Basic Banking
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Transcript of Basic Banking
Page 1
MBM7
Banking Overview
December 17th, 2008By Tran Van Hoanh
@ letshareit.ning.com@ www.letshareit.com,
a MBA community in Vietnam
Page 2
MBM7Balance SheetACB Example
Page 3
MBM7 Incom
e S
tate
men
t- AC
B E
xam
ple
Page 4
MBM7
Liability and Equity Approach
Page 5
MBM7
LiabilitiesLiabilities
Due to Government and State Bank of Vietnam
€ Borrowing from Govt. secured by valuable papers. Ex: Govt Bonds, Treasury Bill, etc (short term, long term) P8,
€ Borrowing from Govt. by means of:
• discounting of valuable papers or
• refinancing (rarely use).
E.g: Base rate 10%
Refinancing rate 11%
Discount rate 9%
Page 6
MBM7
LiabilitiesLiabilities
Deposits and Borrowings from other credit institutions
Borrowings: Bank grant credit line to each other by both:
• Secured by valuable papers
• Or unsecured (by credit worthiness)
E.g: VCB grants a credit line of VND300B to ACB secured by Govt Bonds
Deposits: banks uses available/free sources to place at other banks
Inter-bank Offer Rate
SIBOR, LIBOR
Page 7
MBM7
LiabilitiesLiabilities
Deposits from customers
Deposits from individual customers
Current account/checking account/demand account
• Immediate withdrawal without prior notice
• Low interest rates
• Can link to other products/services: debit card, bill payment
Term deposits: specific term designed in the contract
• Time deposits: fixed amount, fixed term, fixed interest rate, no early withdrawal.
• Savings: amount can be added up, interest can be changed
• Banc assurance: period savings linked to assurance products
• Structured deposit: used for Private Banking and Wealth Management. Ex: deposit linked to VNIndex, Gold price, etc
Page 8
MBM7
Liabilities
• Current account/checking account/demand account Big amount Linked to overdraft• Term deposit: Deposit contract
Deposits from corporate customers
Page 9
MBM7Deposits from customers
• Deposit insurance• Prudence (regulatory reserve): related to monetary
policy• More stable• Accounts for most of bank’s sources
Page 10
MBM7 Liabilities
• Derivatives liability
• Fund received from Govt, International institutions
Page 11
MBM7 Liabilities
• Bill: short term
• Notes: medium term
• Certificate of Deposits: CDs
• Bonds: medium long term Callable bond/noncallable bond Puttable bond Floating bond Bond secured by assets
Governed by Regulations on issuing Valuable papers
Bonds and CDs
Page 12
MBM7
Shareholder’s equity
Page 13
MBM7
Paid- in capital
Reserve funds
Retained earnings
EquityEquity
CAR (capital adequacy ratio)= equity/risk assets
ROE
Page 14
MBM7
Assets
Page 15
MBM7Cash and Balances with SBVCash and Balances with SBV
Cash and cash equivalent
• Cash
• Gold
• Securities with terms less than 3 months
Balances with SBV
• Deposit as prudent reserve
• Deposit for transactions
Page 17
MBM7 Investment in securities
• Trading securities• Available for sales• Held to maturity
• Debt securities Bills
Bonds, etc
• Equity: stocks
Related services
• Advisory
• Underwriting (debt, equity)
• Issuing
Page 18
MBM7 Loan and advances to customers
• Primary products/services
• Bring most of profit
• Most risky
Page 19
MBM7 Loan and advances to individual
• Consumer loan Auto/car loan Unsecured consumer loan Secured consumer loan Overseas study/local study loan Stocks loan
• Mortgage loan/home loan• Overdraft (linked to current account)• Credit card
Page 20
MBM7 Loan and advances to corporate
• Credit line: short term, less than 12 months Working capital
• Short term loan (bullet installment)• Long term loan Finance capital expenditure Amortization
• Overdraft (linked to current account)• Syndication
Page 21
MBM7 Conditions
• 5Cs Character Capacity Capital Conditions Collateral (Cashflow)
• Credit rating
Page 22
MBM7 Credit default- Credit risk
• Debt classification: 5 groups• Provisions General provision Specific provision
• Write-off• Bad debt recovery• Credit risk management Credit rating Credit granting Credit monitoring Credit default resolution
Page 23
MBM7 Other banking services• Other individual products/services Assets management Current account services Card services Internet banking/sms/homebanking Custody services Others
Other commercial bank services• Current account services
• Discount valuable papers
• Financial advisory services
• Commodity trading
• IRS- interest rate swap
• CDS- Credit Default Swap
Page 24
MBM7 Contingency and commitment
• Trade finance L/C (at sight/standby/deferred/revolving) Collection: D/P, D/P
• Guarantees Payment Contract
• FX Spot Swap Forward Swaption
Page 25
MBM7 Equity investment
• Investment in subsidiaries
• Investment in other company
Page 26
MBM7 Liquidity
• Assets management
• Liability management
• Matching principles
• Other means
Page 27
MBM7
Good luck!