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For the safe and healthy development of banking activities
Over the past years, DIV has made important contribution to maintaining stability, ensuring the safe and healthy development of the system of credit institutions, as well as contributing to the process of restructuring credit institutions.
Notably, DIV supports the People's Credit Fund (PCF) system to develop safely and sustainably through deposit insurance operations; Support the implementation of restructuring plans for specially controlled and weakly operating PCFs; support to ensure solid system connectivity; support state management functions for PCFs.
As an effective tool of the Government and the State Bank of Vietnam (SBV) in implementing deposit insurance policy, DIV implements deposit insurance participation certificates, collects deposit insurance fees, regularly monitors, supervises and examines periodically 100% insured institutions. In addition, supervision and examination activities of insured institutions, including PCFs, have been implemented by the DIV since the early days of its establishment.
Accordingly, this organization carries out planned examination of insured institutions, and conducts examination of a number of insured institutions under the direction of the Governor of the SBV; remote supervision of 100% of insured institutions. Supervision content focuses on analyzing and evaluating the current state of operations; compliance with regulations on deposit insurance as well as compliance with regulations on ensuring safety in banking operations; thereby warning the risks, violations and weaknesses that insured institutions need to overcome, and recommending the SBV to promptly resolve them to ensure the safety and health of the entire system's operations.
At the same time, DIV conducts on-site examination, focusing on reviewing compliance with legal regulations on deposit insurance, in-depth examination of insured deposits, accounting and management of deposit accounts in order to promptly detect violations of the PCFs in mobilizing customer deposits, thereby proposing measures to resolve and protect the legal rights of depositors as well as prevent phenomena of deposit insurance fraud and profiteering.
Especially, for PCFs with problems, DIV carries out in-depth supervision to monitor developments, grasp the current situation and fluctuations of various types of deposits, especially deposits subject to insurance and owners. Have solutions or report or make recommendations to competent authorities.
Regarding weak PCFs, within the scope of assigned functions and tasks, DIV has actively coordinated with SBV branches in provinces and cities to participate in the process of monitoring, examination and resolution. With these funds, especially those at risk of failure, deposit insurance payments may arise.
It can be seen that, through supervision and examination, DIV has contributed together with the authorities to control risks better, detect risks earlier to maintain and ensure safe and sound operations of the whole system.
Besides, DIV has been participating in and effectively supporting the process of restructuring the PCFs system. Accordingly, DIV performs the functions and tasks prescribed in the Law on deposit insurance and the new tasks assigned in the Law amending and supplementing a number of articles of the Law on credit institutions in participating more deeply in the process of restructuring of credit institutions; coordinate with the Special Control Board, the SBV and relevant agencies to specifically assess the feasibility of resolution plans, restructuring plans, and bankruptcy plans for PCFs; Participate and coordinate with SBV branches in provinces and cities to evaluate commercial bank plans to participate in resolving People's Credit Funds; Support the Special Control Board, local authorities and commercial banks in reviewing and comparing deposit data, making payments to depositors at PCF; participate in supporting the SBV's supervision and examination functions for PCFs...
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 and deposit insurance activities; contributing with agencies to ensure national financial safety, better control, detect and warn of risks to maintain and ensure safe and healthy operations of PCFs and the system of credit institution in general; proactively 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 PCFs system, helping the credit institution system operates more safely and effectively.
It is undeniable that the efforts of DIV in recent times have made an important contribution to ensuring the safety of the financial and banking system and increasing people's trust. But the activities and roles of DIV have not really been clearly demonstrated in the process of restructuring credit institutions. Supervision and examination activities of DIV for insured institutions have not really been as effective as expected. The role of DIV in participating in the special control process for PCFs, in supporting the implementation of restructuring plans and resolving weak PCFs and in supporting the strengthening of system connectivity, in supporting the SBV in performing the State management function of PCFs.
One of the important reasons is that the legal framework on the functions and tasks of DIV is not complete, clear, inconsistent and does not meet practical requirements. The Law on deposit insurance has not been amended, so it has not created consistency with relevant regulations, and has not created a mechanism to further promote the role of DIV in restructuring the system of credit institutions.
Further strengthen the role of DIV in restructuring credit institutions
The SBV has submitted to the National Assembly the Draft Law on credit institutions (amended) at the 5th session of the 15th National Assembly. After receiving comments from National Assembly delegates and gathering people's opinions, at the 6th session of the 15th National Assembly, this draft Law will continue to be presented to the National Assembly for comments. In particular, the drafting agency paid more attention to the role of DIV in the process of restructuring credit institutions.
Specifically, in this draft Law on credit institutions (amended), the SBV has added regulations that credit institutions and foreign bank branches can be intervened early when mass withdrawals lead to loss of solvency and unable to self-resolve according to the regulations of the SBV.
Based on the experience of some countries and to ensure that there is a timely response mechanism when a case of mass withdrawal of money from a credit institution that threatens system safety arises, the draft Law adds regulations on measures to resolve when there is a mass withdrawal incident.
Specifically, the draft Law stipulates that credit institutions and foreign bank branches can be intervened early when falling into one of the following cases: ranked below average or below according to the regulations of the SBV; at risk of insolvency according to regulations of the SBV; mass withdrawals occurred when many depositors came to withdraw money at the same time, leading to the credit institution falling into a state of insolvency and not being able to overcome it according to the regulations of the SBV...
Depending on the current situation, nature, and level of risk requiring early intervention of credit institutions and foreign bank branches, the SBV applies one or several early intervention measures such as: limiting dividends, transfer of shares, transfer of assets; limit ineffective business activities, limit large and high-risk transactions; suspend or temporarily suspend one or several banking activities or other business activities that show signs of violating the law; limit the decision-making authority of managers and executives in business activities...
The draft Law also inherits the provisions on early intervention application in the current Law and has amendments and supplements to address recent shortcomings; supplementing the authority of the SBV at the early intervention stage; regulates a number of measures currently applied from the special control stage to the early intervention stage to allow early, remote resolving when the credit institution's weakness has not yet reached a serious level.
At the same time, the draft Law further strengthens the role of DIV in developing, evaluating and approving early intervention plans. Specifically: For the PCFs recovery plan, the Special Control Board coordinated with DIV and Cooperative Bank of Vietnam to evaluate the feasibility of the plan; For the plan to restore microfinance institutions and financial companies, the Special Control Board coordinates with DIV to evaluate the feasibility of the plan.
Regarding the development and approval of bankruptcy plans, according to the draft Law on credit institutions (amended): Within 30 days from the date the Government decides on the bankruptcy policy of specially controlled credit institutions, the Special Control Board is responsible for presiding over and coordinating with specially controlled credit institutions and DIV to develop a bankruptcy plan for specially controlled credit institutions and submit it to the SBV for consideration. In case of developing a bankruptcy plan for the PCFs, the Special Control Board is responsible for presiding and coordinating with the specially controlled PCFs, DIV and Cooperative Bank of Vietnam to implement it.
To strengthen the role of DIV in the process of restructuring credit institutions, the authorities need to research to amend and supplement the Law on deposit insurance to be consistent with the current legal framework and in accordance with reality and international practices.
At the same time, the drafting agency needs to consider adding provisions in the Law on deposit insurance regarding the DIV being allowed to make special loans to specially controlled credit institutions, including specially controlled PCFs to be consistent with the Law on credit institutions 2017. Supplementing regulations that DIV can implement a financial support mechanism for credit institutions that have been applied for early intervention by the SBV but have not been placed under special control (Current Law does not have this mechanism). Supplementing regulations in the direction of DIV participating more deeply and effectively in the process of restructuring PCFs and resolving weak PCFs.
It is necessary to amend and supplement regulations on investment activities of DIV towards diversifying investment forms to improve the efficiency of using idle capital of DIV and be consistent with the provisions of the Law on credit institutions 2017. The Government also needs to pay attention to creating conditions for DIV to improve its financial capacity, have a risk prevention mechanism, build a system safety network and a coordination mechanism to handle financial crises, if any.
Add functions and tasks for DIV to coordinate with the SBV or support the State Bank of Vietnam in inspecting and supervising PCFs. Allow DIV to access more types of information on special control, restructuring credit institutions and resolving weak credit institutions, including PCFs...
In order to further enhance the role in risk management for the system of credit institutions and actively participate in the process of restructuring weak credit institutions, authorities need to periodically study and submit to the Prime Minister to raise the deposit insurance coverage limit to strengthen the trust and better protect the legal rights of depositors.
On the part of DIV, it is also necessary to continue promoting the application of information technology, building and implementing a "digital transformation" plan to be able to meet new mission requirements. In the future, DIV also needs to learn a more "multi-functional" organizational model to be able to become a supervising channel for the system of credit institutions. When there is enough information and data, DIV can classify insured institutions on the basis of risk level, have the ability to analyze and forecast, thereby detecting signs early and remotely unusual signs in financial and banking activities in order to create motivation for these organizations to manage risks proactively, effectively, and more deeply to better protect the legitimate rights and interests of depositors in the process of restructuring and developing credit institutions in the coming time.
Communication Department
