Negotiable certificates of deposit (CD)

1:

Định nghĩa

Certificate of Deposit is a bank issued, fixed maturity, time interest bearing deposit. It has
specific maturity date and interest rate and is negotiable.

Các loại

In Vietnam, there are three types of Certificate of Deposit:

1. Registered
2. Unregistered
3. Book-registered

Registered and book- registered CD are considered non-bearer instrument for individual and
corporate, respectively whereas unregistered CD is bearer instrument.

Advantages of certificates of deposit (CD)

 Certificate of deposit is a risk-free investment property because it is often guaranteed by

governments.
 Both principal and interest are guaranteed for the entire investment period. Certificates
of deposit usually have higher interest rates compared to ordinary savings accounts.

Disadvantages of certificates of deposit (CD)

 Mandatory buyers must not pay before the due date.

 Liquidity is not high.
 Low interest rate if long-term investment.

2 Purpose of issuing certificates of deposit:

 The purpose of issuing certificates of deposits completely comes from the demand for
long-term capital. The high interest rates offered by banks aimed at stimulating demand
to encourage investors to buy CDs instead of bank deposits.
 In addition, personal income tax and procedures are also the cause of banks issuing
certificates of deposit.
 Another reason is that many banks are aiming to comply with Basel II

3 Benefits when participating in deposit certificates

1. Enjoy interest on the amount purchased
2. Transferable
3. Giving, donating, inheriting, authorizing others as prescribed by law and issuing
organization