An interview with Mr Truong Quoc Thu – Deputy Director of the State Bank Of Vietnam Branch in Lam Dong province: Deposit insurance contributes to sustainable development of people’s credit funds in Lam Dong

08:40-01/12/2017

The deposit insurance policy not only helps to enhance public confidence in the banking system but also supports credit institutions to gainprestige and attract capital to develop local economies. In order to have better understanding of the role and effects of the deposit insurance policy, along the conference of deposit insurance policy dissemination for local people’s credit funds in Lam Dong province on 27 September 2017, Mr Truong Quoc Thu - Deputy Director of the State Bank Of Vietnam (SBV) branch in Lam Dong province– was interviewed.

Reporter: What do you think of the role of deposit insurance policy to the banking system at your locality?

Mr Truong Quoc Thu: Recently, in the context of global economic challenges and domestic economic difficulties, , the banking system still managed to fulfill its tasks assigned by the Party, National Assembly and Government. It reflectedanendeavor of the whole system and all agencies includingthe Deposit Insurance of Vietnam (DIV)’srole in protecting depositors and enhancing public confidence in the banking system.

The DIV is a state financial agency founded to protect legitimate rights and interests of depositors, contribute to the stability of credit institutions system, ensure the safe and sound development of the banking system. In fact, the deposit insurance policy plays an important role in protecting depositors and contributing to ensuring the safe operation of credit institutions. The operation of the DIV assured local peopleto depositto credit institutions. On the other hand, through DIV’s supervision and examination, the deposit insurance policy has helped to make credit institutions operate safely and therefore contribute to the sustainable development of the banking system in the locality.

Reporter: For the development of people’s credit funds system in Lam Dong province, what is the role of deposit insurance policy? 

Mr Truong Quoc Thu: People’s credit fund is a kind of cooperative credit institutions voluntarily founded by group of individuals, , households to perform some banking activities for the sake of mutual assistance in business and social life. Since the inception, the people’s credit funds system has affirmed the role of a new cooperative model in the monetary and credit sector. The target of forming and developing a model of cooperative in the banking sector over rural localities and other areas has been hit.With the location advantage of being close to the people and better understanding of the people than other kinds of credit institutions, people’s credit funds have been an important channel of borrowing and lending capital, which played a positive role in the process of hunger eradication and poverty reduction, stabilization and expansion of business and production, jobs creation, gradual elimination of usury and social evils in rural areas. These all have contributed to the development of agriculture and rural economy.

At present, in Lam Dong,100 per cent (23/23) of people’s credit funds are members of deposit insurance scheme. Their membership have protected legitimate rights and interests of depositors, contributed to the stability of credit institutions system, ensured the safe and sound development of the banking system. Besides, along with the inspection and supervision conducted by the SBV, the supervision and examination by the DIV have been an independent riskmonitoring channel which helped manage risks of the banking system on a comprehensive scope. The DIV has tightly cooperated with the SBV’s local branch in the process of implementing professional activities, and at the same time sharing information, effectively working and timely dealing with unexpected incidents in order to ensure the prudential operation of the local credit institutions system.

Thanks to the contribution of the deposit insurance policy, the local people’s credit funds have conducted effective and safe borrowing and lending, debt collecting, through which the funds’ prestige has been enhanced. The mobilized capital amount has therefore continuously increased with the current value of roughly 4,400 billion dongs (190 billion dongs per fund). The stable growth of capital mobilization has helped the funds expand their scope of operation and develop sustainably. This is a positive factor which gives the credit fundsan active role to assist their members with an aim to using members’ idle capital to serve the members themselves, promoting production, business and social lives.  

Reporter: For a better implementationof the deposit insurance policy in the locality, could you give some suggestions for the Deposit Insurance of Vietnam?

Mr Truong Quoc Thu: Challenges remains visible for the whole banking system till the end of 2017 which require great effort to hit the set target. The SBV branch in Lam Dong will support local credit institutions in general and people’s credit funds in specific for their safe and stable operation, meanwhile cooperate with the DIV to fulfill the sector’s common tasks of the year 2017. For the DIV’s part, I think the DIV should strengthen its communication of deposit insurance policy so that people, especially depositors know how they are protected. In long term, the DIV should develop the risk based premium system for a fair and competitive environment of all insured institutions which contributes to maintaining the market discipline.

Reporter: Thank you very much!

DIV’s Research and International Cooperation Department