1. Rationale

Becoming the full member of WTO marks a mile-stone for Vietnam in its transitional period of economy, which creates a great deal of unprecedented opportunities and major challenges for the domestic economy. To overcome the difficulties, a smooth and quick capital turnover especially bank credit capital is necessary. By covering some of the risks that the market is not able to bear or adequately evaluate, the bank guarantee can attract new sources of finance, reduce financing costs, and extend maturities. Guarantee operations, therefore, is one of the three basic modes of credit operations (together with loans and equity investments.) for a developed economy.

Bank guarantee operations appeared firstly in US in the early of the 1960s under the form of Standby Letter of Credit. Until the early of the 1970s it really became common in every developed country. Nowadays, guarantee plays a more and more vital role in the international economic transactions and in the bank activities all over the world with the participation of 6-9% total a bank’s revenue. Guarantee, however, is quite new to Vietnam commercial banks. It has just been implemented for the last few years. It means that, in Vietnam, guarantee operations have just been at the primary stage of development. There are a lot of weakness and shortcomings leading to considerable losses for the banks because of its new, complicated and risky characteristics. As a result, ceaseless enhancement in bank guarantee operations is an urgent requirement for Vietnam commercial bank.

It cannot be denied that, in the integration economy, the development of guarantee operations in specific, and credit operations in general are indispensable and objective requirement in order to push banking as well as Economic activities stronger forward. So how to improve and promote bank guarantee operations, how to guarantee banks’ safety and avoid risks are the concern not only of authorities, policy-makers but also of any students like me. Moreover, after reading this issue in a banking finance book, I am really interested in and I desire to learn more about it.

Probating at Agribank Operation Centre gives me a good chance to study about guarantee activities, which offers me a new and comprehensive insight into bank operations. In the short period of probation at Agribank, one of the top commercial bank in Vietnam, with the enthusiastic help of Ms Hoang Giang and the staffs in the credit department, I have completed this report:

Guarantee Operations at Agribank – Current Situation and Recommendation