In the context of the economy needing large financial resources for development and investment, idle money mobilized from the community through the system of credit institutions plays an extremely important role, helps invest in sustainable national economic development with high safety and efficiency.
Deposits are protected by banking supervision mechanism
Banking supervision activities are carried out according to the principle of unified centralization from central to local area, closely combining supervision of compliance with monetary and banking legal policies with risk-based supervision. Banking supervision is conducted through micro-safety supervision and macro-safety supervision, in which micro-safety supervision is understood as a form of safety supervision for each individual credit institution and safety supervision. Macroeconomic is a form of safety supervision of the entire system of credit institutions.
In the structure of interest rates for deposit terms, each credit institution complies with the principle of ensuring harmonious interests between relevant parties. Furthermore, interest rates are also built to meet the central bank's criteria for regulating interest rates in money circulation management. Specifically, deposit interest rates meet the input costs of using deposits, including interest costs for depositors (positive real interest rates), business tax costs, and other costs for operations (labor, equipment and security).
Deposits at credit institutions are protected by banking supervision mechanisms. When mobilizing deposits from the community, credit institutions are responsible for protecting mobilized deposits in a way that protects the owner's assets. With any difficulties arising in business, the credit institution's equity is the first financial source to reimburse deposits to depositors. That demonstrates the highest responsibility of credit institutions towards depositors - who have trusted and deposited money with credit institutions. Furthermore, throughout the process of deposit mobilization, business, and investment of credit institutions, a strict banking supervision mechanism is implemented from within the credit institution itself, in addition to the agency that supervising banking activities and the deposit insurance organization. With the support of advanced technology applications, deposit mobilization is processed quickly.
The Law on Credit institutions and other related laws all stipulate the priority level, ensuring safety, solvency and rights of depositors at the highest level.
Specifically, Article 146 of the Law on credit institutions stipulates that when a credit institution is implementing a restructuring plan that is at risk of insolvency, threatening the stability of the system, it will be approved by the State Bank of Vietnam (SBV), the Deposit Insurance of Vietnam (DIV) and other relevant agencies, commercial banks to make special loans to support liquidity.
Besides, Article 99 of the Law on bankruptcy stipulates that only when the SBV issues a document terminating the special control or a document terminating the application or not applying measures to restore solvency that the credit institution still lose insolvency, it will be allowed to request to declare bankruptcy of a credit institution.
And finally, if a credit institution goes bankrupt, according to the provisions of Article 101 of the Law on bankruptcy, the depositors will also be given priority for repayment above debts to the State and other common creditors.
Deposits are protected at a high level by the deposit insurance tool
Deposit insurance policies have been used successfully in many countries, effectively protecting deposits at credit institutions. The professional activities of the deposit insurance organization that directly protect and contribute to the indirect protection of depositors are specified quite specifically in the Law on deposit insurance and its by-law documents.
Supervision and examination activities are important operations of the deposit insurance organization to indirectly protect depositors. Most deposit insurance schemes in the world have this function. Supervision and examination to detect violations and difficulties of insured institutions, thereby proposing, warning and recommending for credit institutions to correct promptly. Within allowable limits, the deposit insurance organization can support and intervene in the activities of insured institutions when there are signs of insecurity.
The Law on deposit insurance in Vietnam stipulates that the deposit insurance organization must "synthesize, analyze and process information about insured institutions to detect and propose to the SBV to promptly resolve violations of regulations on safety of banking operations and risks causing insecurity in banking system”.
The Law on credit institutions amended in 2017 added regulations on the application of early intervention by the SBV before placing credit institutions under special control to resolve organizations showing signs of weakness but not yet at the level of requiring special control. These credit institutions are subject to high risk, which may lead to termination of operations in the near future, potentially incurring reimbursement.
Accordingly, the SBV is primarily responsible for early detection and timely intervention of weak credit institutions, the deposit insurance organization supports the SBV in the process of early detection and timely intervention of weak credit institutions through off-site supervision, on-site examination and participation in special control process.
According to the provisions of the Law on deposit insurance, the deposit insurance organization can request insured institutions to provide information about insured deposits. For other reporting information serving the performance of functions and tasks of the deposit insurance organization such as financial reports, targets and statistical reports... of the insured institutions, the deposit insurance organization has access to, exploited from the data warehouse of the SBV.
In addition, depositors are also provided with full information about deposit insurance policies and activities of the deposit insurance organization in order to access and improve the necessary knowledge to choose the best service and know their rights, benefits and obligations when participating in the financial and banking market.
If examination, supervision, support in resolving difficulties in banking operations and communication of deposit insurance policies indirectly protect deposits, then reimbursement is a direct method of protecting deposits. According to the Law on deposit insurance, all credit institutions must participate in deposit insurance. In case a credit institution is unable to continue operating or loses liquidity, the deposit insurance organization will reimburse insured money to depositors.
Thus, it can be said that, in terms of law, even in the worst cases, individual depositors are always guaranteed the highest level of rights by the State.
With the rapid development of digital banking, deposit mobilization activities are increasingly diverse, promoting faster and more convenient deposit processing speeds. Along with that, ensuring the safety of deposits at credit institutions is also at a higher level.
With 24 years of experience implementing deposit insurance tools in Vietnam shows that, since the deposit insurance organization exist, there is no one lost a deposit because of the credit institution receiving the deposit was closed and unable to reimburse.
In an unfavorable domestic and world economic context, with difficulties in production and business investment activities of people and businesses, credit institutions are still the channel to save money.
According to the latest statistics on the total amount of deposits from residents and economic organizations into the banking system that the SBV just announced in early September, by the end of June 2023, total deposits have reached highest ever with more than 12.3 million billion VND. This shows that people still have great trust in the system of credit institutions, including the safety assurance of deposit insurance tools.
Communication Department