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The Law on Deposit Insurance is the legal basis for implementing deposit insurance policies, thereby better-protecting depositors' rights and contributing to maintaining the stability of the credit institution system.
The State Bank of Vietnam (SBV) is seeking opinions from organizations and individuals on the draft proposal for the development of the revised Law on Deposit Insurance. In the draft submission, the SBV said that the purpose of developing the revised Law on Deposit Insurance is of great significance in enhancing the capacity of deposit insurers, better protecting the rights of depositors, ensuring the stability of the credit institution system, and social security and safety according to plan No. 81/KH-UBTVQH dated November 5, 2021, of the National Assembly Standing Committee on implementing Conclusion No. 19-KL/TW of the Politburo and the Project on orientations for the Law-making Program for the 15th National Assembly, which sets out the task of "Researching and reviewing the Law on Deposit Insurance."
The development of the revised Law on Deposit Insurance is necessary to improve the deposit insurance policy in Vietnam further, ensure consistency and unity with relevant laws, create a complete and clear legal corridor for deposit insurers to improve their financial capacity and participate more deeply in the process of restructuring credit institutions according to the policy set out in the Deposit Insurance Development Strategy to 2025, with a vision to 2030.
Based on the results of the assessment and summary of the implementation of the Law on Deposit Insurance, the drafting agency proposed to develop five policies, including policies on deposit insurance premiums on completing the financial mechanism to improve the efficiency and financial capacity of the deposit insurer; on the rights and obligations of the deposit insurer; on perfecting regulations on insurance payment and perfecting legal regulations for the Deposit Insurance of Vietnam (DIV) to participate in the restructuring process of weak credit institutions in Vietnam.
Completing regulations on deposit insurance premium
According to the Law on Deposit Insurance, the deposit insurance premium is the amount of money that insured institutions must pay to deposit insurers to insure the deposits of insured persons at the insured institutions. The current deposit insurance premium mechanism is a flat deposit insurance premium.
The amendment and supplement of regulations to ensure that the regulations on deposit insurance premiums are complete and clear, consistent with the actual conditions of implementing deposit insurance premiums in Vietnam, overcoming current difficulties in implementing a differentiated deposit insurance premium system. Through analyzing and evaluating the impact of policies, the drafting agency proposes:
(i) Amend regulations on the differential deposit insurance premium to suit the practical situation and financial capacity of the credit institution system in each period;
(ii) Supplementing regulations on postponing payment of deposit insurance premiums ensures a basis for supporting organizations participating in deposit insurance to avoid having to pay fines for underpayment or late payment of deposit insurance premiums when facing financial difficulties;
(iii) Increase deposit insurance premiums to compensate for the special loans of the SBV to the DIV.
(iv) Supplementing regulations on the rights and obligations of insured institutions in calculating deposit insurance premiums to ensure data sources for comparing results, making full use of resources, and avoiding late payment of premiums.
Improve efficiency and financial capacity for deposit insurer
Article 31 of the Law on Deposit Insurance stipulates the investment activities of the DIV indicated: " The Deposit Insurance Corporation is allowed to use temporary idle capital to buy government bonds, bills of the SBV and deposit money at the SBV."
The objective of developing policies is to perfect the legal regulations on the financial regime of the deposit insurer in the Law and, at the same time, perfect the legal regulations on investment of the DIV in order to increase reasonable revenue sources to help the reserve fund grow better in the future and contribute to improving financial capacity, thereby helping the DIV better perform its functions and tasks in protecting the rights and interests of depositors as well as participating more deeply in the process of supporting the resolving progress of weak credit institutions. The solutions proposed by the drafting agency are as follows:
- Amend and supplement a number of regulations related to the deposit insurer's financial regime in a clear and transparent manner, with a mechanism for the deposit insurer to improve its financial capacity to perform assigned tasks.
- Amend and supplement in the direction of expanding investment forms (in addition to investment forms prescribed in the Law on Deposit Insurance) to increase the scale of the Operational Reserve Fund, including (i) purchasing local government bonds; depositing money at commercial banks, buying and selling bonds and deposit certificates issued by commercial banks; (ii) selling government bonds, SBV bills, local government bonds; bonds and deposit certificates issued by commercial banks that are being held; withdrawing bank deposits.
- Supplementing regulations to limit risks in investment activities of deposit insurers such as: (i) Stipulating the responsibilities of deposit insurers in implementing investment activities, making risk provisions for investments according to the Government's instructions; The Government stipulates the process of controlling, managing risks, setting up and using risk provisions; (ii) Assigning the Government to stipulate criteria for investment portfolios, investment structures, and investment methods.
- Supplementing regulations on the deposit insurer purchasing long-term bonds of credit institutions receiving compulsory transfers according to the decision of the SBV.
Expanding the rights and obligations of the deposit insurer to examine and supervise the People's Credit Fund and other types of credit institutions
Implementing Directive No. 06/CT-TTg, dated March 12, 2019, of the Prime Minister on strengthening solutions to ensure operational safety, firmly consolidates the People's Credit Fund system, promoting the role of the DIV in providing financial support and resolving difficulties of People's Credit Funds, enhancing the role of participation and supporting the SBV's examination and supervision functions for People's Credit Funds.
From 2019 to the present, the SBV has assigned the DIV to conduct examinations of the People's Credit Fund with increasing numbers, and the examination content has also been expanded over the years. During the process of the DIV implementing the examination of the People's Credit Fund at the request of the SBV, a number of difficulties and problems have arisen, such as the rights and obligations of the DIV during the examination and supervision process, the basis for specific instructions on coordination methods and methods, the recording of violations during the examination and supervision process of the DIV and the resolving of recommendations and proposals of the DIV for violations.
From the above shortcomings, the development of policies to expand the rights and obligations of the deposit insurer to examine and supervise the People's Credit Fund and other types of credit institutions according to the plan and content assigned by the SBV; appoint qualified and qualified persons to hold the positions of Chairman of the Board of Directors, Director and other management and executive positions of the People's Credit Fund under special control as required by the SBV and participate in the process of developing a restructuring plan for the credit institutions under special control.
To DIV participate in the restructuring process of weak credit institutions in Vietnam.
Currently, the Law on Credit Institutions 2024 stipulates the participation of the deposit insurer in the special control process for credit institutions, such as coordinating with the Special Control Board and cooperative banks to assess the feasibility of the recovery plan; the transferee is required to issue long-term bonds to the deposit insurer according to the decision of the SBV; special loans for credit institutions under special control...
In addition, Clause 2, Article 190 of the Law on Credit Institutions 2024 stipulates that the DIV is entitled to special loans from the SBV in case the amount in the deposit insurer's operational reserve fund is not enough to pay depositors after the credit institution's bankruptcy plan is approved.
Therefore, it is necessary to amend and supplement the Law on Deposit Insurance to be consistent with the newly added rights and obligations in the Law on Credit Institutions by (i) Amending and supplementing the regulations on the participation of the DIV in the restructuring process of weak credit institutions, providing special loans to credit institutions under special supervision to implement recovery plans, compulsory transfer plans consistent with the provisions of the Law on Credit Institutions and promoting the role of the DIV in restructuring credit institutions as the goal set out in the Development Strategy of Deposit Insurance; (ii) Mechanism to utilize the resources of the DIV in the process of resolving incidents and crises in the operations of credit institutions, avoiding the risk of systemic spread of risks, ensuring the stability and safety of the credit institution system.
Completing regulations on insurance reimbursement process
The amendment and supplementation of regulations to determine the time of arising of the obligation to insurance reimbursement must be clear, specific, and consistent with the process of resolving weak credit institutions in the Law on Credit Institutions; there must be a mechanism to reimburse all deposits to depositors in special cases. At the same time, the amendment and supplementation of legal regulations on the time of arising of the obligation to reimburse insurance r is necessary for the DIV to participate earlier in reimbursing depositors at weak credit institutions, ensure social security and order, stabilize the psychology of depositors, avoid chain reactions, protect the rights and interests of depositors, and contribute to maintaining social security and order.
To ensure policy development goals, the drafting agency proposes the following solutions:
- Amend and supplement the Law on Deposit Insurance to clearly and specifically define the time when the obligation to reimburse insurance arises, consistent with the process of resolving weak credit institutions in the Law on Credit Institutions.
- Amend and supplement regulations on insurance reimbursement deadlines to shorten the deadline for cases where the deposit insurance reimbursement dossiers are complete, valid, and meet the conditions for earlier payment to depositors to stabilize depositors' psychology.
- Supplementing regulations that in special cases, the Prime Minister decides to reimburse all insured deposits of depositors at insured institutions when the obligation to reimburse insurance premiums arises at the request of the SBV.
After 12 years of implementing the Law on Deposit Insurance, the amendment and supplementation of the Law on Deposit Insurance is an urgent requirement to meet the practical and development needs of the national financial system. The advances in the provisions of the Law on Deposit Insurance are expected to contribute to improving the operational efficiency of the deposit insurer so that the deposit insurance policy is truly effective, contributing to maintaining the stability of the system of credit institutions, ensuring the safe and healthy development of banking activities.
Communication Department (Translation)
