Trang Chủ
Law on Deposit Insurance – legal framework to protect depositors
The Law on Deposit Insurance (No.06/2012/QH13) was approved by the XIII National Assembly at its 3rd session on June 18, 2012, and took effect from January 1, 2013. This is the first time the deposit insurance policy has been legislated. Before 2012, the legal framework regulating deposit insurance activities in Vietnam was the Government Decree. The Law on Deposit Insurance has fully regulated the contents of deposit insurance activities in Vietnam, clearly defined the position, functions and duties of the deposit insurance organization, concretized the rights and obligations of the insured institutions, insured deposits, time of insurance reimbursement, etc., thereby contributing to improving the effectiveness of deposit insurance and better protecting the interests of depositors.
After the Law on Deposit Insurance was passed by the National Assembly, the guiding documents were also quickly issued by the authorities. As a result, the legal provisions on deposit insurance were promptly promoting positive effects. Complying with the provisions of the Law on Deposit Insurance, 100% of credit institutions and branches of foreign bank have participated in the deposit insurance and paid the fees in full amounts. Insured institutions are all granted Certificates and copies of Certificates of deposit insurance participation to list at transaction points as prescribed.
With the regulation on insured individuals, they are depositors with deposits at insured institutions, the Law on Deposit Insurance aims to protect the majority of small-scaled depositors with limited access to information on financial and banking activities, and at the same time in line with the enforcement capacity of DIV.
The Law on Deposit Insurance clearly stipulates that insured deposits are deposits in Vietnamese dong, in line with Vietnam's foreign exchange policy in recent years. Regulations on certain types of uninsured deposits for individuals with direct interests related to the activities of deposit insurers have enhanced the liability of these individuals, contributing to limiting moral hazard.
One of the important contents regulated by the Law on Deposit Insurance is the coverage limit. This is the maximum amount that the deposit insurer pays for all deposits of a depositor at an insured institution when the reimbursement duty arises. Coverage limit plays an important role, essential to the interests of depositors. The Law on Deposit Insurance does not set a specific limit, but rather empowers the Prime Minister to determine the coverage limit to ensure flexibility and suitability with the actual situation in each period. Since the Law on Deposit Insurance was promulgated, the coverage limit has been changed twice: it increased from VND 50 million to VND 75 million, applied from August 5, 2017 with full protection for more than 87% of depositors in the whole system, and increased from 75 million VND to 125 million VND, effective from 12/12/2021, capable of fully protecting about 91% of depositors in the whole system.
As for the reimbursement, since the effective date of the Law on Deposit Insurance, the DIV has reimbursed depositors at one insured institution, namely Tran Cao People's Credit Fund (Hung Yen) in November 2013. Notably, from 2013 up to now, the number of insured institutions that failed has decreased sharply compared to the previous period, showing the important role of the the Law on Deposit Insurance as well as the efforts of the DIV in the implementation of the Law, contributing to keeping the system secure.
Mr. Vu Van Long - Deputy General Director of the DIV shared that, as an organization assigned to act as the direct focal point in implementing the deposit insurance policy, the DIV has implemented many measures to protect depositors. Under normal conditions, the deposit insurer closely follows the establishment and operation of the insured institutions. When the insured institution encounters problems, the deposit insurer participates in special control as well as assisting in the recovery process. When a bad situation occurs, the insured institution cannot recover normal operations, the deposit insurance policy acts as a cushion, limiting the damage that depositors may face, refunding the insurance amount according to the coverage limit prescribed by the Prime Minister.
Amendment of the Law on Deposit Insurance - depositors need to be the center
According to information from the DIV, currently, this agency is actively reviewing the implementation of the Law on Deposit Insurance in the past 10 years, identifying difficulties and obstacles to propose amendments and supplements in the upcoming time.
Deputy General Director of the DIV Vu Van Long affirmed that, from before the Law or since the Law on Deposit Insurance was promulgated until now, the deposit insurance policy has always shown the consistent view of the Government in protecting the rights and interests of the the depositors. Therefore, in the process of doing research and proposing amendments and supplements to the Law on Deposit Insurance, the DIV always considers depositors as one of the central objects. The amendments should aim to ensure maximum benefits of depositors.
Accordingly, a number of problems have been revealed in the recent implementation of the Law on Deposit Insurance as well as potential obstacles and limitations will be identified. The amended and supplemented deposit insurance law should be in line with operational practices and international practices, in order to create an open corridor for the effective implementation of the deposit insurance policy.
In relation to relevant laws such as the Law on amendments and supplements to a number of articles of the Law on Credit Institutions, the Law on Bankruptcy, etc., The amended and supplemented Law on Deposit Insurance will synchronize to be consistent in terms of regulations as well as responsibilities, order and procedures for implementation.
In addition, it is necessary to enhance the position and role of the DIV to participate more deeply and effectively in the process of restructuring the credit institution system. The deposit insurer should be given more tools to support the recovery process of the troubled credit institution, as well as tools for orderly handling when the credit institution is unable to recover. Thus, the interests of depositors are not affected, and at the same time, the deposit insurer can limit risks and financial losses, and reduce damage to the economy in general. The option of bankruptcy of a credit institution is only a last resort when no other measures can be applied, then the DIV will pay depositors according to the prescribed coverage limit.
It can be said that through the amendment and supplementation of the Law on Deposit Insurance, depositors will be able to received increased "protection layers" to reduce shocks and injuries even when adverse events for credit institutions occur. Timely amending and supplementing the Law on Deposit Insurance will strengthen the legal basis, clear up obstacles for DIV to continue to perform well its task of protecting the legitimate rights and interests of depositors, contributing to maintaining the stability of insured institutions and the safe and sound development of banking activities.
