Basic Banking


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Basic Banking

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Basic Banking

  1. 1. Banking Overview December 17 th , 2008 By Tran Van Hoanh @ @ , a MBA community in Vietnam
  2. 2. Balance Sheet ACB Example
  3. 3. Income Statement- ACB Example
  4. 4. Liability and Equity Approach
  5. 5. Liabilities Due to Government and State Bank of Vietnam <ul><li>Borrowing from Govt. secured by valuable papers. Ex: Govt Bonds, Treasury Bill, etc (short term, long term) P8, </li></ul><ul><li>Borrowing from Govt. by means of: </li></ul><ul><li>discounting of valuable papers or </li></ul><ul><li>refinancing (rarely use). </li></ul>E.g: Base rate 10% Refinancing rate 11% Discount rate 9%
  6. 6. Liabilities Deposits and Borrowings from other credit institutions <ul><li>Borrowings: Bank grant credit line to each other by both: </li></ul><ul><li>Secured by valuable papers </li></ul><ul><li>Or unsecured (by credit worthiness) </li></ul><ul><li>E.g: VCB grants a credit line of VND300B to ACB secured by Govt Bonds </li></ul><ul><li>Deposits: banks uses available/free sources to place at other banks </li></ul><ul><li>Inter-bank Offer Rate </li></ul><ul><li>SIBOR, LIBOR </li></ul>
  7. 7. Liabilities Deposits from customers Deposits from individual customers <ul><li>Current account/checking account/demand account </li></ul><ul><li>Immediate withdrawal without prior notice </li></ul><ul><li>Low interest rates </li></ul><ul><li>Can link to other products/services: debit card, bill payment </li></ul><ul><li>Term deposits: specific term designed in the contract </li></ul><ul><li>Time deposits: fixed amount, fixed term, fixed interest rate, no early withdrawal. </li></ul><ul><li>Savings: amount can be added up, interest can be changed </li></ul><ul><li>Banc assurance: period savings linked to assurance products </li></ul><ul><li>Structured deposit: used for Private Banking and Wealth Management. Ex: deposit linked to VNIndex, Gold price, etc </li></ul>
  8. 8. Liabilities <ul><li>Current account/checking account/demand account </li></ul><ul><li>Big amount </li></ul><ul><li>Linked to overdraft </li></ul><ul><li>Term deposit: Deposit contract </li></ul>Deposits from corporate customers
  9. 9. Deposits from customers <ul><li>Deposit insurance </li></ul><ul><li>Prudence (regulatory reserve): related to monetary policy </li></ul><ul><li>More stable </li></ul><ul><li>Accounts for most of bank’s sources </li></ul>
  10. 10. Liabilities <ul><li>Derivatives liability </li></ul><ul><li>Fund received from Govt, International institutions </li></ul>
  11. 11. Liabilities <ul><li>Bill: short term </li></ul><ul><li>Notes: medium term </li></ul><ul><li>Certificate of Deposits: CDs </li></ul><ul><li>Bonds: medium long term </li></ul><ul><li>Callable bond/noncallable bond </li></ul><ul><li>Puttable bond </li></ul><ul><li>Floating bond </li></ul><ul><li>Bond secured by assets </li></ul><ul><li>Governed by Regulations on issuing Valuable papers </li></ul>Bonds and CDs
  12. 12. Shareholder’s equity
  13. 13. <ul><li>Paid- in capital </li></ul><ul><li>Reserve funds </li></ul><ul><li>Retained earnings </li></ul>Equity <ul><li>CAR (capital adequacy ratio)= equity/risk assets </li></ul><ul><li>ROE </li></ul>
  14. 14. Assets
  15. 15. Cash and Balances with SBV <ul><li>Cash and cash equivalent </li></ul><ul><li>Cash </li></ul><ul><li>Gold </li></ul><ul><li>Securities with terms less than 3 months </li></ul><ul><li>Balances with SBV </li></ul><ul><li>Deposit as prudent reserve </li></ul><ul><li>Deposit for transactions </li></ul>
  16. 16. Placement and loans to other credit institutions <ul><li>Placement at other credit institutions </li></ul><ul><li>Free sources </li></ul><ul><li>Short term (normally) </li></ul><ul><li>Loan to other credit institutions </li></ul>
  17. 17. Investment in securities <ul><li>Trading securities </li></ul><ul><li>Available for sales </li></ul><ul><li>Held to maturity </li></ul><ul><li>Debt securities </li></ul><ul><li>Bills </li></ul><ul><li>Bonds, etc </li></ul><ul><li>Equity: stocks </li></ul><ul><li>Related services </li></ul><ul><li>Advisory </li></ul><ul><li>Underwriting (debt, equity) </li></ul><ul><li>Issuing </li></ul>
  18. 18. Loan and advances to customers <ul><li>Primary products/services </li></ul><ul><li>Bring most of profit </li></ul><ul><li>Most risky </li></ul>
  19. 19. Loan and advances to individual <ul><li>Consumer loan </li></ul><ul><li>Auto/car loan </li></ul><ul><li>Unsecured consumer loan </li></ul><ul><li>Secured consumer loan </li></ul><ul><li>Overseas study/local study loan </li></ul><ul><li>Stocks loan </li></ul><ul><li>Mortgage loan/home loan </li></ul><ul><li>Overdraft (linked to current account) </li></ul><ul><li>Credit card </li></ul>
  20. 20. Loan and advances to corporate <ul><li>Credit line: short term, less than 12 months </li></ul><ul><li>Working capital </li></ul><ul><li>Short term loan (bullet installment) </li></ul><ul><li>Long term loan </li></ul><ul><li>Finance capital expenditure </li></ul><ul><li>Amortization </li></ul><ul><li>Overdraft (linked to current account) </li></ul><ul><li>Syndication </li></ul>
  21. 21. Conditions <ul><li>5Cs </li></ul><ul><li>Character </li></ul><ul><li>Capacity </li></ul><ul><li>Capital </li></ul><ul><li>Conditions </li></ul><ul><li>Collateral </li></ul><ul><li>(Cashflow) </li></ul><ul><li>Credit rating </li></ul>
  22. 22. Credit default- Credit risk <ul><li>Debt classification: 5 groups </li></ul><ul><li>Provisions </li></ul><ul><li>General provision </li></ul><ul><li>Specific provision </li></ul><ul><li>Write-off </li></ul><ul><li>Bad debt recovery </li></ul><ul><li>Credit risk management </li></ul><ul><li>Credit rating </li></ul><ul><li>Credit granting </li></ul><ul><li>Credit monitoring </li></ul><ul><li>Credit default resolution </li></ul>
  23. 23. Other banking services <ul><li>Other individual products/services </li></ul><ul><li>Assets management </li></ul><ul><li>Current account services </li></ul><ul><li>Card services </li></ul><ul><li>Internet banking/sms/homebanking </li></ul><ul><li>Custody services </li></ul><ul><li>Others </li></ul><ul><li>Other commercial bank services </li></ul><ul><li>Current account services </li></ul><ul><li>Discount valuable papers </li></ul><ul><li>Financial advisory services </li></ul><ul><li>Commodity trading </li></ul><ul><li>IRS- interest rate swap </li></ul><ul><li>CDS- Credit Default Swap </li></ul>
  24. 24. Contingency and commitment <ul><li>Trade finance </li></ul><ul><li>L/C (at sight/standby/deferred/revolving) </li></ul><ul><li>Collection: D/P, D/P </li></ul><ul><li>Guarantees </li></ul><ul><li>Payment </li></ul><ul><li>Contract </li></ul><ul><li>FX </li></ul><ul><li>Spot </li></ul><ul><li>Swap </li></ul><ul><li>Forward </li></ul><ul><li>Swaption </li></ul>
  25. 25. Equity investment <ul><li>Investment in subsidiaries </li></ul><ul><li>Investment in other company </li></ul>
  26. 26. Liquidity <ul><li>Assets management </li></ul><ul><li>Liability management </li></ul><ul><li>Matching principles </li></ul><ul><li>Other means </li></ul>
  27. 27. Good luck!