Trang Chủ
The world's first deposit insurance system was established in the US in 1930 during the Great Depression of 1929-1931, which laid the foundation for the formation and development of the world deposit insurance mechanism. To date, about 160 official deposit insurers have been established in 146 countries and territories (some countries have more than one deposit insurer). In 2022, the Great Depression was once again mentioned in the 2022 Nobel Prize in Economics awarded to three American co-authors, Ben Bernanke, Douglas Diamond and Philip Dybvig for their research on economic and financial crises. In particular, in the authors' research, the role of the official deposit insurance mechanism established by the government is confirmed to have an important role in preventing and reducing the risk of bank runs leading to banking crisis. This role is confirmed by the continuous efforts of the deposit insurance systems of countries in contributing to maintaining public confidence, ensuring the safety and stability of the countries' financial and banking systems.
In Vietnam, DIV is the only deposit insurer established under the Prime Minister's Decision No.218/1999/QD-TTg dated November 9, 1999. The activities of the deposit insurance organization are not for profit but to protect the legitimate rights and interests of depositors, contribute to maintaining the stability of insured institutions and the safe and healthy development of their operations. During more than 20 years of operation, DIV has always actively implemented deposit insurance professional activities, successfully completed assigned tasks.
On December 30, 2022, the Deposit insurance development strategy to 2025, with orientation to 2030 (Strategy) approved by the Prime Minister under Decision No. 1660/QD-TTg has enhanced the role of the deposit insurer. This is an important milestone defining the future direction for the deposit insurance system in Vietnam. The orientations and objectives identified in the Strategy affirm the role of the deposit insurer in the Vietnamese banking system, and at the same time affirm the development orientation of the deposit insurance system in Vietnam in accordance with the best international practices.
The overall objective for the development of the deposit insurance system in Vietnam is “Protecting the legitimate rights and interests of depositors, actively contributing to maintaining the stability of the system of credit institutions, foreign bank branches, ensuring the safe and healthy development of banking activities.
Improve quality and efficiency in deposit insurance activities including granting certification of deposit insurance participation, reporting information, supervision, examination, participation in special control, early detection and warning of potential risks to insured institutions; participation in effective restructuring of weak institutions; Calculation and collection of deposit insurance fees, management of capital and investment, promotion of deposit insurance policies, and reimbursement in accordance with international practices and the provisions of Vietnamese law.
Strengthen the financial capacity of the deposit insurer to affirm the State's commitment and enhance depositors' confidence in the deposit insurance policy.
The major objectives identified in the Strategy can be mentioned as increasing the insurance coverage limit, shortening the actual payment time, improving the public awareness of the deposit insurance policy, enhancing the role of deposit insurance in supervising, examining, detecting and early warning potential risks at deposit insurance participating institutions as well as handling weak credit institutions.
In terms of coverage limit, as recommended by the International Association of Deposit Insurers (IADI), the coverage limit should be limited, reliable and insurable for the majority of depositors (full protection for 90 to 95 percent of depositors). However, if the coverage limit is too high, it will erode market discipline, negatively affect the financial market, because then depositors do not care about risks and choose the bank with the highest interest rate to deposit money. From December 2021, the coverage limit is VND 125 million, whereby the proportion of fully insured depositors out of total insured depositors reaches 90.72% by the time of adjustment. In order to ensure the best protection of depositors' legitimate interests, the deposit insurance development strategy sets a goal to strive for the ratio of fully insured depositors to total insured depositors reaching 92 to 95% by 2030, ensuring compliance with international practices.
Besides policy on deposit insurance coverage limit, deposit insurance payment is considered as the most important operation in order to maintain public confidence in the banking system and financial stability. The Core principles for effective deposit insurance system identify the need for a deposit insurance system to deliver timely payouts to depositors in order to contribute to financial stability. According to the core principles, the deposit insurer should aim to pay the majority of insured depositors within 7 working days. If this goal has not been achieved, the deposit insurer needs to have a credible plan to reach it. This is one of the most challenging goals for any deposit insurer in the world. The insurance payment term depends greatly on financial capacity, the capacity to access to information and technology to meet actual requirements. According to the provisions of the Law on deposit insurance, currently, the time limit for payment of deposit insurance is 60 days from the date of arising the insurance payment obligation. Stemming from the current practical conditions and capacity, the deposit insurance development strategy sets out the goal of trying to shorten the actual payment time from the time the insurance payment obligation arises to 30 working days by 2025 and 15 working days by 2030 to move towards compliance with the Core Principles for effective deposit insurance systems.
In many international studies, public confidence in the banking system plays an extremely important role in maintaining stability, preventing mass withdrawals and banking crises. In order to contribute to maintaining public confidence in the banking system, understanding about deposit insurance has always been focused by the DIV. Many policy advocacy activities carried out by the DIV over the years have significantly improved people's awareness of the deposit insurance system. In order to define specific targets for deposit insurance policy dissemination, the Strategy sets out the goal of striving for 45% and 55% of depositors grasp the core contents of deposit insurance policy by 2025 and 2030 respectively.
In terms of deposit insurance operations, the Strategy aims to enhance the role of the deposit insurer in monitoring, examining and early warning through solutions such as perfecting risk monitoring methods and monitoring indicators, paying attention to important for early detection and early warning of potential risks to deposit insurance participating institutions, in order to match the development of the market and the requirements of the State Bank of Vietnam in each period. At the same time, the DIV will apply advanced monitoring models to ensure that insured institutions comply with the provisions of the law on insured deposits, and detect and warn early about potential risks to insured institutions in order to timely protect the rights and interests of depositors.
In particular, the role of the deposit insurer in dealing with weak credit institutions is not only identified in the deposit insurance development strategy but also in the development strategy of the banking industry in Vietnam to 2025, with orientations to 2030. Specifically, the Banking sector development strategy has determined that the DIV will effectively participate in restructuring weak credit institutions. Deploying the deposit insurance development strategy, the DIV will closely coordinate with the State Bank of Vietnam in the process of special control in order to ensure the interests of depositors, and to implement the functions and duties specified in the Law amending and supplementing a number of articles of the Law on Credit Institutions and developing a scheme on additional application of measures and forms of resolving weak deposit insurers in a manner consistent with international practices and actual conditions in Vietnam.
To ensure the achievement of the assigned objectives and tasks, ensuring the financial capacity and operational capacity of the deposit insurer plays a key role. The Law on deposit insurance allows DIV to receive support on the principle of being reimbursed from the State budget under the decision of the Prime Minister or borrowed from a credit institution or other organization with a Government guarantee in case the capital source of the deposit insurer is temporarily insufficient to reimburse. The strategy determines that the deposit insurer is allowed to borrow from the State Bank of Vietnam in case the deposit insurer's capital is not sufficient to pay the insurance. This is a step forward in the policy to secure capital in case of need and ensure a safe source of debt repayment in the future.
In addition, to ensure the financial capacity of the deposit insurer, affirm the State's commitment and improve depositors' confidence in the deposit insurance policy, ensuring resources for effective implementation of deposit insurance activities, the Strategy approves the policy to increase the charter capital for the deposit insurer to VND 10,000 billion by 2025 and to VND 15,000 billion by 2030 from self-accumulation and other legal capital sources.
At the same time, in order to improve the financial capacity of the deposit insurer to effectively perform its assigned functions and tasks, the Strategy allows the deposit insurer to diversify forms and investment portfolios including: (i) Purchasing and selling government-guaranteed bonds; (ii) Depositing money at a commercial bank with good operational quality; (iii) Buying and selling bonds, promissory notes, bills, certificates of deposit issued by commercial banks with good operating quality and in the long term, according to the roadmap allowing the DIV to buy and sell major bonds of local authority according to the provisions of the Law on State Budget, Law on Public Debt Management, guiding documents and high credit rating.
The strategy also identifies specific solutions to improve the capacity and operational efficiency of the DIV through technology modernization, streamlining and digital transformation of governance and operating processes, and enhanced training human resources to meet development requirements.
Thus, the deposit insurance development strategy has set out general objectives, specific objectives and specific solutions and tasks in line with international practices and actual conditions in Vietnam. The approval of the deposit insurance development strategy is an important turning point to help the deposit insurer have a clear development orientation in the future, help the deposit insurer innovate and develop, improve its position, thereby better protecting the legitimate rights and interests of the depositors, contributing to maintaining the stability of the system of credit institutions, ensuring the safe and healthy development of banking activities.
