An interview with Mr Ngo Quang Luong – Deputy General Director of the Deposit Insurance of Vietnam: depositors should keep calm in all situations


The banking system is considered the backbone of the national economy but it is quite vulnerable to external factors. Unfavorable rumor can trigger a panic which may lead to unexpected losses to credit institutions and the financial market.

For providing depositors with useful information to identify and properly react to rumors relating to the banking system, the reporter had an interview with Mr NgoQuangLuong – Deputy General Director of the Deposit Insurance of Vietnam (DIV).

Reporter: MrLuong, how does the DIV protect depositors? Through which activities?

Mr Ngo QuangLuong: As long as the depositors are not excluded as stipulated by the Law on Deposit Insurance, the dong-nominated deposits at insured institutions are automatically insured and protected by the DIV.

Once a credit institution is established and licensed, it is compulsory to be a member of the deposit insurance scheme. The DIV grants deposit insurance certificates to insured institutions. Besides, as ruled by law, the DIV performs its functions of supervision and examination towards member institutions in terms of deposit insurance regulations compliance; collection and analysis of data from insured institutions for detecting violations of banking regulations, and then making recommendations to the State Bank of Vietnam (SBV) for timely resolution. When an insured institution encounters with serious difficulties, the DIV takes part in a “special control” regime as assigned by the SBV. In case that the institution fails to recover,runs into default or goes bankrupt, the DIV reimburses insured depositors as stipulated by laws. After that, the DIV takes part in the management and liquidation of the closed institution’s assets as regulated by the Government.

All in all, the ’s functions are attached with a life cycle of every insured credit institution. Through the whole process, all DIV’s professional activities directly or indirectly protect legal rights and interests of depositors. Meanwhile, not the insured depositors but the deposit taking institutions pay fees for the insurance.

Reporter: So how can depositors recognize an insured institution?

Mr Ngo QuangLuong: According to the Law on Deposit Insurance, deposit insurance membership is compulsory to all commercial banks, branches of foreign banks, Cooperative Bank, people’s credit funds, micro finance institutions which take deposits nominated in dongand these insured institutions have to post deposit insurance certificates at their headquarters, branches and transaction points which take deposits from individuals.   

When you go to do transactions at these institutions, you can see deposit insurance certificates which show their deposit insurance membership and their legitimate status for taking deposits.

Reporter: In recent time, there have been some rumors causing bad effects to the operation of credit institutions. Please let us know if such rumorscausebank runs, what consequences may they and the credit institutions take? 

Mr Ngo QuangLuong: Such impetuous actions as drawing deposits and urging other people to draw their money before maturity date make their deposits be paid with interests just as for call deposits, much lower than for term deposits drawn at maturity date. At the same time, this causes difficulties to the credit institutions. Even in some cases, rumors carry no truth but a bank run may induce threats to the liquidity of the credit institutions causing risk of failure. Therefore, both depositors and credit institutions have losses.

Reporter: Could you give some advices for the depositors to deal with such rumors?

Mr Ngo QuangLuong: When adverse rumors concerning credit institutions appear, depositors should stay calm and verify the information. Firstly, depositors should notice the SBV, local government authority, and the DIV for identifying, checking and verifying rumors, meanwhile keep track of official announcements of relevant offices, especially the SBV –top regulator of the banking system.

In the past, there were some cases of rumors spreading and pushing some credit institutions into risks of bank run. However, the SBV and other relevant agencies quickly reacted, intervenedin and stabilized the situation. The credit institutions then soon came back to normal operation.

People who start or spread rumors which cause serious losses may face a fine, an administrative punishment, or even a criminal charge.

Reporter: how about credit institutions, what should they do?

Mr Ngo QuangLuong: In my opinion, in face of not only rumors but also all kinds of risk, the most important thing to do is prevention, not resolution. And the most effective preventive method is to clarify all the information and activities, at the same time listen carefully to the public for timely reaction to bad news. 

In case  negative information related to your institution or others arises, whether it is right or wrong, all credit institutions should promptly notice the SBV, the DIV and local government authority in order to help functional agencies to stay updated, make the information consistent, and have timely intervention method. I say so because rumors about one institution may cause domino effects which can damage the all through operation of the whole banking system.

For small-sized institution with limited scope of operation like local people’s credit funds and micro finance institutions, other than reporting the SBV, DIV and local government authority for stabilizing the situation, it is indispensable to have direct communication channels on a continuous basis to avoid a spread of the rumor. 

In long term, the public awareness programs should be organized to improve the financial literacy of the community and strengthen depositors’ immunity against rumors. The financial and banking system thereby will be ensured to operate safely and soundly. 

Reporter: Yes. Thank you very much.

DIV’s Research and International Cooperation Department