Interview with Assoc. Prof. Dr. Nguyen Thi Mui –Member of the National Financial and Monetary Policy Advisory Council: People need to have thorough understanding of deposit insurance

08:20-13/03/2019

Depositing idle money with banks is a habit of many people. These deposits not only bring profits through interest, but also are ensured through deposit insurance policy (DI). If credit institutions fail, depositors will be paid out for their insured deposits. How are rights of depositors ensured? How is the role of DI institution indicated? In this regard, the interviewer had an interview with Assoc. Prof. Dr.   Nguyen Thi Mui - Member of the National Financial and Monetary Policy Advisory Council.

Interviewer: How do you evaluate the roles of the DI institution in Vietnam?

Assoc. Prof. Dr.   Nguyen Thi Mui: In Vietnam, the DI institution plays an important role in keeping the socio-economic development stable, protecting depositors, contributing to keeping banking activities safe and sound, as well as dealing with financial crisis.

In our country, before, the DI policy was mainly indicated in legal documents of the Government and ministries, sectors. Since the DI law was approved and became effective in 2013, the role of DI has been further improved.

Besides inheriting suitable regulations, the DI policy has institutialized view-points, policies of the Party and the Government, reflected particularities of Vietnam’s banking system, ensuring conformity with socio-economic conditions in our country, especially of the development of monetary, capital markets, banking system, level of awareness, saving habit of people.

Specific regulations on insured depositors, insured deposits, rights and responsibilities of insured depositors, coverage limit, suitable deadline for insurance payment, etc have shown commitment of the State to ensuring safety of deposits within the coverage limit upon the insured institutions fail, toward the objective of protecting the legitimate rights and benefits of depositors at the maximum level.

Besides protecting the legitimate rights and benefits of depositors at insured institutions, the DI policy has also made it possible for the economy as well as insured institutions to operate stably, contributing to maintaining security, social order. This is a very fundamental role of the Deposit Insurance of Vietnam.

Interviewer: In other countries in the world, are the roles of DI institutions similar to that of Vietnam?

Assoc. Prof. Dr.   Nguyen Thi Mui: DI activities in other countries over the world and in Vietnam play very important roles. Firstly, they protect legitimate rights and benefits of depositors at credit institutions, and contribute to minimizing risks of banking operation, keep the national financial system safe and stable, and promote sound competition among credit institutions for development of the financial market.

Though a DI institution is called in one name or another but with DI in nature, it is a special financial institution in the national financial system and operates not for profit. Therefore, the role of DI institutions in different countries is similar and Vietnam is not an exception. If there is any difference, it lies in level, scope and model of operation. The very basic role, which is to protect legitimate rights and benefits of depositors and to keep insured institutions safe and sound, is the same in Vietnam and other countries.

Interviewer: The Government and State Bank of Vietnam have been restructuring credit institutions and dealing with non-performing loans in a drastic way. In that context, how is the role of the Deposit Insurance of Vietnam indicated?

Assoc. Prof. Dr.   Nguyen Thi Mui: For the last years, through the process of restructuring credit institution system, the Deposit Insurance of Vietnam has also gradually brought into play its roles and especially since its establishment, the Deposit Insurance of Vietnam has made adequate and timely payment to thousands of depositors at failed People’s Credit Funds, preventing bad impacts of failures of these Funds over operation of sound ones.

Besides, recently, the Law on amendment and supplement to a number of articles of the Law on Credit Institutions has empowered the Deposit Insurance of Vietnam to participate more deeply in restructuring credit institutions, including: special lending, buying long-term bonds of assisting credit institutions, evaluating the feasibility plan of rehabilitating credit institutions under special control, setting up the bankruptcy plan of credit institutions under special control to submit to the State Bank of Vietnam for review. This has shown the greater roles of the DI institution in Vietnam.

However, due to a lot of external factors, the roles of the Deposit Insurance of Vietnam have been indicated to a certain extent. Specifically, a lot of depositors are not really concerned about and rightly aware of the DI policy, as they think that there is a back-up from the Stated when a credit institution fails.

But I believe that when the economy is really transformed to the market economy, the DI institution will bring into play its roles, functions as regulated in the law on DI.

Interviewer: Although the DI institution plays a very important role in the economy, some people do not really pay attention to DI. How do you assess necessity of disseminating the DI policy?

Assoc. Prof. Dr.   Nguyen Thi Mui: In my opinion, there are a lot of reasons why people do not really pay attention to the DI policy.

Firstly, dissemination of the DI policy by the Deposit Insurance of Vietnam has some shortages, which results in people’s incorrect awareness of the role of DI. Secondly, regarding the State competent agencies, the view-point of “ensuring rights of depositors and preventing failures in any case” makes people not be concerned and enquire about this issue in a proper manner.

I suppose that people should find out the contents of the DI policy in the economy. Because the fact that people have understanding and knowledge, learn about important roles of the DI policy, the DI institution over their rights will not only bring benefits to them but also to State competent agencies, and banks.

Complete, accurate awareness of the DI policy will help people to be more responsible upon selecting and depositing with insured institutions. The situation that some credit institutions lure clients to deposit their money through high interest rates as a competitive measure will be restricted.

In a market economy, high interest rates are often in parallel with high risks. The Law on Credit Institution 2017 opened up the orientation of allowing credit institutions to go bankrupt, which make people consider banks before depositing their money. Besides, this also requires the Deposit Insurance of Vietnam to be responsible to people upon credit institutions fail and similarly, deposit-taking credit institutions need to be more responsible for deposits of the public.

Therefore, once people have knowledge of the DI policy and roles of the DI institution, provide information to the DI institution, it is helpful for the DI institution to supervise credit institutions for more sound and stable operation of these institutions.

Interviewer: Thank you very much!