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The need to enhance the role of deposit insurance in restructuring credit institutions
At the meeting of the National Assembly Standing Committee in mid of March 2023, regarding the restructuring of weak credit institutions, Chairman of the National Assembly of Vietnam - Mr Vuong Dinh Hue noticed that it is necessary to0 amend the Law on Credit Institutions and the Law on Deposit Insurance as soon as possible. If it is not possible to amend the Law on Credit Institutions immediately, it is necessary to amend the Law on Deposit Insurance, as a basis for amending the Law on Credit Institutions.
Previously, at Directive No. 06/CT-TTg dated March 12, 2019 on strengthening solutions to ensure operational safety and firmly strengthen the people’s credit fund system, the Prime Minister directed to lay down as a the policy to research and propose the amendment of the Law on Deposit Insurance to use the deposit insurance premium to deal with weak credit institutions.
Decision No. 1382/QD-NHNN dated August 2, 2022 of the SBV on the issuance of the action plan of the banking sector to implement the project of "Restructuring the credit institutions system in association with resolving bad debts in the period of 2021-2025”, Decision No. 689/QD-TTg dated June 8, 2022 of the Prime Minister approving the project "Restructuring the credit institutions system associated with bad debt settlement in the period of 2021- 2025", clearly state the point of view: "Research and amend the Law on Deposit Insurance to use the deposit insurance premium to deal with weak PCFs".
In Report No. 302/BC-NHNN dated September 19, 2022, assessing the implementation of the 2022 socio-economic development plan and the implementation of Resolution No.43/2022/QH15 of the National Assembly; the socio-economic development plan for 2023 sent to the Economic Committee of the National Assembly, the State Bank of Vietnam inform that “Revising the Law on Deposit Insurance is one of the important tasks in the coming time to accomplish the legal system on monetary and banking activities”.
Thus, it can be seen that amending and supplementing the Law on Deposit Insurance has been a cross-cutting policy of the National Assembly, the Government and the SBV in recent years, as well as an important task assigned by DIV, which mainly focuses on the goal of supporting specially controlled credit institutions to be able to recover and return to normal operations.
In addition, DIV also directly participates more deeply in the restructuring of the PCFs such as: participating in the Special Control Board for the PCFs, giving opinions on the plan to restore the specially controlled PCFs; participating in formulating bankruptcy plans, handling/liquidating assets in accordance with law.
This is also a considerable responsibility that the DIV is taking step by step to better protect the legitimate interests of depositors; actively contribute to ensuring the safety and participating in restructuring the system of weak credit institutions.
Some proposed amendments and supplements in the Law on Deposit Insurance
According to information from the DIV, recently this organization has basically completed the proposed contents of the Law amending and supplementing of the Law on Deposit Insurance, focusing on key issues, including: improving financial capacity and operations of the deposit insurer; supplementing the rights and obligations of the deposit insurer; perfecting legal regulations for DIV to participate more effectively in the process of restructuring credit institutions; complete regulations on insurance payment, specifically:
Regarding the improvement of financial capacity, the DIV would study and propose the competent authorities to amend and supplement relevant legal provisions, ensuring a sufficient legal basis to:
Increase charter capital for the deposit insurer to VND 10,000 billion by 2025 and VND 15,000 billion by 2030 from self-accumulation and other lawful capital sources to ensure the financial capacity of the deposit insurer, affirming its commitment to results of the State and improve depositors' confidence in the deposit insurance policy, ensuring resources for effective implementation of deposit insurance activities.
Strengthen financial capacity through diversification of investment forms and portfolios; supplementing the form of borrowing from the SBV in case the deposit insurer's capital is not enough to pay the insurance premium.
Research and supplement the investment portfolio including buying and selling government-guaranteed bonds; deposit money at a commercial bank with good operational quality; buying and selling bonds, promissory notes, bills, certificates of deposit issued by commercial banks with good operational quality; develop a scheme to access support capital in case the deposit insurer's capital is temporarily insufficient to pay insurance premiums.
Research, implement, and supplement the investment portfolio of buying and selling local government bonds in accordance with the provisions of the State Budget Law, the Law on Public Debt Management, guiding documents, and obtain a high credit rating for the local government period 2025-2030.
Regarding the content of supplementing the rights and obligations of the deposit insurer, the deposit insurer believes that, adding the rights and obligations of the deposit insurer to clearly define the organization's position and role, helping to better protect the legitimate rights and interests of the deposit insurer, contributing to maintaining the stability of credit institutions, ensuring the safe and healthy development of banking activities.
Therefore, it is necessary to supplement the rights and obligations of the deposit insurer in the direction of improving its role and capacity in: participating in the restructuring of weak credit institutions; coordinating with the SBV in inspecting and supervising the deposit insurance participating organizations according to the scope, content and time limit decided by the SBV; to appoint persons to participate in the handling of credit institutions subject to special supervision in accordance with the functions and tasks of DIV following SBV requirement; disseminate activities of the deposit insurer; training and fostering knowledge on deposit insurance for organizations and individuals related to deposit insurance policies.
Completing the legal regulations for DIV to participate more deeply in the restructuring of credit institutions, the deposit insurer said that it would propose to supplement the rights and obligations of the deposit insurance in coordination with the supervisory board to assess the feasibility of the compulsory transfer plan, merger, consolidation, transfer of all shares and contributed capital; implement support measures, especially financial ones, according to decisions of competent authorities for organizations participating in supporting the implementation of the restructuring plan.
In the case that DIV participates in the bankruptcy plan for a credit institution, it is necessary to supplement regulations so that DIV cooperates with the Special control Board to inspect and supervise the implementation of the bankruptcy plan approved by competent authorities.
In addition, supplementing specific regulations on the management, use and disposal of assets by DIV during the implementation of support measures when participating in the restructuring of credit institutions subject to special supervision in accordance with the law.
Regarding the regulations on insurance payment, the deposit insurer is currently studying the contents to ensure the prevention of deposit insurance profiteering, the responsibility for coordination between the deposit insurer and related agencies; create a legal framework for the deposit insurer to participate in the liquidation of the deposit insurer's assets in order to maximize the recovery value.
At the same time, develop contingency plans and payment drills for each type of organization participating in the deposit insurance; develop a payment manual for each type of deposit insurance participating organization in order to standardize the payment process, diversify payment methods, and apply information technology to the payment process to shorten the actual payment time.
With the guidelines and views of the National Assembly, the Government and the SBV in perfecting the legal basis for deposit insurance activities in order to better protect the interests of depositors, gradually contribute to a healthy system of credit institutions, soon amending and supplementing the Law on Deposit Insurance in the short term is a necessary requirement to create a basis for DIV to implement its tasks, especially to participate more effectively in the process of restructuring weak credit institutions in the future.
