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Enhance the role of DIV in restructuring credit institutions
In the Law on Credit Institutions 2024, the drafting agency has paid more attention to the role of DIV in the process of restructuring credit institutions, especially in the recovery plan and measures to support the implementation of the recovery plan for specially controlled credit institutions; in support for commercial banks with mandatory transfer; in case of bankruptcy for specially controlled credit institutions…
The Law mentions that it is necessary for DIV to participate in the early intervention process for credit institutions, both to take advantage of resources and demonstrate the role and responsibility of DIV to depositors as well as insured institutions. In particular, the Law on Credit Institutions 2024 creates more basis and legal foundation for continuing to consider amending and supplementing the Law on deposit insurance.
Accordingly, for the recovery plan for specially controlled credit institutions, Article 169 of the Law on Credit Institutions 2024 stipulates the development and approval of recovery plans, specifically:
“Within 60 days from the date of receiving the written request from the Special Control Board specified in Clause 7, Article 167 of this Law, the specially controlled credit institution shall complete the development of a recovery plan and send it to the Special Control Board.
Within 30 days from the date of receiving the recovery plan of the specially controlled credit institution, the Special Control Board evaluates and reports to the State Bank of Vietnam (SBV) on the feasibility of the recovery plan.
Regarding the recovery plan for the People's Credit Funds, the Special Control Board coordinated with the deposit insurer and the cooperative bank to evaluate the feasibility of the recovery plan.
The SBV shall consider and approve the recovery plan within 60 days from the date of receipt of the report of the Special Control Board specified in Clause 2 of this Article or within 60 days from the date of the Prime Minister's decision on the special lending according to the provisions of Clause 4 of this Article. In case of non-approval, the SBV will send a document to the credit institution and the Special Control Board.
In case the recovery plan proposes special lending measures from the SBV with an interest rate of 0%/year, without collateral, the SBV submits to the Prime Minister for consideration and decision on special lending with interest rates of 0% per year, no collateral before approval of recovery plan.
The time limit specified in Clauses 1, 2 and 3 of this Article may be extended by the SBV but no more than twice that time limit.
Regarding measures to support the implementation of plans to recover specially controlled credit institutions:
Under Article 171 of the Law on Credit Institutions 2024, specially controlled credit institutions, especially commercial banks, cooperative bank, and financial companies, are entitled to apply one or several of the following support measures:
“a) Receive special loans from the SBV, deposit insurance organization, and other credit institutions as prescribed in Point b, Clause 1, Clause 2, Article 192 of this Law;
b) Exempt from interest on refinancing loans and special loans from the SBV;
c) Receive deposits or loans from supporting credit institutions at preferential interest rates;
d) Buy debt and corporate bonds held by credit institutions that are classified as qualifying debt groups according to regulations of the SBV; resell debt and corporate bonds to supporting credit institutions;
e) Agree and select one or several credit institutions to support participation in the recovery plan;
f) Receive support from credit institutions in sending personnel to participate in administration and management; information technology support;
g) In case a credit institution has receivable profits that must be divested, the credit institution is allocated receivable profits that must be divested according to its financial capacity on the principle of total allocation of receivable profits that must be divested and the amount of provision to be made equal to the difference in revenue and expenditure from the annual business results of the credit institution. The maximum time limit for allocating interest receivables must be 10 years from the date of approval by the SBV and only applies to receivables arising up to the time the credit institution is placed under special control;
h) When implementing the solution to increase charter capital according to the remedial plan, shareholders and capital contributing members are allowed to own shares and capital contributions in excess of the share ownership and capital contribution limits specified in Article 63 and Article 77 of this Law. Shareholders and capital contributing members must have a roadmap to reduce their share ownership and capital contributions to comply with the limit;
i) Other measures according to the authority of the SBV.
Specially controlled credit institutions, especially people's credit funds and microfinance institutions, are eligible to apply one or more of the following support measures:
a) Measures specified in Points b, c, d, dd, e, g and i, Clause 1 of this Article;
b) Microfinance institutions are entitled to special loans from the SBV, deposit insurance organization, and other credit institutions according to the provisions of Point b, Clause 1, Clause 2, Article 192 of this Law;
c) The People's Credit Fund is entitled to special loans from the Cooperative bank from the fund to ensure the safety of the People's Credit Fund system with an interest rate of up to 0%/year."
Regarding support for commercial banks with mandatory transfer:
Article 182 stipulates support measures for commercial banks subject to compulsory transfer:
"1. The transferred commercial bank is required to apply one or more of the following measures:
a) Sell bad debt without collateral or bad debt with collateral whose collateral is being distrained or collateral without valid records and papers to the purchasing and resolving organization;
b) Receive deposits or loans from the party receiving the compulsory transfer according to the compulsory transfer plan or agreement;
c) Buy debt, buy corporate bonds held by the transferee that are required to be classified as qualified debt groups according to the provisions of law; resell debt, resell corporate bonds to the mandatory transferee according to the agreement or in case these debts are converted into bad debt;
d) The transferee is required to appoint personnel to participate in administration, management, and control; Support for information technology and other activities as agreed;
d) Exempt from interest on refinancing loans and special loans from the SBV;
e) Special loans from the SBV, deposit insurance organization, and other credit institutions as prescribed in Point b, Clause 1, Clause 2, Article 192 of this Law;
g) Other measures according to the authority of the SBV".
In cases of bankruptcy of credit institutions that are specially controlled:
Article 188 of the Law on Credit Institutions 2024 regulates the bankruptcy of specially controlled credit institutions:
"1. The bankruptcy plan of a specially controlled credit institution is developed when it falls into one of the following cases:
a) Specially controlled credit institutions do not have a restructuring plan within the time limit specified under Clause 1, Article 169, Clause 1, Article 176 of this Law and do not meet the conditions for mandatory transfer specified in Clause 1, Article 179, Clause 1, Article 180 of this Law, does not meet the dissolution conditions specified in Clause 1, Article 187 of this Law;
b) Commercial banks fall into the cases specified in Clause 7, Article 179, Clause 5, Article 180, and Clause 9, Article 183 of this Law;
c) Credit institutions fall into the cases specified in Clause 2, Article 204 of this Law;
d) Specially controlled credit institutions propose a bankruptcy plan within 60 days from the date of receiving the written request from the Special Control Board specified in Clause 7, Article 167 or Clause 5, Article 172 or Clause 6, Article 178 of this Law.
2. The Special Control Board coordinates with specially controlled credit institutions and the deposit insurance organization to develop a bankruptcy plan for specially controlled credit institutions and proposes to the SBV to submit to the Government for approval, except for the cases specified in Clause 3.
After the bankruptcy plan is approved, the SBV submits to the Prime Minister to decide the deposit insurance payment coverage limit for depositors, up to the maximum amount of the insured individual's deposit at the credit institution.
3. The Special Control Board is responsible for coordinating with specially controlled people's credit funds, deposit insurance organization and cooperative banks to develop a bankruptcy plan for specially controlled people's credit funds and Proposing the SBV to submit to the Prime Minister to decide on deposit insurance payment coverage limit for depositors, up to a maximum of the amount of insured individuals' deposits at the people's credit fund.
After the Prime Minister decides on the deposit insurance limit, the Special Control Board is responsible for coordinating with specially controlled people's credit funds, deposit insurance organization and cooperative banks to complete the bankruptcy plan and submitted to the SBV for approval.
Thus, with the provisions in the Law on Credit Institutions 2024, the role of DIV continues to be promoted and enhanced.
Amending the Law on deposit insurance is an objective requirement for policy improvement
In order for DIV to better fulfill its mission and participate more deeply in the restructuring process to better protect the legal rights of depositors, contributing to ensuring the safety of the system of credit institutions, it is necessary to amend the Law on deposit insurance. At the same time, it is also more consistent with the new points in the Law on Credit Institutions (amended). This is also an objective requirement for perfecting deposit insurance legal mechanisms and policies to suit the development of the banking system, as well as absorbing international experiences in the field of deposit insurance.
Up to now, it has been more than 10 years that depositors have had their legal rights and interests protected by the Law on deposit insurance which took effect from January 1, 2013. Since its establishment, DIV has paid deposit insurance to depositors at nearly 40 people's credit funds that were dissolved and went bankrupt. The legal rights and interests of depositors at these funds are guaranteed to be paid fully and promptly, creating confidence for depositors at PCFs in particular and credit institutions in general.
During the implementation of the Law on deposit insurance, this organization has clearly demonstrated its role through remote monitoring and examination of insured institutions. During examination and supervision, if violations are detected that affect system safety, DIV promptly reports to the SBV for timely inspection and correction. That has limited risks in the operations of organizations participating in deposit insurance, limiting the phenomenon of collapse and loss of liquidity at credit institutions.
In addition, DIV regularly disseminate policies and laws on deposit insurance to enhance public trust and contribute to ensuring the safety of the system of credit institutions. Thanks to that, people can feel secure and trust in depositing money at organizations participating in deposit insurance.
It can be said that DIV has affirmed the important role of a non-profit State-owned financial institution, carrying out the mission of protecting depositors through effective implementation of deposit insurance policy and deposit insurance professional activities; contributing with agencies to ensure monetary security, national financial safety, ensuring safe and healthy operations of PCFs and the system of credit institutions in general; proactively do research, propose and recommend to competent authorities contents on amendments and supplements to legal documents on mechanisms and policies for the organization and operation of the PCF system, helping the credit institution system operates more safely and effectively.
Although it has achieved quite impressive results after 10 years of implementing the Law on deposit insurance, up to now, this Law has revealed a number of inadequacies and limitations.
First of all, the Law on deposit insurance has unclear regulations or has regulations that are not consistent with other laws such as: on the time when the obligation to pay insurance premiums arises, and deposit insurance fees are waived; about uninsured deposits; about investment channels; about the financial mechanism of the deposit insurance organization...
In addition, the Law on deposit insurance has not been amended and supplemented in a timely manner compared to the Law on Credit Institutions in 2024, leading to some regulations in the Law on Credit Institutions being amended, but in the Law on deposit insurance, there is no such thing, leading to difficulties in the process of participating in restructuring, supporting credit institutions to recover as well as the special control process.
At the same time, related legal and policy mechanisms are not synchronized and consistent, causing limitations and difficulties for the deposit insurance organization in protecting the legitimate rights and interests of depositors and participating more deeply in the process of supporting and restructuring weak credit institutions...
Furthermore, amending the Law on deposit insurance is very urgent to better protect the interests of depositors, enhance the role of DIV and be consistent with reality. This is clearly shown in the guiding documents of the Government and the National Assembly such as:
Under Decision No.986/QD-TTg dated August 8, 2018 of the Prime Minister on approving the Vietnam Banking Industry Development Strategy to 2025, with a vision to 2030, amendments of the Law on deposit insurance were mentioned. Directive No.06/CT-TTg dated March 12, 2019, the Prime Minister directed to urgently study and propose amendments to the Law on deposit insurance to use deposit insurance premium to resolve weak credit institutions. Under Decision No.1660/QD-TTg dated December 30, 2022 on approving the Deposit Insurance Development Strategy to 2025, with orientations to 2030, the Prime Minister also requested to study and amend the Law on deposit insurance...Under Resolution No. 62/ 2022/QH15, the National Assembly also requested to review and amend laws on credit institutions and the SBV, including the Law on Deposit Insurance.
Thus, amending and supplementing the Law on deposit insurance is a thorough policy of the National Assembly, the Government, and the SBV. This is also an important task assigned to DIV so that DIV can participate more deeply in the process of restructuring credit institutions to better protect the legal rights of depositors, contributing to ensuring the safety of the credit institution system.
In the coming time, DIV needs to focus on proposing amendments to the Law on deposit insurance in a direction consistent with international practices and supplementing mechanisms for DIV to effectively participate in the process of resolving weak and appropriate credit institutions in consistent with the Deposit Insurance Development Strategy until 2025, with orientations to 2030.
Communication Department
