Trang Chủ
Timely detection of weak or problematic insured institutions is very important for the stable and effective operation of financial systems in general and the deposit insurance system in particular. Early detection of weaknesses and risks for insured institutions allows supervisory agencies and/or members of the financial safety net to take effective measures to reduce exposure and costs of failure of an insured institution, such as providing liquidity support, supporting mergers and acquisitions, and in certain cases, refinancing the insured institution with its own capital from deposit insurance or other authorized government agencies.
In reality, the responsibility for early detection of problems and timely intervention of weak banks often falls to the banking supervisory agency (usually the Central Bank). Depending on the orientation and authority of the legalized deposit insurance organization, the role of each deposit insurance organization in this issue is different. Deposit guarantees that comply with IADI Principle 13 will have full authority and responsibility for early detection and timely intervention of problematic banks along with other members of the financial safety net.
With the goal of becoming a financial institution that contributes to ensuring the safety of the banking system and protecting depositors, in recent times, Deposit Insurance of Vietnam (DIV) has well performed the functions and tasks assigned as an effective tool of the State Bank of Vietnam in early detection and resolution of weak institutions, contributes significantly to ensuring the safety of the banking system and protecting depositors. Up to now, DIV is protecting more than 111 million depositor accounts at 1,280 participating institutions accordingly.
Regarding the legal basis, the Law on Credit Institutions 2010 and the Law on Credit Institutions amended in 2017, the Law on Deposit Insurance 2012 and a number of guiding documents under the Law have created a fairly solid legal corridor for DIV to participate and carry out early detection and timely intervention activities for public institution. At the same time, it creates a basis for DIV to receive relatively complete information about organizations participating in deposit insurance from the SBV to serve the early detection of problematic organizations and propose and recommend that the SBv take measures to deal with them promptly.
DIV participates in early detection and timely intervention activities
Based on input information according to Article 34 of the Law on Deposit Insurance and Circular No.34/2016/TT-NHNN dated December 28, 2016 regulating the provision of information between the SBV and DIV and other information sources, DIV has implemented supervision, monitoring and detecting signs and warnings of risk trends of organizations participating in deposit insurance, and the risk capacity of the system. Through the results of the periodic monitoring report for the system of organizations participating in deposit insurance sent to the SBV, the DIV has proposed that the SBV handle violations of regulations on safety of banking operations and risks causing insecurity in the banking system.
In addition, to implement Directive No.06/CT-TTg dated March 12, 2019 of the Prime Minister on strengthening solutions to ensure operational safety and firmly consolidating the People's Credit Fund system, DIV has participated in examining the safety of a number of public institutions, namely the PCFs under the direction of the SBV, participating in the Special Control Board of 27 out of 30 PCFs with special control, sending personnel to participate Executive management of 01 organization participating in deposit insurance is subject to special control. In addition, the 2017 Law on Credit Institutions also allows the DIV to grant special loans (according to the agreement for organizations participating in the deposit insurance with special control; special loans according to the decision of the SBV); Buy bonds from supporting credit institutions according to decisions of the SBV; Participate in assessing the considerations of plans to restore PCFs, microfinance institutions, and financial companies with special control; and participate in other plans under the direction of the SBV.
The deposit insurance strategy to 2025, with orientation to 2030 approved by the Prime Minister has set the goal of improving the quality and efficiency of deposit insurance activities, including detecting and early warning of potential risks to public institutions, participating in effective restructuring of weak public institutions. Based on the Strategy's orientation, the Law on deposit insurance will be amended in terms of content and orientation for early detection and timely intervention. The amendments to the legal basis will create a premise for the DIV to effectively manage and use the deposit insurance fund on the principle of ensuring the stability of the system and protecting depositors.
To achieve the above goals, DIV needs to:
- Amend and supplement the amended Law on Credit Institutions and the Law on Deposit Insurance and guiding documents under the Law in a direction that allows DIV to have enough authority and functions to participate more actively and proactively in the process of implementing early detection and timely intervention of weak insured institutions, ensuring compliance with market discipline with principle of minimum cost.
- Supplement regulations or mechanisms to allow DIV to have enough resources to support the implementation of new functions and tasks assigned in the amended Law on Credit Institutions and the Law on Deposit Insurance, including the function of early detection and warning, timely intervention for public institutions.
- Regularly review and evaluate the operation and improvement of the reporting information system to ensure complete and reliable information; improve the effectiveness of coordination and information provision between DIV, SBV and relevant agencies; ensure effective exploitation and make appropriate adjustments to the actual operations of the deposit insurance organization.
- For activities of examination, supervision, and early warning of potential risks for public institutions according to international standards and practices on banking risk management and implementing the strategy for developing deposit insurance, in the coming time, DIV needs to:
Complete risk monitoring methods and sets of monitoring indicators, focusing on detecting and early warning of potential risks for insured institutions, in accordance with market developments, especially according to international standards and practices (Basel II, Basel III...). Research and apply advanced supervision models to ensure that insured institutions comply with legal regulations on insured deposits, detect and warn early on potential risks to insured institutions to promptly protect the rights and interests of depositors.
Deploy new risk monitoring tools and methods associated with promoting the application of information technology while enhancing training and improving the quality of supervisory human resources to improve quality and efficiency. The most effective result of supervision is the ability to early warn of potential systemic risks and the process of innovating the management and supervision of insured institutions according to international practices and standards.
- Actively participate and closely coordinate with the SBV in the process of special control of weak public institutions; Develop a project to apply additional measures and forms of resolving weak claims institutions in accordance with international practices and Vietnamese conditions.
In summary, Principle 13 – Early detection and timely intervention of the IADI plays an important role as a reference for deposit insurances in the process of restructuring and moving towards an effective deposit insurance model. However, there needs to be careful assessment in applying the criteria of Principle 13 to each deposit insurance in each period, in accordance with the legal system and the level of development of the financial system to ensure the effective and stable operation of the system in general and the deposit insurance in particular.
Communication Department
