Discussion multination financial management topic foreign currency loan service offered by bidv

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THUONG MAI UNIVERSITYFINANCE & BANKING

------DISCUSSION

MULTINATION FINANCIAL MANAGEMENT

Topic: Foreign currency loan service offered by BIDV

Group: 1

Ha Noi, 2023

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TABLE OF CONTENTS

CHAPTER 1: BANK LOAN SERVICE...3

1.1. Bank Loan Service...3

1.1.1 Introduction to Bank Loan Service...3

1.1.2. Characteristics of Bank Loan Service in Vietnam...4

1.2. Foreign Currency Loan Service...5

1.2.1. Definition of Foreign Currency Loan Service...5

1.2.2. Characteristics of Foreign Currency Loan Service...6

1.2.3. Factors Affecting the Foreign Currency Loan Service...8

CHAPTER 2: FOREIGN BANK LOAN SERVICE AT BIDV...10

2.1. Overview of BIDV...10

2.2. Foreign Loan Service Offered by BIDV...11

2.2.1 Export financing...11

2.2.2 Import financing...12

2.2.3 Overseas education loan...15

2.2.4 Foreign currency trading...16

2.3. Comparison of Foreign Currency Loan Service and Local Currency Loan Service at BIDV... 17

2.4. Comparison of Loan Services at BIDV and Eximbank...19

CHAPTER 3: CONCLUSION...21

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1.1. Bank Loan Service

1.1.1 Introduction to Bank Loan Service

Bank loan services are financial products offered by banks to individuals, businesses, and organizations in need of funds. These services provide a convenient and accessible way to borrow money for various purposes, such as purchasing a home, starting a business, or funding personal expenses.

Bank loan services typically involve the lender providing a specific amount of money to the borrower, which is then repaid over a predetermined period of time, along with interest and any applicable fees. The terms and conditions of the loan, including the interest rate, repayment schedule, and collateral requirements, are agreed upon between the borrower and the bank.

One of the key advantages of bank loan services is that they offer a reliable and regulated source of financing. Banks have established lending criteria and processes in place to assess the creditworthiness of borrowers, ensuring responsible lending practices. Additionally, banks often offer a range of loan options tailored to different needs, such as personal loans, home loans, car loans, and business loans.

Bank loan services also provide borrowers with the benefit of professional guidance and expertise. Banks have experienced loan officers who can assist borrowers in understanding their financial needs, evaluating loan options, and structuring repayment plans that align with their financial capabilities.

Furthermore, bank loan services often come with added features and benefits, such as flexible repayment options, competitive interest rates, and the potential for building a positive credit history. Borrowers may also have access to additional banking services, such as online account management, automatic payment options, and the ability to consolidate debts.

However, it is important to note that bank loan services require borrowers to meet certain eligibility criteria and provide necessary documentation, such as proof of income, identification, and collateral (in some cases). Failure to repay the loan as agreed can result in penalties and damage to credit scores, and potential legal consequences.

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Overall, bank loan services play a crucial role in providing individuals and businesses with the financial resources they need to achieve their goals and manage their financial obligations effectively.

1.1.2. Characteristics of Bank Loan Service in Vietnam

- Loan Amounts: Banks in Vietnam offer a wide range of loan amounts to cater to different financial needs. The loan amount is determined based on factors such as the borrower's income, credit history, and collateral.

- Loan Tenure: The tenure of bank loans in Vietnam can vary from a month to several years, depending on the type of loan. Short-term loans are typically for a period of 1-3 years, while long-term loans can extend up to 20 years or more.

- Collateral Requirements: Banks in Vietnam often require collateral for certain types of loans, such as mortgage loans or business loans. Collateral can be in the form of vehicles, or other valuable assets that can be used to secure the loan.

- Repayment Options: Bank loan services in Vietnam offer various repayment options, including monthly installments, quarterly installments, or bullet payments. Borrowers can choose the repayment schedule that best suits their financial situation

- Loan Purpose: Bank loans in Vietnam can be used for various purposes such as purchasing a home, buying a car, funding education, or starting a business. Different loan products are designed to meet specific needs and have specific eligibility criteria. - Loan Approval Process: Banks in Vietnam have a thorough loan approval process that involves assessing the borrower's creditworthiness, income stability, and repayment capacity. The process may include document verification, credit checks, and evaluation of the borrower's financial situation.

- Customer Support: Banks in Vietnam provide customer support services to assist borrowers throughout the loan application and repayment process. This includes guidance on loan eligibility, documentation requirements, and assistance with any queries issues that may arise.

1.2. Foreign Currency Loan Service

1.2.1. Definition of Foreign Currency Loan Service

A foreign currency loan service is a financial product that allows borrowers to obtain a loan in a currency other than their own. This type of loan can be useful for

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businesses and individuals who need to finance international transactions or who have income in a foreign currency.

Foreign currency loans can be either covered or uncovered. A covered loan is one in which the borrower enters into a forward currency contract to lock in the exchange rate at which they will repay the loan. This helps to protect the borrower from adverse currency movements. An uncovered loan is one in which the borrower does not enter into a forward contract, and therefore bears the risk of currency fluctuations.

 Foreign currency loans can be used for a variety of purposes, including:

- Working capital: Businesses can use foreign currency loans to finance their day-to-day operations, such as paying for imports or payroll.

- Fixed asset investment: Businesses can also use foreign currency loans to finance the purchase of long-term assets, such as machinery or equipment.

- Individual consumption: Individuals can use foreign currency loans to finance international travel, education, or other expenses.

Foreign currency loans can be attractive to borrowers because they can offer lower interest rates than domestic loans. However, it is important to be aware of the risks involved, such as currency fluctuations and exchange rate risk.

 Here are some of the key features of foreign currency loan services:

- Loan amount: Foreign currency loans can be for any amount, from a few thousand dollars to millions of dollars.

- Term: Foreign currency loans can have terms of anywhere from a few months to several years.

- Interest rate: Foreign currency loan interest rates can be fixed or floating. Fixed-rate loans offer borrowers more certainty about their monthly payments, while floating-rate loans offer the potential for lower interest payments if interest rates decline.

- Repayment: Foreign currency loans can be repaid in installments or in a lump sum at the end of the term.

 Who should consider using a foreign currency loan service?

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Foreign currency loans can be a good option for businesses and individuals who: - Have income in a foreign currency

- Need to finance international transactions

- Are comfortable with the risks associated with currency fluctuations

Before applying for a foreign currency loan, it is important to compare rates from different lenders and to understand the terms and conditions of the loan carefully.

1.2.2. Characteristics of Foreign Currency Loan Service

Foreign Currency Loan Service (FCLS) is a type of loan that allows borrowers to borrow money in a foreign currency. This can be useful for businesses and individuals who need to make payments in a foreign currency, such as to import or export goods or services, or to invest in foreign assets.

 Characteristics of FCLS:

- Currency flexibility: FCLS allows borrowers to borrow in a variety of foreign currencies, giving them the flexibility to choose the currency that best suits their needs. - Competitive interest rates: FCLS interest rates are often competitive with domestic loan rates, making them an attractive option for borrowers.

- Access to global markets: FCLS can give borrowers access to global markets and opportunities that may not be available to them in their domestic market.

- Risk diversification: FCLS can help borrowers to diversify their risk portfolio by exposing them to different currencies and economies.

 Benefits of FCLS:

- Save money on foreign exchange fees: By borrowing in the foreign currency that you need, you can save money on foreign exchange fees.

- Hedge against currency fluctuations: If you have a revenue stream in a foreign currency, you can use FCLS to hedge against currency fluctuations.

- Invest in foreign assets: FCLS can allow you to invest in foreign assets, such as real estate or businesses.

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- Expand your business internationally: FCLS can help you to expand your business internationally by giving you access to foreign markets and suppliers.

 Risks of FCLS:

- Currency exchange risk: The main risk associated with FCLS is currency exchange risk. This is the risk that the value of the foreign currency will change relative to your domestic currency, which could make your loan more expensive to repay.

- Interest rate risk: Interest rates can also fluctuate, which could affect the cost of your loan.

- Country risk: There is also the risk of country risk, which is the risk that the political or economic situation in the country where you are borrowing money could change, making it difficult or impossible to repay your loan.

1.2.3. Factors Affecting the Foreign Currency Loan Service.

The provision and utilization of foreign currency loan services are influenced by various factors, and these factors can impact both lenders and borrowers. Here are some key factors affecting foreign currency loan services:

- Exchange Rates: Fluctuations in exchange rates can significantly affect the cost of servicing foreign currency loans. Borrowers may face increased repayment obligations if the local currency weakens against the currency in which the loan is denominated.

- Interest Rates: Changes in interest rates, both in the domestic and foreign markets, can impact the cost of borrowing and the attractiveness of foreign currency loans. Higher interest rates may increase the overall cost of servicing the loan.

- Economic Conditions: The economic conditions of both the borrower's country and the country where the currency is issued play a crucial role. Economic stability and growth can positively influence the ability of borrowers to repay loans.

- Political Stability: Political stability in both the borrower's country and the currency-issuing country is essential. Political instability can lead to uncertainties and increased risks for lenders, affecting the terms and conditions of foreign currency loans.

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- Regulatory Environment: Regulatory frameworks, including foreign exchange controls and capital flow restrictions, can impact the availability and terms of foreign currency loans. Changes in regulations may affect the ability of borrowers to access these services.

- Currency Hedging Options: The availability and cost of currency hedging instruments can influence the decision to take foreign currency loans. Borrowers may use hedging tools to mitigate the risk of adverse exchange rate movements. - Global Financial Market Conditions: Conditions in the global financial markets, including changes in investor sentiment and risk appetite, can impact the terms and conditions of foreign currency loans.

- Terms of the Loan Agreement: The specific terms and conditions negotiated between the lender and borrower, such as loan maturity, repayment structure, and covenants, can impact the overall dynamics of foreign currency loan services.

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2.1. Overview of BIDV

 History of establishment and development

- BIDV was founded on 26 April 1957 under the initial name of Bank for Construction of Vietnam. BIDV is the bank with the longest history in the system of credit institutions in Vietnam. In history, BIDV has changed its name 4 times in accordance with each period of national construction and development:

+ 1957 - 1981: Bank for Construction of Vietnam

+ 1981 - 1990: Bank for Investment and Construction of Vietnam + 1990 - 2012: Bank for Investment and Development of Vietnam

+ 2012 - present: Joint Stock Commercial Bank for Investment and Development of Vietnam.

- Mission: To deliver the best interests and conveniences to customers, shareholders, employees and society.

- Vision: As a leading financial institution in the Southeast Asian region, with the most advanced digital platform in Vietnam, we aspire to be among the top 100 largest banks in the Asian region.

- Core Values: Intelligence - Trust - Integrity - Professionalism - Aspiration.

- Now, BIDV has 25.000 employees, 190 branches, 871 transaction offices, 57.825 ATM and POS.

 Lines of business

- Banking: A full range of modern and convenient banking products and services. - Insurance: Life and non-life insurance product bundles are tailored to the needs of customers.

- Securities: Diverse brokerage, investment and consultancy and services, with the ability of quickly developing agents.

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- Financial investment: Contributing capital for investment in projects, taking the lead in key national projects.

 Awards and Accolades

BIDV has been recognized and awarded by many international and major financial institutions for its outstanding business performance. The bank is listed in the Top 500 world’s most valuable banking brands (by Brand Finance), named “Best Retail Bank in Vietnam” for the fourth consecutive year (by The Asian Banker) and received a series of IT awards. Since 2009, BIDV has ranked first amongst Vietnamese commercial banks in terms of readiness for IT application and development in the Vietnam ICT Index of Vietnam Ministry of Information and Communications and Vietnam Association for

- BIDV makes a non-recourse discount on the bill of exchange with a set of export documents presented to BIDV under a deferred L/C for customers when receiving confirmation of payment acceptance from the bank with the obligation to pay the L/C.

 Characteristic

- Non-recourse discount on Bills of exchange under deferred payment L/C based on Forfaiting Agreements with Correspondent Banks (Hereinafter referred to as Non-recourse discount under deferred payment L/C): is BIDV's purchase and Receive ownership of the Bill of Exchange with the set of export documents presented to BIDV under the deferred L/C before payment due from the Customer when:

 There has been confirmation of payment acceptance from the Bank with payment obligation for the Bill of Exchange/Export Document Set;  The agent bank agrees to discount without recourse the above Bill of

Exchange/Set of export documents according to the Forfaiting Agreement signed between BIDV and the agent bank.

 Benefit

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