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Ensuring consistency with relevant legal provisions
The Law on Deposit Insurance No. 06/2012/QH13, passed by the 13th National Assembly at its third session on June 18, 2012, effective from January 1, 2013, serves as the highest and most comprehensive legal document on deposit insurance in Vietnam. It comprehensively regulates deposit insurance activities, clearly defines the role, functions, and tasks of the DIV, specifies the rights and obligations of insured institutions and depositors, and details regulations on insured deposits, trigger for insured depositor reimbursement, among others. Over 12 years of implementation, besides notable achievements, certain difficulties and constraints have emerged, necessitating adjustments to enhance the role of the DIV and ensure the policy's effectiveness. The SBV has identified several key challenges as follows:
Firstly, the rights and obligations of insured institutions and DIV need to be adjusted to be aligned with relevant legal documents and practical implementation.
Secondly, revisions to deposit insurance premiums are required to address shortcomings during practical implementation.
Thirdly, provisions regarding deposit insurance coverage limits and trigger for insured depositor reimbursement should be appropriately regulated and consistent with other legal provisions to better protect depositors' legitimate rights and interests.
Fourthly, provisions related to funding sources, operating revenue, financial regimes, and investment portfolios are required to be amended and supplemented to enhance the financial capacity of the DIV.
Furthermore, on January 18, 2024, the National Assembly passed the Law on Credit Institutions 2024, which amends and supplements certain provisions concerning the DIV's rights and obligations in early intervention and special control of credit institutions. However, certain provisions of the Law on credit institutions are not specified but referred to the Law on deposit insurance for detailed guidance. Consequently, revising the Law on deposit insurance to be aligned with the Law on credit institutions 2024 is crucial to ensuring the effective fulfillment of the DIV’s assigned tasks and contributing to the stability of the credit institution system.
Previously, the Party, the National Assembly, and the Government had required the researching and amending the Law on deposit insurance and enhancing the DIV's involvement in the restructuring process of credit institutions, specifically:
Plan No. 81/KH-UBTVQH dated November 5, 2021, of the Standing Committee of the National Assembly on the implementation of the Political Bureau’s Conclusion No. 19-KL/TW and the Scheme on orientation for the legislative program of the 15th-tenure National Assembly, sets forth the task of “Researching and reviewing the Law on deposit insurance”.
Decision No. 986/QD-TTg dated August 8, 2018, of the Prime Minister on approving development strategy of Vietnam Banking Sector by 2025 and vision to 2030, identifies the key tasks and solutions for the DIV, including strengthening financial capacity, enhancing operational capacity, improving the organizational structure, enhancing staff qualifications, and leveraging modern technology to effectively perform supervision, examination, and special control; detect and provide early warnings of potential risks to insured institutions; effectively participate in restructuring weak credit institutions; calculate and collect deposit insurance premiums, manage investment funds, disseminate deposit insurance policies, and reimburse deposit insurance in line with international practices and Vietnamese legal regulations.
Decision No. 1660/QD-TTg dated December 30, 2022, of the Prime Minister on approval of Development Strategic Plan for Deposit Insurance through 2025, with a vision towards 2030, outlines key solutions for improving the legal framework, including amending and supplementing the Law on deposit insurance and its guiding documents; improving regulations on the financial regime of the DIV; enhancing financial capacity by allowing the DIV to diversify investment forms and portfolios; and supplementing the form of borrowing from the SBV in case the DIV's funds are insufficient to reimburse depositors...
Directive No. 06/CT-TTg dated March 12, 2023, by the Prime Minister, on strengthening solutions to ensure operational safety and reinforcing the People's Credit Fund (PCF) system, requires enhancing the role of and assigning tasks to the DIV in coordinating with and supporting the SBV in on-site examination and off-site supervision of PCFs; researching and proposing amendments to the Law on deposit insurance to use temporarily idle capital accumulated from deposit insurance premiums to resolve weak credit institutions.
Thus, it is an urgent requirement to amend and supplement the Law on deposit insurance to ensure its effective implementation in practice, and its consistency with other relevant laws, so that it will serve as a legal basis for the DIV to enhance its role and position.
Better protecting legitimate rights and interests of depositors
The Law drafting agency emphasizes that the amendment of the Law on deposit insurance is essential for strengthening the DIV’s capacity, better protecting depositors' rights, ensuring the stability of the credit institution system, and maintaining social security. The amendment aims to address difficulties and obstacles arising in deposit insurance activities over recent time, ensure consistency with relevant laws, and establish a comprehensive and clear legal framework for the DIV to enhance its financial capacity and participate more deeply in the restructuring process of credit institutions, as outlined in the Development Strategic Plan for Deposit Insurance through 2025, with a vision towards 2030.
Regarding the perspective on drafting documents, the SBV stated that to effectively implement the deposit insurance policies and better protect the legitimate rights and interests of depositors, it is essential to address and resolve the difficulties and obstacles in the existing Law on deposit insurance so that the DIV performs its assigned tasks more effectively. The amendment of the Law on deposit insurance should follow these directions:
Firstly, the amended Law on deposit insurance should obey and concretize the Party's guidelines and the State's policies on deposit insurance and the restructuring of weak credit institutions. Particularly, the Law should focus on effectively utilizing deposit insurance as a tool in the restructuring process of credit institutions to handle non-performing loans.
Secondly, the amended Law on deposit insurance should be designed to address the shortcomings and limitations encountered during its implementation since 2013.
Thirdly, the amended Law on deposit insurance should ensure consistency with other relevant laws, making its implementation more effective in practice.
Fourthly, the amended Law on deposit insurance should be developed to supplement new functions and tasks to the DIV, drawing on the experiences of other countries in developing their deposit insurance laws and international guidelines for developing an effective deposit insurance system.
To achieve these objectives for developing the amended Law on deposit insurance, the SBV has prepared an Impact Assessment Report on the deposit insurance policy, proposing comprehensive solutions regarding deposit insurance premiums; financial regime to enhance the efficiency and financial capacity of the DIV; the rights and obligations of the DIV; and deposit insurance reimbursement provisions.
According to the SBV, the DIV is the sole institution in Vietnam responsible for protecting the legitimate rights and interests of depositors, contributing to the stability of the credit institution system. Consequently, the enhancement of the legal framework governing deposit insurance in Vietnam, in consistence with the overall development of banking laws, is an objective and inevitable requirement to ensure that deposit insurance regulations are compatible with both domestic and international economic contexts, updating international standards while addressing the shortcomings and limitations of current deposit insurance regulations.
Research and International Cooperation Department (translation)
