Trang Chủ
According to the Article 156 of the Law on Credit Institutions, credit institutions which are declared to go bankrupt, or dissolved must have their assets liquidated as legally stipulated. The purpose of asset liquidation is to recover debt to pay creditors, thereby contributing to the stability of the financial and banking system, social security in the region where failed credit institutions are located.
The Decree 89/1999/ND-CP dated 1/9/1999 and the Decree No 109/2005/ND-CP dated 28/6/2005 by the Government on amending, supplementing some issues of the Decree 89 provides “the Deposit Insurance Institution shall become the creditor of a insured institutions for the amount it has paid to the depositors. If insured organizations are forced to dissolve due to their insolvency or become bankrupt under the provisions of laws on dissolution and bankruptcy, the deposit insurer may get the value of their assets in the order of payment like for depositors. Deposit insurers shall be entitled to participate in the management and liquidation of assets of insured organizations according to applicable law.” This provision ensures compliance with the principles 16 and 18 in the Core principles for effective deposit insurance systems, namely effective resolution process and the right of deposit insurers to be involved in recovering assets of failed credit institutions, contributing to maintaining public confidence.
The current legal documents relating to asset liquidation of credit institutions include: the 2010 amended Law on Credit institutions, the Decree No 05/2010/ND-CP dated 18/1/2010 on application of the Bankruptcy Law to Credit institutions, the Decision No 24/2006/QD-NHNN dated 6/6/2006 by the State Bank of Vietnam promulgating the regulation on issuing, withdrawing the licenses of establishment and operation of people’s credit funds; opening, terminating operation of transaction bureaus, branches, representative offices and transaction offices, spots of people’s credit funds; splitting, merging people’s credit funds; liquidating people’s credit funds under the supervision of the State Bank of Vietnam. Liquidation of assets of credit institutions which are declared to go bankrupt is undertaken according to the provisions of Bankruptcy Law, and for dissolved credit institutions, asset liquidation is carried out under the supervision of the State Bank of Vietnam and in accordance with procedures of liquidation stipulated by the State Bank of Vietnam. During the process of supervision on liquidation, if detecting any credit institutions incapable of paying debts in full, the State Bank of Vietnam shall make decision on terminating liquidation, require credit institutions to file for bankruptcy and from that time asset liquidation shall be carried out in accordance with the Law on Bankruptcy .
DIV’s participation in management and liquidation of assets of insured organizations before the Law on Deposit Insurance came into effect
Since the establishment of DIV in 1999 up to now, failed insured organizations whose depositors were reimbursed by DIV have been people’s credit funds. They were dissolved compulsorily due to legal violations leading to insolvency, none was declared bankrupt.
After making deposit insurance payouts to insured depositors at dissolved people’s credit funds, DIV became a creditor and nominated representatives to participate in the liquidation committees for these funds (Decision No 24/2006/QD-NHNN dated 6/6/2006 by the State Bank of Vietnam).
During process of supervising liquidation, DIV actively and closely monitored performance of liquidation committees, continued supervising, protecting rights of depositors with deposits exceeding the insurance limit, ensured the priority order of payment by proceeds from liquidation and recovered the amounts of deposit insurance that DIV had made to insured depositors, contributing to replenishment of the Deposit Insurance Fund to ensure provision for cases of subsequent payouts. At the same time, DIV coordinated with the State Bank of Vietnam, the Party’s local executive committees, local authorities in monitoring, supervising liquidation committees.
However, activities of liquidation committees for the last time have still faced a lot of difficulties, and been not so effective due to the following reasons:
- The legal documents have not yet had specific provisions on responsibilities and coordination among legal enforcement bodies in localities, the maximum duration of liquidation and therefore, operations of liquidation committees have dragged and been ineffective. There also have been no specific regulations on responsibilities and power in receiving, resolving failed institutions to ensure timely and effective recovery of the amount of deposit insurance payouts.
- Some liquidation committees are not capable of recovering debts to make payment to creditors but have not completed liquidation to carry out the procedure of bankruptcy in accordance with the provision in Clause 3, Article 156, the Law on credit institutions in 2010 and Paragraph 3, Point b, Item 4, Article 32, Decision No 24/2006/QD-NHNN dated 6/6/2006 by the State Bank of Vietnam.
Participation in management and liquidation of assets of insured organizations according to the Deposit Insurance Law
On June 18, 2012, the Deposit Insurance Law was ratified by the National Assembly XIII in the third session and officially effective since 01/01/2013, in which Clause 13, Article 13 stipulates that The Deposit Insurance Organization shall participate in management, liquidation of assets of insured organizations as regulated by the Government”. The Governmental Decree No 68/2013/NĐ-CP dated 28/6/2013 detailing and guiding the implementation of the Law on Deposit Insurance effective from August 19, 2013, Article 14 stipulates:
1. The Deposit Insurance Organization shall participate in management, liquidation of assets and recovery of paid amount of insurance in the process of resolving assets of the insured institutions which are credit institutions in accordance with legislation on bankruptcy of credit institutions.
2. The Deposit Insurance Organization shall participate in management, liquidation of assets and recovery of paid amount of insurance in the process of resolving assets of the insured institutions which are branches of foreign banks in accordance with the State Bank’s regulations on revocation of operating licenses and liquidation of assets of foreign banks’ branches
The above provision has inherited regulations on deposit insurance valid for the last 13 years. In addition, it presents a new point, namely, the division of insured organizations into credit institutions and branches of foreign banks and accordingly, the specific regulations on liquidating assets corresponding to each group in order for the Deposit Insurance Organization to participate in management and liquidation of the assets; . This makes it convenient for the Deposit Insurance Organization to supervise liquidation of assets of failed insured institutions and comply with provisions of laws on dissolution, bankruptcy, liquidation of assets.
On the other hand, the time when the Deposit Insurance Organization participates in management, liquidation of assets of insured organizations as failed credit institutions remains unchanged, but for credit institutions which are compulsorily dissolved there is a difference compared to the previous regulation as the date from which the obligation of insurance payment arises changes. The Deposit Insurance Organization only participates in the team of management, liquidation of assets after dissolved credit institutions file bankruptcy but not in the liquidation committees for the dissolved credit institutions like before since no obligation of deposit insurance payouts is yet to arise.
Some recommendations
For liquidation of assets of failed credit institutions to achieve higher results, some recommendations are put forward as follows:
- Legal documents guiding the implementation of the Law on Bankruptcy should clearly stipulate the roles of DIV in participation in management, liquidation of assets of failed insured organizations, coordination with the State Bank of Vietnam in monitoring, supervising liquidation for effectiveness;
- Circulars detailing and guiding the implementation of the Decree on Deposit Insurance should be issued soon, in which the Deposit Insurance Organization’s participation in liquidation of assets of insured organizations including branches of foreign banks and credit institutions should be specifically stipulated;
- The authorities should consider, examine, amend and promulgate simultaneously legal documents related to dissolution, bankruptcy of credit institutions; liquidation of assets of foreign banks’ branches for consistent implementation;
- As for inefficient liquidation committees, if incapable of recovering debts, liquidation should be finished soon as legally stipulated to minimize costs.
In the coming time, with the synchronous promulgation of legal documents related to dissolution, bankruptcy of credit institutions, enhancement of supervision of State management agencies in liquidation of assets and especially active operation of teams of management, liquidation of assets, hopefully, effectiveness of liquidation of credit institutions will have positive changes, rights of depositors will be better protected, contributing to reinforcing public confidence in the financial and banking system for social welfare security in regions.
References:
1. Decree No 89/NĐ-CP dated 01/9/1999 by the Government on deposit insurance; Decree 109/NĐ-CP dated 24/8/2005 by the Government on amending, supplementing some items of the Decree No 89/NĐ-CP dated 01/9/1999.
2. Law on Credit Institutions was approved by the National Assembly XII, 7th session on 16/6/2010;
3. Law on Bankruptcy No 21/2004/QH11 dated 15/6/2004; Decree No 05/2010/NĐ-CP dated 18/1/2010 by the Government stipulating application of the Law on Bankruptcy to credit institutions.
4. Decision No 24/2006/QĐ-NHNN dated 6/6/2006 by the State Bank of Vietnam.
5. Law on Deposit Insurance No 06/2012/QH13 approved by the National Assembly XIII at the 3rd session dated 18/6/2012; Decree No 68/2013/NĐ-CP dated 28/6/2013 by the Government detailing and guiding the implementation of the Law on Deposit Insurance.
6. Core Principles for effective deposit insurance systems.
7. Reports on performance of DIV.
Nguyễn Thị Loan- DIV Hanoi branch
(Translated by the Department of Research and International Affairs)
