Commercial Banking and Retail Banking Services





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Commercial Banking and Retail Banking Services


1.1.1. Overview of commercial banking in a market economy The formation and development of commercial banks

The formation and development of banks is closely linked to the history of development

of commodity production. The forerunner of modern banking operations

today originates from the money exchange and minting profession of goldsmiths. People who work in money exchange and minting conduct currency business by exchanging foreign currency for local currency and vice versa. Profit is obtained from the difference between buying and selling prices.

Stemming from the need for traders to store money, many people working in the money exchange business also perform storage operations. The reputation of money changers gradually increased. They not only stored money but also made payments on behalf of merchants. When they accumulate a lot of money, money changers also work as lenders. Over a long period of time, the money exchange profession has developed into a banking profession. In the early days, the banking profession only included simple operations including: exchanging money, receiving deposits, preserving money, making payments and lending.


In history

development, profession

The bank has gone through many advancements

Modern banking appeared in the 17th century, with the establishment of banks such as Amstecdam Bank in 1609 in the Netherlands; the Bank of Hamburg in 1619 in Germany; or the Bank of England in 1649. The banks were combined

connected into a system but still operating independently of each other with publishing rights

private bank notes. Since the 19th century, the scale and scope of commodity circulation has grown strongly, and the independent issuance of money by each bank has become a barrier limiting the process of circulation and economic development. To eliminate this situation, countries have restructured the banking system into two levels: Central Bank (Central Bank) and Commercial Bank (Commercial Bank). Accordingly, in many countries, the Central Bank is assigned by the State to issue money and perform the function of state management of currency. Commercial Bank is an organization that does monetary business and provides currency-related services in the market.

In Vietnam, in the transition to a market mechanism with State management, consistent implementation of multi-sector economic policies with socialist orientation. Since 1986, the banking system was organized

According to Decree 53/HDBT, it is separated into two levels: State Bank

undertakes the work of issuing money and regulating currency circulation, remaining functional

Business is carried out by Commercial Bank. Main and regular activities

of commercial banks is to mobilize capital, grant credit, perform discount operations,

providing payment services and many other related financial services. Today, the commercial banking system has developed strongly, deeply participating in socio-economic fields and becoming an indispensable part in the development process of each country. Concept and characteristics of commercial banks


Commercial banks are a type of bank that can carry out all banking activities and other business activities according to the provisions of the Law on Credit Institutions with the aim of profit[82].

Economist Frederic Mishkin said , Commercial banking is _ _

an intermediary financial institution that provides financial services including accepting deposits and lending money, making payments and other financial services”

Some views say that, "A commercial bank is a financial institution that carries out activities related to the field of currency supply, currency exchange intermediary, and provision of financial services (such as bank accounts). savings, certificates of deposit...) for individual and business customers"

Summarizing the above views, according to the author, "A commercial bank is an intermediary financial institution, performing all banking activities such as receiving deposits, lending, performing payment services and Other business activities as prescribed by law for profit purposes.


Business activities in the field ofnancialnance and provision of payment services : specifically , mobilizing deposits and granting _ _ _ _ _ _ Credit for the economy follows the basic principle of bringing money from surplus to shortage so that money can go into the production and business process to create value for the economy. As with any economy, due to the mismatch in implementing investment goals in terms of time required for capital, it will lead to excess and shortage of capital in the economy. Through banking activities, this capital will be regulated. Subjects with temporarily idle capital will deposit money at credit institutions and enjoy capital mobilization interest rates. Subjects who need capital for business go to credit institutions to borrow capital and must repay the loan interest.

Products and services, associated with distribution and use

use capital and private capital

financial consultation

main , with characteristics such as: intangibility (the production of banking services is the process of creating an immaterial, non-existent economic value. Therefore, before buying, customers do not look find it impossible to hold, especially because they have difficulty evaluating the quality of products and services before, during the purchasing process and after purchasing.); inseparability (service provision and consumption take place simultaneously. This makes banking products and services incapable of being stored); heterogeneity (while industrial firms can produce large volumes of well-standardized goods to meet

pre-determined standards, the bank's service provision will be different at different times, meaning that the provision of products and services will be different from time to time.

inconsistent service. So it creates services of the same type but does not

agree with each other. Services of the same type performed by different employees will be different, even if they are performed by the same person at different times, they are not the same.)

Business activities have many potential risks : Banks are the place where capital accumulates in the economy, so all risks in the economy are related to and affect the bank . row. Banking activities are highly competitive among banks in the banking system. Banking activities are closely related to other financial and monetary activities that have inherent risks such as the stock market, gold market, oil market, real estate market...

Business activities are systematic in nature , with mutual influences : Banking activities all have the same objects of impact : money and money . Based on the basic foundations of monetary circulation rules. Credit institutions all have the same impact and business purposes in the same market

school. Therefore, to ensure synchronization and consistency in banking operations

In the banking system, there is connection, cooperation and attachment to each other. On the other hand, banking activities are "sensitive" to socio-economic and political fluctuations, so they are easily affected by sensitive laws such as: the law of contagion, psychology crowd management. Functions and operations of commercial banks

(1) Function

Intermediary : This is considered the most important function of the company

Commercial banks because it reflects the nature of commercial banks which is to borrow to lend, it determines the existence and development of the bank. Simultaneously

it is also the basis for performing other functions. When performing the function

Credit intermediaries and commercial banks act as "bridges" between people with excess capital and people with capital needs. Through mobilization of funds

Monetary capital temporarily idle in the economy, commercial banks form

become a fund

loan to

provide credit to the economy. With function of

In this case, commercial banks act as both borrowers and lenders. With the credit intermediary function, commercial banks have contributed to creating benefits for all parties involved: depositors, banks and borrowers, while promoting the development of the economy.

Payment intermediary : At the request of the customer, the commercial bank performs tasks such as deducting money from their deposit account to pay for goods and services or entering the customer's deposit account. sales proceeds and other revenues according to their orders. With this function, commercial banks act as "treasurers" for businesses and individuals because the bank is the keeper of their accounts. The payment intermediary function of commercial banks is performed on the basis of performing the credit intermediary function, because the condition for customers to make payments through the bank is the amount of money the customer previously deposited with the bank. The fact that commercial banks perform the payment intermediary function has great significance for the entire economy. With this function, commercial banks provide customers

Many convenient payment methods. Ask for a favor

That is, the subjects

economics will

Saves a lot of costs, time going to the creditor, the person who must pay and ensures safe payment. Thereby, this function promotes the circulation of goods, speeds up payment and capital circulation, thereby contributing to economic development. At the same time, non-cash payments through banks have reduced the amount of cash in circulation, leading to savings in cash circulation costs such as printing costs, counting and receiving money, preserving money.... Function This function contributes to increasing profits for banks through collecting payment fees. In addition, it increases the bank's lending capital

appear on the balance in the customer's deposit account. This function is also the basis for forming the money creation function of commercial banks.

Money creation function : With the function of credit intermediary and payment intermediary, commercial banks have the ability to create credit money (or book money) shown on deposit accounts . Customer payments at commercial banks

commercial. This is exactly one set

fraction of the amount of money used

used in transactions

pandemic. Initially from increased reserves, commercial banks used

used to

loan by bank transfer, then these funds will


partially returns to commercial banks when users deposit money in the form of demand deposits. This process takes place in the banking system and creates an amount of deposits (credit money) many times greater than the initial increase in reserves. The level of deposit expansion depends on the deposit expansion coefficient. This coefficient, in turn, is affected by the following factors: the required reserve ratio, the excess reserve ratio and the ratio of cash holdings to public payment deposits. With the function of "creating money", the commercial banking system has increased payment means in the economy, meeting the payment and payment needs of society. Clearly the concept of money or transaction money is not only paper money issued by the central bank but also includes an important part of the amount of recorded money created by commercial banks. This function also


out relationship

between bank credit and currency circulation. One block

The amount of credit that commercial banks lend out increases the ability of commercial banks to create money, thereby increasing the money supply.

The functions of commercial banks have a close relationship, supplement and support each other, in which the credit intermediation function is the most basic function, creating the basis for the implementation of the following functions. At the same time, when banks perform well their payment intermediary and money creation functions, they contribute to increasing credit capital and expanding credit activities.

(2) Operations:

Same thing

economic development

society and its needs

Commercial banks' customers and operations are increasing in quantity and improving in quality. Specifically includes:


Debt assets : This is the operational group

create capital for

bank. As a monetary business unit, the bank's capital source determines the scale of operations, reputation and competitiveness of the bank. This transaction includes the bank's equity capital and amounts that the bank owes to customers.

Financial services include treasury , credit and investment operations .




payment, agent, guarantee,

entrusted, consigned, private

In other words, commercial banks do business regularly and mainly in: Capital mobilization, capital use and payment intermediation

in 3 karma

Mobilizing capital : Commercial banks are considered deposit business organizations, which shows how important deposit mobilization is in banking business activities . Commercial banks mobilize idle capital in society under the following conditions:

form like

Receive savings deposits (term

term, without period

term), deposit

payment..., issue valuable papers (certificates of deposit, bills, promissory notes, bonds...) or borrow from the State Bank, from commercial banks and other credit institutions. Capital mobilization is a basic operation that helps commercial banks perform the function of creating money.

Capital use : Credit granting is the main operation in the use of capital of commercial banks . Specifically, commercial banks provide short, medium and long-term loans, financial leasing, guarantees... Commercial banks use the mobilized capital to lend and thereby earn profits based on the difference in input and output costs. Credit granting operations are the main operations that bring profit to commercial banks.

This business also contains high risks. In addition to credit granting, historical operations

Commercial banks' capital use also includes treasury operations (reserves, ensuring safe payments) and investment operations (joint ventures, securities trading).

Payment intermediary : In addition to the two basic operations mentioned above, in the process

In the process of perfecting its functions and roles, commercial banks also perform a number of other operations of a payment intermediary such as non-cash payment operations (payment cards, electronic payments, payment/collection orders). , check, L/C...), entrustment, deposit, financial consulting...

Along with the development of the market economy, the operations of commercial banks also develop diversely and have a close relationship with each other. Capital mobilization operations determine the scale and scope of operations of capital use operations. This business is the premise and condition for maintaining and developing the other business. The role of commercial banks in a market economy

(1) Providing timely capital to the economy. In the economy, there are always subjects in a state of temporary surplus. They need to invest to preserve capital and make a profit. However, not everyone has the opportunity to do that. Commercial banks mobilize these capitals in many forms: receiving deposits, issuing valuable papers, accumulating them and lending them back to the economy. Thus, instead of being withdrawn from circulation and remaining in storage, money is converted into investment capital, generating profit. Through the commercial banking system, capital flows are formed and circulated more easily and smoothly in the economy. Some parts of these capital flows are directly related to economic growth, such as investments in infrastructure development, but most other parts simply increase capital resources in the future. relationship with financial returns

of investments, both

in investments

debt and investment

owner's capital

property. With the ability to provide capital, commercial banks have become one of the points

starts the economic development of each country.

(2) Being a dynamic intermediary between businesses and markets

school. In

In a market economy, businesses need capital to be able to bring products, goods and services to the output market and earn profits. When equity capital is not enough, businesses look for other sources of capital. NHTM will help

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