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Deposit insurance - the specific policy field
Deposit insurance - as defined by The International Association of Deposit Insurers (IADI) - is “a system established to protect depositors from the loss of their deposited deposits in case of the banks cannot fulfill their debt obligations as committed to depositors”.
In Vietnam, the Law on Deposit Insurance stipulates that: Deposit insurance is a guarantee for the return of deposits to the insured depositors within the insurance payment limit when the insured institutions falls into insolvency or bankruptcy. Insured institutions are understood as credit institutions established and operating under the Law on Credit Institutions, including commercial banks, foreign bank branches, Co-operative Banks, People's credit funds and microfinance institutions.
Therefore, deposit insurance is the guarantee by the deposit insurance to return all or part of insured deposits (including principal and interest) to depositors when insured guarantees is determined to be insolvent or cease operations.
Around the world, deposit insurance policy is often considered as the public policy field, aiming at one or multiple purposes depending on the specific conditions of each period. In which, the objectives of this policy can be divided into 3 main groups. The first is to protect small to medium-sized depositors who have certain limitations in accessing information on depository institutions. The deposit insurance policy can also contribute to the stability of credit institutions system. The deposit insurance policy is used for the purpose of enhancing public trust, minimizing the run on the bank occurs, contributing to the creation of an official mechanism to face to trouble depository institutions and participating in the process of handling financial crisis. In addition, the deposit insurance policy contributes to building a competitive and equal market for depository institutions of different sizes and levels of development; helping to create conditions to clearly define the responsibilities and interests of depositors, deposit takers and the Government; reducing the cost of resolving bank failures and the financial burden on taxpayers in case of bank failures. To achieve these goals, deposit guarantees are government in most countries around the world, operating organizations for non-profit purposes.
Protect deposits at 1283 credit institutions
According to DIV, there are currently 1,283 public institutions, including 97 commercial banks and branches of foreign banks, 1,181 people's credit funds, 01 co-operative bank and 04 Micro financial institutions. These organizations are all granted Certificates and copies of Certificates of deposit insurance participation in accordance with the regulations. built, insured institutions have to pay periodic deposit insurance premium calculated on the balance of insured deposits with the insured institutions. Generally, in the first 7 months of 2022, the DIV collected deposit insurance premiums reached 77.7% of the plan assigned by the State Bank of Vietnam. DIV also implemented the fees for a few public institutions following the regulations.
Accumulated premiums amounted significantly contributes to making the Operational Reverse Fund supplement that would be important financial resource for depositor reimbursement when insurance payment duty arises. In addition, the Operational Reverse Fund is also used for providing special loans when insured institutions are under special control as regulated by the amending and supplementing Law on Credit Institutions 2017. When there is no payment duty arises, the DIV is entitled to use its temporary idle capital to increase financial capacity, while ensuring capital preservation and growth. By the end of July 2022, DIV's investment of temporarily idle capital helped the DIV to record a revenue of more than 175 billion dong, equivalent to 86.5% of the plan assigned by the SBV.
By the end of July 2022, the DIV completed examination of 195 announced institutions, reaching nearly 70% of the plan and examining 26 People's Credit Funds under the direction of the Governor of SBV . The examination results were reported to the SBV by DIV in order to promptly monitor and evaluate the development and operation of credit institutions, thereby correcting arising problems. In addition, 100% of public institutions are supervised through reports from the aforementioned organizations and from shared data of the SBV.
In the past time, DIV has not incurred special loans from public institutions, nor has any insurance payment duty arise. However, DIV always closely supervises public institutions, while ensuring financial capacity, human resources and technical resources to be able to quickly respond to any arising cases.
To organize public awareness activities regarding policies and legislation on deposit insurance, DIV has implemented many communication measures on various media channels with great coverage such as television, radio, newspapers and magazines, online newspapers, websites and reports, thereby improving the public awareness of deposit insurance.
On the international activities, DIV has strengthened cooperation with deposit insurers around the world in order to share information and experience in building modern and effective deposit insurance systems. DIV is currently one of the active members of the IADI and the Asia Pacific Regional Committee (APRC) of IADI, and also participates in international seminars and talks on international deposit insurance profession.
Amendment of deposit insurance legal framework to improve depositors protection
According to Decision No.689/QD-TTg dated June 8, 2022 of the Prime Minister approving the project of restructuring the system of credit institutions associated with bad debt settlement in the 2021 -2025 period, one of the main legal method is to study, review and amend a number of laws and legal documents, including the Law on Deposit Insurance. Research and supplement the functions and duties of DIV to participate in restructuring weak credit institutions. In addition, resources for restructuring credit institutions have also been identified that can be mobilized from DIV Operational Reverse Fund. These are directions to enhance the role of DIV in the restructuring process in accordance with practical needs as well as international practices.
Mr. Vu Van Long - Deputy General Director of the DIV said that one of the top priorities in the remaining months of 2022 and in the coming time is the proposal to amend and supplement the Law on Deposit Insurance. In the past time, the DIV has reviewed the implementation of the Law and submitted to the SBV proposals and recommendations on the deposit insurance policy.
Also according to the DIV, the proposed amendments and supplements to the Law on Deposit Insurance will revolve around three main contents: perfecting the legal basis, being in line with international practices, and enhancing the position and role of the DIV to participate more deeply and effectively in the process of restructuring the credit institution system, in order to better and promptly protect the legitimate rights and interests of depositors; solving difficulties and problems arising during the implementation of the Law on Deposit Insurance in recent years; in accordance with relevant laws such as: the Law amending and supplementing a number of articles of the Law on Credit Institutions (Law No. 17/2017/QH14), Law on Bankruptcy etc.
In order to promote the role of the deposit insurance in protecting the legitimate rights and interests of depositors and ensuring safe and sound development of the banking system, the consideration of amending the Law on Deposit Insurance should be carried out in a timely manner. At the same time, the DIV also needs to constantly improve financial resources, quality of human resources and professional activities to be ready to fulfill newly assigned tasks.
