leading bank in Vietnam to top into the niche market such as Bank for Women
(8 March Branch) and Chinese Community Bank (Hoa Viet Branch);
•
The first bank in Vietnam to receive funding allocations from international
financial institutions such as IFC, FMO, ADB, Proparco, etc to support individuals, small
and medium-sized enterprises;

Besides, the bank has received many awards and rankings from charismatic global and
domestic organizations, for example: "Best Retail Bank in Vietnam 2012" by The Asian
Banker, "Best Foreign Exchange Provider in Vietnam 2010" by Global Finance, "Best
Cash Management Bank in Vietnam 2010" by The Asset, etc.
On August 8th 2007 , Sacombank-Thang Long Branch was established at 60A Nguyen
Chi Thanh. At present, Sacombank- Thang Long Branch has set up 3 transaction offices
in order to better serve its customers in the local area. It carries out all of the traditional
and modern banking services such as raising capital in form of VND, foreign currencies,
gold from organizations and individuals; making loans in diverse forms of maturity and
currencies to promptly meet the borrowing needs of customers; transferring money and
other banking services(international payment , factoring , ... )
In the initial time of establishment, Thang Long branch faced up with many difficulties,
howerver, with the unity of the staff and the wise leadership of Sacombank, Thang Long
branch overcame those difficulties and confirmed its first success with the active
contribution to the operating results of the whole Sacombank system.
After nearly five years of operation, any year Thang Long branch always exceeds the set
target and receives the commendation from the Sacombank board of director. Now
Sacombank - Thang Long branch has its foodhold on the financial market, being
competent enough to compete with other major banks in the same area. With the plan of
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expansion in 2012, Thang Long branch will become an important link in the network of
modern and multifunctional branches of Sacombank.
2.2. The organizational structure of Sacombank – Thang Long Branch
In Sacombank Thang Long, the leaders are the Director and his two Deputy Directors.
They are responsible for the performance of all staff. The branch is divided into 5
functional departments, namely the Business Support Department, the Customer Service

Department, the Administration Department, the Finance and Accounting Department and
the Transaction Offices. Figure 1 below will clearly show the structure of the branch:

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Figure 2.1: The organizational structure of Sacombank- Thang Long

DIRECTOR

DEPUTY
DIRECTOR

DEPUTY
DIRECTOR

Business
Support
Department

Customer
Service
Department

Administration
Department

Finance and

Accounting
Department

Transaction
Offices

International
Payment

Marketing

Accounting

Credit
Management

Credit

Treasury

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2.3. The result of some main operations of Sacombank – Thang Long Branch
2.3.1. The operation of capital mobilization
Figure 2.2 : The result of capital mobilization 2009-2011 (billion VND)
Year
2009

2010
Total
amount
mobilized capital

2011

of
710

1,020

1,500

370

540

880

Economic organizations
Terms
Short term
Medium and long term
Kinds of currency
VND

340

480

620

470
240

640
380

950
550

485

620

980

Foreign currencies

225

400

620

Types of customers
Residents

(Source: Sacombank- Thang Long’s annual report in 2009, 2010 and 2011)

Total amount of raised capital increased over the years: in 2009, this amount was 710
billion VND; in 2010 it reached 1,020 billion VND; in 2011, this number increased by
50% to 1,500 billion VND. As for the structure of raised capital, deposits of residents
were bigger than capital from economic organizations, which represents a stable structure,
reflecting the nature of a retail bank. According to terms of capital, we can see that from
2009 to 2011, short term capital accounted for 67% total mobilized capital. Regarding
kinds of currency, capital in VND usually constituted 65 % of the total capital raised
through the years.

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2.3.2. The operation of capital financing
Figure 2.3: The result of capital financing from 2009 to 2011(billion VND)
Year
2009
2010
2011
680

950

1200

360

690

870

320

260

330

VND

490

700

900

Foreign currencies

190

250

300

Total loan
Terms
Short term
Medium and long term
Kinds of currency

(Source: Sacombank- Thang Long’s annual report in 2009, 2010 and 2011)
Total loan in 2010 was 950 billion VND, increasing by 45% compared to 2009. This
amount in 2011 was 1200 billion VND, in which USD reached 150 million
(approximately 300 billion VND). Regarding the loan structure, short-term loans in VND
still accounted for more than 80 % of total loan. However, due to the fact that
mobilization situation in the last months of 2011 of the branch confronted many
difficulties and are restricted by the sources, limit of credit growth offered by the State
Bank of Vietnam, the branch did not develop its capabilities fully . In the early months of
2012, the branch continued to promote the short-term loans in VND, especially consumer
loan.
2.3.3. The operation of international payment
Sacombank is one of the first commercial banks in Vietnam joining SWIFT (Society for
Worldwide Interbank Financial Telecommunication) to strengthen its ability to support
and improve customer service quality in terms of payment. During the past years,
Sacombank- Thang Long has always been appreciated as a branch with the largest
volume of transactions through SWIFT.

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Figure 2.4: The result of international payment 2009- 2011 (thousand USD)
Value
Year

L/C

Remittance

Collection

Others

Total value

2009

23,000

12,000

3,000

8,000

46,000

2010

60,000

42,000

3,200

3,800

109,000

2011

120,000

65,000

5,000

6,000

196,000

(Source: Sacombank- Thang Long’s annual report in 2009, 2010 and 2011)
Total value in international payment rose over the years: in 2009, it was 46,000 thousand
USD; in 2010, it reached 109,000 thousand USD; in 2011, the revenue increased by
nearly 85% compared to 2010. Of the three main methods of international payment,
namely remittance, collection, and letter of credit, letter of credit is the most frequently
used method and brought about the most revenue for the branch. In 2010, the total return
from L/C was 60,000 thousand USD, accounting for 55% of the total the revenues from
international payments. In 2011, this sum increased to 120,000 thousand USD, accounting
for 62%. This increase shows that there was an improvement in international payment,
especially in L/C method. It was a positive result to Sacombank- Thang Long because in
spite of severe competition in the banking system and negative consequence of the
economy in 2011, Sacombank-Thang Long still gained such a high growth rate.

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CHAPTER 3
ANALYSES AND FINDINGS
3.1. The reality of the improvement of the international payment by documentary
credit at Sacombank - Thang Long Branch
3.1.1. Legal framework governing the international payment by documentary credit
at Sacombank – Thang Long Branch
International Laws and Practices
UCP 600: is the latest revision of the Uniform Customs and Practice, including 39 articles
that govern the operation of letters of credit (ICC, 2007). UCP 600 is not automatically
applied to adjust the payment by L/C unless the parties agree to use it as reference.
ISBP 681 is a practical supplement to UCP 600; it explains in detail how to apply the
rules of the UCP 600 in the L/C transaction L/C, not modifies UCP 600. ISBP unifies the
different understandings of the worldwide participants in L/C payment.
In addition to UCP and ISBP, with a view to identifying the parties’ responsibilities in
goods delivery, International Commercial Terms 2000 (Incoterms 2000) published by
International Chamber of Commerce ( ICC) is also commonly used.
Domestic Law Resources and the branch’s regulations
Together with international laws, the international payment by documentary credit of
Sacombank – Thang Long also follows a number of national legal documents such as:
-Law on the Transferable Instruments 2005
-Decision No.226/2002/QD-NHNN issued on 26th March 2002 on the payment operation
via organizations providing payment services.
-Decision No.711/2001/QD-NHNN issued on 25th May 2001 on opening letter of credit
for deferred payment.
-Decree No.63/198/ND-CP issued on 17th August 1998 on foreign exchange management
of Vietnamese organizations and individuals in the territory of Vietnam and overseas, etc.
Besides, L/C payment activity is governed by the regulations issued by the General
Director of Sacombank.
3.1.2. The reality of the improvement of international payment by documentary
credit at Sacombank - Thang Long Branch

3.1.2.1. Qualitative criteria
a) The transaction duration of a L/C payment
The process of international payment using L/C in branch is clarified by import and
export L/C. The branch is only responsible for receiving, advising and carrying out
payment or collecting debts. All the issuance and technical steps are carried out by the
International Transaction Center. However, the time to open a L/C set does not take as
long as it used to in the past, which is shown in the following table.

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