Comparision between Vietnamese and US banking system.docx

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Comparision between Vietnamese and US banking system Vietnamese Banking System US Banking System Institution Vietnam’s banking system revolves around the central bank, which is the State Bank of Vietnam. The Vietnamese banking system’s main functions are very similar to general policies and laws which have been implemented around the world, especially the general outline of the US banking system. The US Central Bank, the Federal Reserve, was established by an act of Congress in 1913, which created the Federal Reserve System. The Federal Reserve Bank is publicly run, but it is also owned privately by several banks which were prominent at the time of its establishment. Operation The Vietnamese central bank considers and weighs the policy options lying before it, for monetary policy as well as for other things. The Vietnamese central bank has great control over certain policies, therefore, it has more power of the banking system and commercial banks. The central bank of Vietnam develops the policy it wishes to implement, through a meeting of the members on the board. After the policies the bank wishes to implement are laid out, the head of the central bank goes to the Vietnamese government, the Communist Party, to get its approval. Following the government’s approval of the policies which the central bank wishes to pursue, the central bank then gets to work and implements its policies in order to ensure that things run smoothly. Chairman of the Federal Reserve, who resides in Washington, D.C, meets with the heads of the regional federal reserves in order to decide what policies are to be carried out by the Fed. A vote is taken of the members, and whatever policy the majority decides is what the Federal Reserve will do. Minutes of the Federal Reserve meetings are made public shortly after it has met, as are the policies, if any, which will be implemented. The Chairman of the Federal Reserve often gives testimony before the US Senate Finance committee, so as to inform Congress of the Fed’s intentions, but the Federal Reserve does not require the approval of the government in order to take action. Policy Tools The tools available to the central bank are the use of the prime rate to control the rate at which banks may borrow money and thereby encourage more or less economic growth. The bank may also raise capital requirements, and other financial ratios which in effect would reduce lending and tighten the amount of credit available in the economy. The use of these policy tools, however, requires permission from the government, the Communist Party Congress, in order to implement them, and this can lead to delays in putting them into action.
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