The implementation of policies in the North Eastern region enrich the experience of the North Eastern Regional Branch (NERB) in coordinating with State Bank’s branches in continuously executing the operational activities of the DIV. This piece of writing is expected to cover practical results of the coordination process with SBV branches, thus put forward several solutions to effectively implement the DI operation in the future.
Practical experience in coordinated with SBV branches to execute DI operational activities
Revocation of deposit insurance participation certificates
In order to ensure the compliance of credit institution's operation to the law, create equal competitive environment, especially in provinces with a large number of newly established and expanded institutions, NERB regular exchanges information with SBV's branches on newly established institutions or information on network expansion. When the decision of establishing new institutions or expansion was made, SBV branches informed NERB for guidance on dossiers preparation and procedures for granting the DI participation certificates in a timely and legally compliant manner; in search of institutions which have not applied for new certificate or supplementary certificate as prescribed by law, thus recommended for appropriate corrective action. As of 2014, NERB granted and revoked 461 DI participating certificates including 62 newly issued, 287 changing, 103 supplementing, 01 re-issuing and 08 revoking certificates (excluding revoked certificates due to changing) for credit institutions in the region.
DI Premium collection
NERB, on regular basis, coordinated with SBV's branches in the region to instruct, urge and remind the announced institutions to comply with legal regulations on premium assessment and payment by sending the examination results to SBV's branches, report to SBV's branches so that they will request credit institutions for corrective actions, premium assessment and payment as stipulated. As the result, the premium assessment and payment of public institutions are executed in order. Insufficient and excessive premium payout improved. Most of the institutes assess and pay premium in a timely and sufficient manner. Over 13 years, the total premium amount of the public institutions under the administration of the NERB was approximately 59 billion VND.
Offsite supervision
Based on supervision results, NERB screened and selected the institutions with signs of operational difficulties, contacted SBV's branches to proactively collect information, identified causes, sent detection and required corrective actions.
Moreover, in resolution of published institutions which violated prudential regulations in banking activities, NEBR closely and regularly coordinated with SBV's branches, followed even minor development of their operations in order to build up appropriate resolution plans depend on each institution's situation. It would also help prevent irregular development and bank run which might badly affect the social and security orders in the region. NERB took initiative to send request to SBV’s branches for DIV’s participation in the Special Control Committee of the public institutions under special control as provided by law.
Indeed, coordination between NERB and SBV’s branches to resolve bad institutions has been carried out for many years. It has been demonstrated in reality that it worked well to detect and resolve bad institutions and mitigate negative impacts on banking prudential activities as well as depositor’s rights. Besides, the information sharing between NERB and SBV’s branches facilitates the detection of bad institutions for inspection and timely supervision.
Onsite examination
To mitigate the overlapping examination activities of SBV and DIV, NERB made plan at the beginning of each year and discussed with SBV's branches to work on appropriate schedule of examination, at the same time , improved the examination plan in case the SBV performed its unexpected inspection. NERB monthly reported the examination results to SBV’s branches as well as the current situation, other essential information and recommended reasonable solutions.
As of June, 2014, NERB executed 741 examinations (690 to people's credit funds, 10 to commercial banks, 2 to Central people's credit funds, 39 to branches of commercial banks) and 04 re-examinations to announce institutions in the region.
Deposit insurance payout
The reimbursement of deposit insurance must be executed in a timely manner when the failure arises so as to assure depositors and prevent incidents which may affect local security. And so, coordination between NERB and SBV's branches is essential. During supervision process of public institutions, if any irregular activities were detected and the institutions were placed under special control, NERB would recover up several solutions, assess deposits data, be prepared for reimbursement in case the institution couldn't. NERB also took initiatives to consult with SBV’s branches regarding dissolution and bankruptcy. It also coordinates with SBV's branches and local authorities to prepare for the reimbursement process in order to ensure the transparency and safety. During the payout process, SBV’s branches assigned staff to participate in the payout group to facilitate payout in a quick and correct manner.
During the liquidation of failed public institutions, NERB assigned staff to participate in the Liquidation Commission, closely cooperated with the Liquidation Supervision Group of the SBV in order to understand the liquidation situation. It also requested the Liquidation Supervision Group to give instructions to the liquidation group so as to guarantee the liquidation’s order and the creditor payout priorities. In case bad debts were hardly recovered or some creditors purposefully refused to pay debts, NERB coordinated with SBV's local branches to handle and work on solutions in order to maximum the recovery. As the results, NERB recovered 100% of the payout amount at two local credit funds: Thanh To (Hai Phong) (with the amount of 2,384 billion VND) and Ke Sat (Hai Duong) (with the amount of 93.8 million VND ). Other fund sources collected by other liquidation commissions were also paid for deposit insurance as stipulated. The total amount of recovery since 2002 was 4 billion VND.
PR activities
From the perspectives of the state's authorities, some SBV's branches play an important role in PR activities and explain regulations on deposit insurance to the insured institutions when they face any question or difficulty, thus facilitates the activities of NERB. Besides, suggestions and speeches of SBV's leaders at financial, banking and deposit insurance seminars are important voices to accelerate PR activities for policy amendments which are appropriate for the practical situation in Vietnam and bring policies into life.
Briefly, the close coordination between NERB and SBV's branches contributes to its operations in: granting and revoking deposit insurance participation certificates, supervision, examination, resolution of bad institutions, reimbursement, liquidation, etc., over 13 years.
Recommendations
In 2014, the coordination between DIV and SBV in exercising mandates was put on research and executed in the whole system. Statutes on information sharing between the two authorities have been drafted and prepared for issuance. It is expected to bring about positive changes to the DIV’s operational effectiveness in the future. In the coming time, so as to work out the consistent coordination mechanism between SBV’s branches and DIV’s local branches, from NERB’s practical experience, some recommendations were as follows:
Firstly, the SBV should issue a Statute on information sharing between SBV and DIV so that DIV can assess directly the data available from SBV for DIV operational activities.
Secondly, the coordination mechanism between SBV's branches and DIV's local branches should be built up in which it will clarify the information eligible for exchanging, improve the legal basis and concretely guide the implementation in the whole system.
Thirdly, DIV's branches, so as to accelerate the coordination in tasks fulfillment and protection of depositor's rights, should take initiative to exchange and update information and create close connections in job performance.< /div>