Enhancing the role of DIV in the restructuring credit institutions

DIV supports the safe and sustainable development of the PCF system through: (i) Supporting the safe and healthy operation of the PCF system by professional activities of the deposit insurer; (ii) Supporting the implementation of restructuring plans for specially controlled and weak PCFs; (iii) Supporting to ensure solid system connectivity; (iv) Supporting the state management function for PCFs.

DIV performs the activities of issuing the Certificate of participation in deposit insurance, collecting deposit insurance premiums, regularly monitoring, supervising and periodically examining 100% of PCFs. In addition, supervision and examination activities for insured institutions (including PCFs) have been implemented by the DIV since the early days of its establishment. DIV carried out the planned examination of the insured institutions, conducted the examination under the direction of the Governor of the SBV; remotely monitored 100% of insured institutions.

The supervision content focuses on analyzing and evaluating the current status of operation of the People's Credit Funds; the compliance with regulations on deposit insurance as well as compliance with regulations on the safety in banking operations; thereby warning the risks, errors, and weaknesses that the People's Credit Fund needs to overcome, and recommending the SBV to handle it promptly to ensure the safe and healthy operation of the whole system.

On-site examination focused on reviewing the compliance with legal provisions on deposit insurance, in-depth examination of insured deposits, accounting and management of deposit accounts in order to promptly detect violations of the People's Credit Fund in mobilizing deposits from customers, thereby proposing measures to handle and protect the legitimate interests of depositors as well as prevent fraud and profiteering from deposit insurance.

In particular, for people's credit funds with problems, the DIV conducts in-depth supervision to monitor developments, grasp the current status and fluctuations of deposits, especially insured deposits, and proactively manage solutions or report, propose to the competent authority.

For weak people's credit funds, within the scope of their assigned functions and tasks, the deposit insurer has actively coordinated with the SBV’s branches in provinces and cities to participate in the process of supervising, examining and resolving these people's credit funds, especially those at risk of failure may result in deposit insurance payments.

The supervision and examination work of the DIV over the past time has contributed together with the authorities to better control risks, detect risks earlier to maintain and ensure safe and healthy operations of the whole system.

The DIV has effectively participated in and supported the restructuring of the PCF system. Accordingly, the DIV correctly performed the functions and duties specified in the Law on Deposit Insurance and the new tasks assigned in the Law amending and supplementing a number of articles of the Law on Credit Institutions to participate more deeply in the restructuring process of credit institutions; coordinated with the Special Control Board, the SBV and relevant agencies to assess specifically the feasibility of the resolution plan, restructuring plan, bankruptcy plan for the People's Credit Fund; participated in and coordinated with the SBV’s provincial branches to evaluate the commercial bank's plan to participate in resolving the People's Credit Fund; supported the Special Control Board, local authorities and commercial banks in reviewing and comparing deposit data and making payments to depositors at the People's Credit Fund; participated in supporting the supervision and examination functions of the SBV over People's Credit Funds...

It can be said that, over the past time, the DIV has affirmed the important role of a non-profit state financial institution. This organization has carried out its mission to protect depositors through the effective implementation of the effective deposit insurance policy and professional activities; contributed together with agencies in ensuring national financial safety, better controlled, detected and warned of risks to maintain and ensure safe and healthy operation of the PCF system; actively carried out research, proposed and recommended to competent agencies contents on amendments and supplements to legal documents on mechanisms and policies for the organization and operation of the PCF system, helping the People's credit fund system operate more safely and effectively.

In addition, the DIV also carries out communication and policy dissemination activities to improve the public awareness of deposit insurance, creating favorable conditions for the process of mobilizing idle capital from the population of the People's Credit Funds and contributing to the rural economic development.

However, the role of the DIV is still limited in the process of special control over the PCF, in supporting the implementation of restructuring options and resolving weak PCFs, and in helping strengthen the linkages between people's credit fund system; in supporting the SBV in performing the State management function of the people's credit fund. One of the important reasons is that the legal framework on the functions, roles and responsibilities of the deposit insurer is still incomplete, unclear, inconsistent and does not met practical requirements. The current law lacks mechanisms and policies to effectively handle the restructuring process of specially controlled credit institutions. There is a shortage of legal provisions to create conditions for the DIV to promote its role in supporting PCFs and in linking activities with the PCF system. There is a lack of legal provisions for DIV to support the State management function of the SBV… The Law on deposit insurance has not been amended, so it has not yet created a consensus with relevant regulations, and has not created a mechanism to further promote the role of DIV in restructuring the credit institution system.

In order to strengthen the role of the deposit insurance mechanism as well as the DIV in the process of restructuring credit institutions, it is necessary to seriously study to amend and supplement the Law on deposit insurance so that it is in sync with the current legal framework, in line with the practices, and towards international practices.

At the same time, the agency in charge of drafting the law should consider supplementing the provisions in the Law on deposit insurance on the provision of special loans by DIV to specially controlled credit institutions, including specially controlled PCFs to be consistent with the Law on credit institutions (2017). It should supplement the regulation that the DIV is allowed to implement a financial support mechanism for cases that have been early intervened but has not been placed under special control (the current law does not regulated this mechanism). It should supplement regulations in the direction of the DIV to participate more deeply and effectively in the process of restructuring the people's credit funds, resolving weak people's credit funds. It is necessary to amend and supplement regulations on investment activities of the DIV in the direction of diversifying investment forms to improve the efficiency of using idle capital of the DIV and to be consistent with the provisions of the Law on Credit Institutions (2017). It should supplement the functions and duties of the DIV to coordinate with the SBV or to assist the SBV in examining and supervising the people's credit funds. Thereby, allowing the DIV to access more types of information on special control, credit institution restructuring and resolving weak credit institutions (including PCFs).

The creation of a clear legal framework for deposit insurance activities, in line with practical needs and international practices, helps to enhance the position and role of the deposit insurer. Since then, the DIV can participate more deeply and effectively in the process of restructuring the credit institution system, in order to better protect the legitimate rights and interests of depositors, and contribute to maintaining the stability of credit institutions, ensuring the safe and healthy development of banking activities.

The DIV also needs to promote the application of information technology, develop and implement a "digital transformation" plan to be able to meet the requirements of new tasks. The management agency also needs to pay attention to creating conditions for the DIV to increase its financial capacity, have a risk prevention mechanism, build a systematic safety net and a coordination mechanism to handle the financial - monetary crisis, if any.

In the future, DIV also needs to learn about a more "multi-functional" organizational model so that it can become a monitoring channel for the system of credit institutions. When there is enough information and data, the DIV can classify the insured institutions on the basis of risk level, having the ability to analyze and forecast, thereby detecting early and remote signs of irregularities in financial-banking activities to create motivation for these organizations to manage risks more proactively, effectively, and deeply to better protect the legitimate rights and interests of depositors in the process of restructuring and developing credit institutions in the coming time.