To rectify weaknesses, strengthen prevention and limit the violations of the law to ensure security, safety and sustainable development of the People's Credit Fund system, in recent times the Prime Minister and the Governor of the SBV have issued many mechanisms, policies as well as drastic instructions for SBV branches, local government committees and relevant agencies as well as the PCF system itself. Through these documents, the legal framework for the operation of the PCF system has been consolidated and developed, and the restructuring of the PCF has achieved important results.
Since its launching, Deposit Insurance of Vietnam (DIV) has always accompanied the development of the PCF system, which is an effective tool of the Government and the SBV in the mission of protecting depositors and enhancing public confidence; contributing to maintaining stability and ensuring the safe and healthy development of the credit institution system in general and the PCF system in particular. Through the implementation of professional activities, DIV has affirmed its role in contributing to ensuring the safety of the PCF system. Thereby, DIV has been assigned new tasks by the Prime Minister and the Governor of the SBV to participate more deeply in the process of restructuring the system of credit institutions, first of all the system of PCFs. Especially in Directive No.06/CT-TTg dated March 12, 2019 of the Prime Minister on strengthening solutions to ensure operational safety and firmly consolidating the PCF system, the DIV was assigned specific tasks as follows:
“Strengthening the role and assigning tasks to DIV in coordinating and supporting the examination and supervision functions of the SBV of PCFs; actively participating in resolving PCFs that are weak or show signs of unsafety in operations; proposing amendments to the Law on deposit insurance to use deposits from deposit insurance premiums to resolve weak credit institutions.”
Implementation results
Immediately after being assigned the task, DIV proactively developed detailed programs and plans for implementation. Up to now, after more than 4 years of implementation, DIV has gradually affirmed its role in the process of resolving weak PCFs as well as effectively supporting the examination and supervision functions of the SBV. Specifically:
First, about supervision
In addition to preparing periodic/unscheduled monitoring reports for the entire system in accordance with the regulations of the SBV, DIV also carries out in-depth supervision of weak and potentially high-risk PCFs. From the results of supervision, DIV identifies units that violate regulations on operational safety, have high levels of risk, and operate poorly in the PCF system, thereby proposing solutions and measures to contribute to handling them. Active part in ensuring safety and health in the operations of each group of PCFs with problems. For specially controlled PCFs and violating PCFs, DIV closely monitors to promptly grasp the causes of weakness and is ready to coordinate in resolution when sudden problems arise. At the same time, DIV proactively do research about the operational situation and unusual fluctuations to propose solutions and recommend remedial measures to the SBV.
Accordingly, the monitoring results of the Vietnam DHTV have been recorded by the State Bank and given instructions and handling in the PCF system. Many State Bank branches in provinces and cities, after receiving information from DHTTVV, have also issued documents requesting the People's Credit Fund to rectify and learn from experience.
Second, about examination
Implementing the Prime Minister's direction on strengthening the role of DIV in participating in supporting the examination function of the SBV against PCFs, from 2019 up to now, the Governor of the SBV has assigned DIV to carry out examination for 159 PCFs.
Accordingly, 2019 is the first year that DIV was assigned to conduct pilot examination for 6 PCFs under the direction of the Governor. The test results have received good recognition and evaluation from the SBV. From the positive results of 2019, every year the SBV continues to assign the DIV to conduct examination of PCFs with the number next year being higher than the previous year; the examination content has also been expanded over the years. Among the contents, there are contents that are quite new to DIV and there are areas directly related to PCF's customers. However, DIV has completed all the assigned contents of quality assurance examination according to the requirements set by the SBV. Through the examination work, DIV has made many suggestions and recommendations to the PCFs to overcome the shortcomings, and violations discovered through the examination, and also made recommendations to the SBV. It is necessary to edit a number of mechanisms and policies for the operation of the PCF system to strengthen management and create conditions for PCFs to develop safely and healthily.
Third, about coordination, provision and sharing of information
With the direction and support of the SBV, for the first time there has been a regulation on coordination, provision and exchange of information between SBV branches in provinces and cities and DIV branches on a large scale. This is the basis to strengthen management, ensure operational safety and firmly consolidate the PCF system in the area.
Up to now, the entire DIV system has completed signing agreements with 100% of SBV branches in provinces and cities with PCFs in the area of operation. On that basis, DIV has been able to share information about the operations of the PCFs that is relatively complete, with better quality and highly reliable. DIV branches have received attention, support and facilitation from the SBV branches in provinces and cities during the implementation of tasks, especially the examination of PCF at the request of the SBV as well as information and communication work through the organization of events. On the contrary, the recommendations of the DIV branch when detecting problems in the operations of the PCF were also received and handled by the SBV branches in provinces and cities according to its authority.
Fourth, regarding the work of participating in resolving PCFs that are weak or show signs of insecurity in their operations
Regarding participating in resolving weak PCFs, in recent times, DIV has actively coordinated with SBV branches in provinces and cities to participate in the process of monitoring, examining, and resolving weak PCFs, especially the PCFs that are under special control.
Currently, DIV appoints 34 officers to participate in the Special control board for 27 PCFs that receive special control at the request of the SBV; participates in consulting with the SBV branch on plans to consolidate and rectify the PCF approved by the special control board in an effort to restore the operations to normal, limit negative impacts on the operations of other PCFs in the area, and avoid causing disturbance and socio-political instability in the locality. During the process of participating in special control, staff of the DIV actively coordinate with other members to successfully complete tasks as assigned by the Head of the special control board; participate in resolving problems that arise during the process of special inspection. At the same time, perform well the work of checking and comparing customer deposit records to serve as a basis for building an accurate and timely insurance payment plan.
Although the work of checking and reconciling insured deposits at PCFs still faces many difficulties and obstacles, DIV officials have tried to accurately determine the balance of insured deposits and the number of people covered by deposit insurance, through We also discovered a number of suspicious cases with signs of profiteering beyond the jurisdiction of DIV to request the State Bank to inspect, examine and conclude according to the provisions of Circular No. 24/2014/ TT-NHNN dated September 6, 2014.
For People's Credit Funds that are expected to handle legal entities, DHTTVVN proactively grasps the situation, provides data, and gives opinions to the State Bank on handling plans for People's Credit Funds that are subject to special inspection as well as plans for commercial banks to participate in handling. People's Fund; Participate in assessing the feasibility of recovery plans for a number of PCFs at the request of the State Bank of Vietnam's provincial and city branches; Report the expected payment amount according to the assumed limits, estimate the data on deposits, cash, and recoverability according to the direction of the Governor of the State Bank. At the same time, appoint staff to participate in reviewing data, making a list of depositors as well as supporting the process of participating commercial banks in processing and paying deposits to depositors at some PCFs.
Fifth, do research and propose amending the Law on deposit insurance to use deposit insurance premium balances to resolve weak credit institutions
Before the Prime Minister's direction in Directive No.06, DIV proactively implemented the work of reviewing and summarizing the process of implementing the Law on deposit insurance, focusing on difficulties and obstacles that need to be resolved and content that needs revision and supplementation. On that basis, in the period of 2019 to present, DIV has submitted reports to the SBV on the contents summarizing the implementation process of the Law and proposing contents that need to be edited and supplemented. It is expected that the proposed amendments and supplements will focus on key issues, including: completing regulations on deposit insurance fees; improve the financial and operational capacity of the deposit insurance organization; supplement the rights and obligations of the deposit insurance organization; complete legal regulations so that DIV can participate more effectively in the process of restructuring credit institutions; complete regulations on insurance payments.
On January 18, 2024, the National Assembly passed the Law on credit institutions No. 32/2024/QH15, which officially takes effect from July 1, 2024 (Law on Credit Institutions 2024) and clearly stipulates the role of DIV participating in restructuring the system of credit institutions, focusing on providing special loans to credit institutions; participating in assessing the feasibility of the plan to restore the PCF, the plan to merge, consolidate, and transfer the entire capital contribution of the PCF; buying long-term bonds of credit institutions that receive compulsory transfer according to the decision of the SBV; participating in developing bankruptcy plans and make payments to depositors. This is an important legal basis for the DIV to review, research and propose amendments and supplements to the Law on deposit insurance to promote the role and use of resources of the DIV to support and resolve weak credit institutions, contributing to ensure the safety of the system of credit institutions.
Challenges and obstacles
However, in the process of implementing its tasks, DIV still encounters some difficulties and obstacles, specifically:
(i) Regarding the support of the SBV’s examination and supervision functions for PCFs:
Participation in supporting the examination unction of the SBV is carried out according to Directive No. 06/CT-TTg of the Prime Minister, which has not yet been legalized. Therefore, the way and method of coordination between the DIV for the examined PCF, the SBV branches in the province/city where the PCF is headquartered, and relevant agencies during the implementation process are not really unified, some PCFs do not have a good cooperative attitude with examination teams.
The number of PCFs that DIV is assigned to examine by the SBV increases each year, along with the content also being expanded. Meanwhile, the qualifications, experience and examination skills of DIV staff for some new contents assigned by the SBV are still limited; there is a lot of workload at the examination teams. In addition, in order to properly carry out the work in accordance with the content and time requirements of the SBV, DIV has to adjust and reduce the annual examination plan to maximize human resources and funding for examination of PCFs at the request of the SBV.
Although the DIV's receipt of information and reports from PCFs from the SBV has been stipulated in Circular No.34/2016/TT-NHNN dated December 28, 2016, however, some reports are currently inaccessible to the DIV, especially reports on safety indicators, including minimum capital safety indicators.
In addition, the reporting criteria for DIV are received in written form such as annual ranking results, examination and supervision plans, reports summarizing the results of implementation, conclusions, recommendations, and decisions. Post-examination processing, macro-monitoring results, and information about organizations participating in DI that are at risk of insolvency, DIV has not yet been able to access.
(ii) Regarding the work of participating in special control over PCFs: most of the PCFs under special control have now stopped capital mobilization and lending activities or are almost no longer operating, so access to information and data for reporting still meet many difficulties. In addition, at some PCFs under special control, records, books, vouchers, and customer deposit documents are not complete and valid. Official documents on financial losses and violations of related individuals and organizations cause difficulties in comparing data.
Some solutions
In the coming time, to implement assigned tasks under the direction of the Prime Minister more effectively, better protect the rights and interests of depositors as well as contribute to ensuring the safety and health of the banking activities, it is necessary to pay attention to implement the following solutions:
(i) Based on the Law on credit institutions 2024, actively and proactively review, do research and propose policies to amend and supplement the Law on deposit insurance to report to the SBV. At the same time, do research and develop administrative and executive documents to implement the provisions of the Law on credit institutions 2024 related to the functions and tasks of DIV.
(ii) Effectively deploy the groups of tasks and solutions set out in the Deposit insurance development strategy to 2025, with orientation to 2030 approved by the Prime Minister under Decision No.1660/QD-TTg dated December 30, 2022.
(iii) Strengthen the application of information technology and digital transformation in deposit insurance operations, contributing to innovating working methods, improving productivity, quality and efficiency of DIV's operations to meet requirements due to current and future demand.
(iv) Continue to coordinate and exchange information with departments under the SBV and relevant units to ensure the receipt of reporting information on the operations of insured institutions from the data warehouse to be complete and timely. In addition, well implement the regulation on coordination and information exchange between the DIV branches and the SBV branches in provinces and cities to improve efficiency in monitoring, supervising, examining and resolving troubled insured institutions as well as the implementation of functions and tasks of each party.
(v) For each professional activity, implement the following solutions:
Strengthen resources to build a modern and highly effective system of indicators, monitoring and warning models to detect and promptly warn of weaknesses and potential risks of insured institutions to make recommendations to agencies for the resolution and corrective measures.
Continue to focus on and strengthen in-depth training in professional skills and soft skills, as well as training and exchange of practical experiences for professional staff, especially those involved in examination and participation in special control. Besides, it is necessary to supplement human resources for DIV to better complete the assigned tasks.
Direct DIV branches to appoint officers to join the special control board to promptly and fully grasp information about the operating situation, results of special control, and the SBV’s resolution plan for weak and PCFs with high risk; Participate effectively in the work of the local control board of PCFs in the area; Do research and firmly grasp the organizational and operational situation of PCFs that are being inspected by the SBV to participate in evaluating restructuring plans, special loans, deposit payments, commercial banks participating in processing... when required to effectively carry out assigned tasks.
Based on the results achieved, in the coming time, the entire DIV system will continue to strive to fulfill the mission of protecting the interests of depositors, the tasks assigned by the Prime Minister and the Governor of the SBV./.
Communication Department