Trang Chủ
Deposit Insurance of Vietnam (DIV) is a state owned financial institution established by the Government. After 10 years of operations, DIV has proved to be an effective financial tool of the Government to protect depositors, ensuring social security and contributing to the stability of financial and banking operations. Currently, tens of millions of depositors at more than 1000 insured institutions are protected by DIV, and the number of insured institutions is on an on-goings increase. Deposit insurance as an important channel, in coordination with other national safety net players, operates for the stability of the banking.
So far, DIV has conducted regular examination and supervision towards to all insured financial institutions. Supervision and examination has gradually improved to effectively control the performance of insured institutions and to exercise prudential supervision and early warnings towards the compliance to legal regulations on banking and deposit insurance by insured institutions, contributing to enhance the consolidation and improvement of their performance. Besides, DIV’s financial assistance has been on pilot implementation, initially bringing about primary achievements. This operation is to assist problem insured institutions to access to liquidity for preventing bank failures due to the banks’ temporary illiquidity, reducing the incidence of depositor reimbursement. In reality, several people’s credit funds risking failures have recovered to normal operation thanks to DIV’s financial assistance.
Depositor reimbursement is one of DIV’s main activities to represent its direct protection of depositors’ rights. In case there is a bank failure, DIV shall, on behalf of the Government, reimburse to insured depositors up to the coverage limit of VND50 million per one insured account at an insured institution. The excessive amount over the limit will be paid upon the recoveries in the liquidation of that failed institution as stipulated by relevant legal regulations.
However, as Vietnamese economy has integrated well into the world economy, the financial and banking sector will be more exposed to external shocks. Therefore, the financial and banking sector has been under its robust reform to meet the requirements of international integration. The equitisation and restructuring process of the system has also been pushed up to be commensurate with Vietnam’s commitments and roadmaps to open its financial services and markets. Before that robust development, deposit insurance policies have revealed many inadequacies and insufficiencies needed to be adjusted or revised for new requirements of the financial market.
The fact that there are weakness and gaps in the current legal framework for DIV is far from international best practices, which has constrained the effective implementation of deposit insurance policies in Vietnam. The current coverage limit is set at inadequate level, which may cause difficulties in building public confidence in the financial and banking sector. According to international best practices, the coverage limit should be set equivalent to 6 to 10 times national GDP per capita. In this light, the coverage limit in Vietnam should be increased to VND 200 million per an insured account at an insured institution. Moreover, DIV’s financial capability is still weak, incommensurate with its mission to protect depositors, which has detained DIV in developing its business and widening its coverage in accordance with international best practices. Therefore, this has led to an essential and objective need to improve DIV’s financial capability.
According to international practices, a flat premium system is usually adopted when a deposit insurer is in its early stage of development, and then a risk - based premium system will be adopted later on. Currently, DIV has adopted the flat premium system. However, this method of premium calculation has revealed several shortcomings and lacked of market disciplines. It is, therefore, essential and urgent for DIV to conduct research on developing a risk-based premium system. Besides, DIV current organization, functions and mandates has also showed such inadequateness and weakness as the lack of DIV’s autonomy and independence in deploying its operational activities. Currently, many countries have adopted risk minimizing deposit insurance systems, but DIV’s model only represents an incomplete risk minimizer.
Deposit insurance has actively contributed to protect depositors’ rights, ensuring social security pursuant to the Party and Government’s policies. The deposit insurer has played an important role in consolidating and enhancing public confidence, contributing to the recovery of the financial and banking industry. Therefore, it is prerequisite to strengthening the legal framework and developing DIV following international practices and commensurate with Vietnamese context for the sake of monetary and financial security, economic development and social security.
As of June 30th, 2009, DIV has reimbursed to more than 1.5 thousands depositors at 36 failed insured people’s credit funds with the total amount of VND19 billion. DIV’s direct reimbursement to depositors has proactively contributed to build up public confidence in the financial and banking industry, avoiding bank runs and contagions of bank failures.
