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The Law on Deposit Insurance stipulates that the obligation to reimburse arises when the insured institution is determined by an authoritative authority to be unable to pay deposits to depositors, unable to return to normal operation.< /p>
Point c, Clause 3, Article 191 and Clause 2, Article 192 of the Law on Credit Institutions 2024 stipulate that: Commercial banks, cooperative banks, people's credit funds, and microfinance institutions are entitled to special loans from the deposit insurance according to the provisions of the law on deposit insurance, and Point r, Clause 1, Article 185 stipulates that: The recipient of the compulsory transfer is a credit institution with the right to issue long-term bonds to the deposit insurance according to the decision of the SBV. This is an important legal basis for DIV to promote its role and participate more deeply in the process of restructuring specially controlled credit institutions.
Finance - important resources to support restructuring
To well implement public policy goals of deposit insurance and the organization's political tasks, DIV must improve its financial capacity through capital investment activities. In recent years, DIV's investment activities have been carried out in accordance with legal regulations, ensuring safety and capital development. The cumulative annual investment amount for the period 2015-2022 increases at an average rate of about 21%. The proportion of accumulated investment amount out of total capital is stable at 93-96%. Up to the present time, the total revenue of DIV includes revenue from investment activities and other revenue (headquarters rental, staff training consultancy revenue for insured institutions), in which revenue from investment activities accounts for over 99%, while other revenue accounts for less than 1%. The average growth rate of investment in the period 2015-2022 is about 11%, helping to accumulate and increase capital, contributing to improving the financial capacity of DIV, improving its position and ensuring the implementation of public policy on goals deposit insurance.
After nearly 25 years of formation and development, the investment activities of DIV have revealed certain limitations when VND's investment portfolio is government bonds, SBV bills and deposits at SBV. In the context of low deposit interest rates at the SBV, it is difficult for SBV bills to find trading partners. Currently, DIV focuses on investing over 99% in government bonds. However, the government bond investment principle of DIV is "buying - holding until maturity" and can only be sold in case the professional reserve fund is not enough to pay deposit insurance. This regulation limits flexibility in cash flow coordination, partly affecting liquidity to serve compensation if DIV arises this obligation.
In order to strengthen the financial capacity of DIV, as a basis to ensure resources in necessary cases, current legal documents basically have content regulating a number of financial mobilization mechanisms of DIV. calculus, Clause 12, Article 13 of the Law on Deposit Insurance stipulates that DIV can "receive support on the principle of reimbursement from the State budget according to the decision of the Prime Minister or borrow from credit institutions or other organizations with guarantees from the Government in case the deposit insurance organization's capital is temporarily insufficient to reimburse, receive funding from domestic and foreign organizations and individuals to enhance operational capacity.
Clause 2, Article 190 of the Law on Credit Institutions 2024 stipulates that: In case the amount of money in the professional reserve fund of the deposit insurance organization is not enough to reimburse depositors, the SBV shall lend to the deposit insurance organization.
Thus, based on the above regulations, there are 3 options related to DIV receiving support and loans from external sources, including: receiving support on the principle of reimbursement from the State budget according to the decision of the Prime Minister; loans from credit institutions and other organizations with Government guarantees; and special loans from the SBV.
Complete the legal basis for financial mobilization of DIV
Sources of financial mobilization of DIV have been stipulated in many different legal documents, but are not unified and do not completely meet practical requirements. restricted:
Firstly, receive support according to the principle of reimbursement from the State Budget.
The goal of this plan is to create capital from receiving support to make payments and participate in restructuring through purchasing long-term bonds from supporting credit institutions. Therefore, the authors propose to apply interest rates. The interest rate during the period of receiving support is 0%, because DIV receives capital from the State Budget to protect the legitimate rights and interests of depositors at public institutions and participate more deeply in the process of restructuring.
The mechanism is that DIV receives support on the principle of reimbursement from the State Budget according to the decision of the Prime Minister under the provisions of Clause 12, Article 13 of the Law on deposit insurance. However, the SBV and the Ministry of Finance need to coordinate to issue detailed documents so that DIV has a reference basis for implementation.
Secondly, loan plans from credit institutions and other organizations with Government guarantees
It is proposed that 100% of VND's loans be borrowed from credit institutions and other organizations with the Government's guarantee because this loan originates from political goals, and government bonds are highly safe collateral assets. DIV is responsible for monitoring the use of loans by credit institutions and other organizations with Government guarantees and reporting to the SBV on implementation status. When the repayment period is due, DIV implements a plan to repay the loan with the Government's guarantee according to regulations.
The mechanism for DIV to make loans from credit institutions and other organizations with Government guarantees is specified under Clause 12, Article 13 of the Law on deposit insurance. However, there needs to be a Circular from the State Bank of Vietnam and the Ministry of Finance providing specific guidance on guarantee limits and collateral value, interest rate/fee/guarantee period, debt repayment source and repayment method. In addition, DIV needs to have a plan to develop internal documents on the implementation of loan plans from credit institutions and other organizations with Government guarantees.
Thirdly, special loan plan from the SBV. The legal basis for special loans from the SBV is specified in:
Clause 4, Section II under Decision No.1660/QD-TTg dated December 30, 2022 approving the Deposit Insurance Development Strategy to 2025, with orientation to 2030: "Supplementing the form of loan from the State Bank of Vietnam in the case of the deposit insurance organization's capital resources are not enough to pay the insurance premium.
Clause 2, Article 190 of the Law on Credit Institutions 2024 specifies that: “In case the amount of money in the professional reserve fund of the deposit insurance organization is not enough to pay depositors as prescribed in Clause 1 of this Article, the SBV will grant a special loan to the deposit insurance organization.
The inclusion of a special form of loan from the SBV into the Law on Credit Institutions 2024 has realized the Deposit Insurance Development Strategy to 2025, with orientation to 2030, actively contributing to helping the DIV has more financial mobilization options to participate more deeply in the process of restructuring credit institutions. However, currently, DIV is implementing a roadmap to research and develop regulatory documents on this professional activity based on detailed guidance documents of the management agency.
In order to have a mechanism for DIV to be ready to perform the tasks of reimburse deposit insurance and participate in restructuring, the authors have a number of suggestions and recommendations as follows:
Continue to research and propose amendments and supplements to the Law on deposit insurance. Amending provisions to be consistent and synchronized with the Law on credit institutions 2024 and the Deposit Insurance Development Strategy to 2025, with orientation to 2030 for the following contents: to establish a mechanism to create resources, allowing DIV to implement public policy objectives and participate in restructure according to plans for receiving support and borrowing from external sources (borrowing on the principle of repayment from the bank, loans from credit institutions and other organizations with Government guarantees, special loans from the SBV).
Recommend to agencies and departments: Amend/issue separate and unified guiding circulars related to DIV's receipt of support and loans from external sources in case capital is temporarily insufficient to reimburse or participate in restructuring credit institutions, including: (i) receiving support on the principle of reimbursement from the State budget according to the Prime Minister's decision; (ii) loans from credit institutions and other organizations with Government guarantees; and (iii) special loans from the SBV.
With the goal of protecting the legitimate rights and interests of depositors, contributing to maintaining the stability of the system of credit institutions as well as strengthening the role of the deposit insurance in the process of participating in restructuring credit institutions and credit institutions, the above proposal aims to provide basic but sustainable solutions, helping to minimize the risks of the system of credit institutions, realizing the role of deeper participation of DIV in the process of restructuring credit institutions.
Communication Department
