Deposit Insurance of Vietnam (DIV) in its efforts to best protect depositors

Lessons from the collapse of the credit cooperative system and the impact of the 1997-Asian financial crisis showed a general principle in market economy operation: wherever risks exist, there must be prevention and resolution measures. Further integrated into the world markets, banking activities are of even more potential risks. The DIV is among institutions, which takes measures to mitigate losses, prevent from domino-effect failure of credit institutions. It is not incidentally the case of assessing safety level of financial markets and credibility of an economy that the first question raised by international independent assessment organizations is whether country has an effective Deposit Insurance System existed or not. Since its establishment until now, the DIV has step-by-step asserted a pro-active role in the process of renewing, restructuring the financial and banking system with no bank failure and deposit insurance related complaint. These were important and remarkable achievements, especially in the environment that the global financial crisis has severely affected most countries world-wide. Over the last years, the DIV has protected directly and indirectly tens of millions of depositors through activities such as payment of insured deposits, off-site supervision, on-site examination, receivership and resolution…By so far, more than 1,500 depositors with total deposit of 20 billion VND in 36 dissolved People’s credit funds have fully received every single cent of their savings thanks to DIV’s timely payment procedures. This has made an active contribution to strengthening and improving public confidence in the Government, in general and credit institutions, in particular, preventing from panic and bank run like what happened in the late-1980s story as no deposit insurer availed. Simultaneously, these attainments have given a hand to ensuring political stability, social order and safety in localities where credit institutions failed and went bankrupt.
As an integral part of the national financial supervision system, the DIV implements regular supervision on nearly 1,200 credit institutions, takes effective control of credit institutions’ compliance with legal regulations on deposit insurance and banking safety, gives warnings of potential risks to help those improve and enhance activity quality. The DIV is now researching on how to improve supervisory activities in parallel with international standards and practices, implementing pilot online connection with insured institutions to acquire e-reports. Timely financial support provided by the DIV shall help credit institutions to quickly overcome difficulties and keep on healthy business upon short-term liquidity problems challenging them ... Now deposit insurance has become an indispensable factor in building confidence, credibility, and value of credit institutions... It is easily recognized that CDI with message on it "deposit is insured" posted in visible place next to interest rate lists in all corners of bank trading counters. This tells us about the truth that deposit insurance policy has really come into real life, brought its effect into play and been aside with credit institutions. Behind success of credit institutions, a “silent” role of deposit insurance in recent years attributes to vibrant development of financial and banking sector, as shown in early warning of risks. Especially, DIV has, side by side, shared challenges sent to banking sector during 2008-2009 financial crisis. It is affirmed the right policy of the Government on the establishment of the financial institution as a “risk warning fence” with mandate of ensuring public confidence for sustainable development  that attributes to today-steady position of DIV in financial markets. The latest figure of the International Association of Deposit Insurance (IADI) shows more than 100 countries having deposit insurance systems in place and there is an increasing trend of newly established deposit insurer. Governments in many countries have used deposit insurance as one of the most effective instruments to maintain public confidence in banking activities and market stabilization. This demonstrates the increasingly important role of this type of insurance.
Deposit insurance policy has been implemented for over 10 years in Vietnam. At the very beginning of its operation, DIV has been fully aware of the importance of international integration by joining the IADI. Today, DIV has established bilateral and multilateral cooperation with many deposit insurers around the world as well as many large financial institutions like WB, ADB, USAID, JICA, CIDA ..., thereby affirming the position of the DIV in the international community.
Whatever countries newly establish deposit insurer or restructure DI system, the current trend is to pursue objective of protecting interest of depositors in a positive and pro-active manner. It means that deposit insurers shall be biased to designing features of a "risk-minimizer" model with further expanded functions. To meet demand for a modern DI model, DIV has very soon set a prolonged development orientation with long-term vision and a specific 5-pillar based roadmap inclusive of: a solid legal foundation; consolidated financial capacity and maintained systemic transparency; improved quality of products and services towards international integration; effectively structured organization that closely linked to human resource development of high profession in order for responding preparedness upon banking incidents; IT-based operation modernization. Beside improvement of supervision quality, shifting from compliance to risk safety supervision, payment procedures improvement…applied research has been taken into account as first priority to serve the DIV’s long-term objectives. The DIV has pro-actively worked out and submitted ”DIV Development Strategy of 2009-2015 and orientation up to 2020” for relevant authorities for the Government’s approval. The DIV has been deploying project of off-site supervision of insured institutions; a research on building a safety examination system; a proposal on making research and deployment of activities to support public and depositors; a research on client-related information system. Especially, the completion and submission to relevant authorities of three programs, namely risk-based premium collection system; receiving special support funding; receivership and resolution, have shown the DIV’s timely approach to risk-minimizer model that the organization is pursuing. The DIV has also actively participated in and proposed to the Advisory Council of National Monetary Policy measures to ensure healthy operation of the banking and financial system etc…Each step of the development of the DIV has reflected its strenuous efforts in realizing its ambition to become a modern institution, meeting international standards on deposit insurance in order to best protect depositors and ensure the safety of banking activities. The decisive factor for success is to promptly have the Law on deposit insurance promulgated as a complete and firm basis for implementing public policy on deposit insurance. In fact, documents regulating deposit insurance activities are  governmental decrees, which are not keeping abreast with the development of the banking and financial sector in general and deposit insurance in particular as well as the stature of the DIV - just like an already tight coat for a quickly growing person.