Trang Chủ
It is necessary to ensure that Deposit Insurance of Vietnam (DIV) has sufficient financial capacity to implement the deposit insurance policy - a policy to protect depositors and to ensure the safe and healthy development of credit institutions.
On December 30, 2022, the Prime Minister issued Decision No.1660/QD-TTg approving the development strategy of deposit insurance until 2025, with orientation to 2030. Among the tasks and solutions of the deposit insurer, there are regulations on improving the financial capacity, specifically:
In the period 2022 to 2025: Study and propose to competent authorities to amend and supplement relevant legal provisions, ensure adequate legal basis for implementation: Increase charter capital for deposit insurers to VND 10,000 billion by 2025 and VND 15,000 billion by 2030 from self-accumulation and other legal capital sources to ensure the financial capacity of the deposit insurer, affirm the State's commitment and improve confidence of depositors for deposit insurance policies, ensuring resources for effective implementation of deposit insurance activities.
Increasing charter capital - ensuring financial capacity for the deposit insurer participating in restructuring credit institutions
At the time of establishment, DIV was funded by the State Budget with a charter capital of VND 1,000 billion and by 2015 was supplemented to VND 5,000 billion from self-accumulated capital.
In the current context, the charter capital of DIV needs to be increased to match the growth trend in the size of the system of credit institutions and the growth of insured deposits, as well as in line with the orientation of the banking industry in requiring banks to increase their charter capital to meet the capital requirements of Basel II standards. The increase of charter capital for DIV will ensure the financial capacity of the deposit insurer, affirm the commitment of the State and improve depositors' confidence in the deposit insurance policy.
Moreover, the role of DIV when participating in the special control process of weak credit institutions in general and people's credit funds in particular has been increasingly enhanced, in order to protect rights and interests of depositors, contributing to maintaining the stability of the system of credit institutions, ensuring the safe and healthy development of banking activities.
Accordingly, in the Law on Credit Institutions (2017), it has added a number of new functions and tasks in order for DIV to participate more deeply in the restructuring process of credit institutions under special control, including participating in assessing the feasibility of implementation of the plan to restore people's credit funds, microfinance institutions, financial companies subject to special control.
The Law on Credit Institutions 2017 does not have regulations on allowing the DIV and the Cooperative Bank to participate in the application of early intervention measures for weak PCFs. Along with that, this Law also does not have specific provisions on sending seconded commune-level cadres to hold the position of Chairman and Director of the specially controlled People's Credit Fund. At the same time, the fact that some units (such as the DIV, commercial banks with more than 50% of charter capital held by the State ...) appointing personnel so that the SBV's branches in provinces and cities appoint the title of Chairman, Director of the People's Credit Fund under special control also faces legal difficulties.
Not to mention, according to the provisions of Article 22 of the Law on Deposit Insurance and Article 155 of the Law on Credit Institutions, Clause 5, Article 146a of the amended Law on Credit Institutions, the DIV cannot reimburse the depositors at the People's Credit Funds without the bankruptcy plan being approved. This, according to the drafting agency of the revised Law on Credit Institutions, makes it difficult for the resolution process to stabilize depositors' psychology.
Therefore, in the support measures at the early intervention stage, on the basis of the support measures in the special control stage, the draft Law supplements supporting measures from the supporting credit institutions, together with the participation of the DIV and the Cooperative Bank of Vietnam at the same time. These are all resources mobilized within the credit institution system, enhancing the responsibility of credit institutions for maintaining and ensuring system safety, while reducing pressure and costs for management agencies in the weak credit institution resolution process.
Specifically, for the participation in the early intervention process of the DIV, in order to timely protect the interests of depositors and ensure the safety of the credit institution system, the SBV issues a document to apply early intervention including the status and reasons why credit institutions need the support of DIV.
Depending on the actual situation, the nature and level of risk of the need for early intervention of the credit institutions or foreign bank branches, the deposit insurer may participate in one or several of the following early intervention measures: developing a plan for reimbursement; providing special loans to support liquidity when credit institutions are at risk of insolvency that threatens the stability of the system; and supporting the implementation of the recovery plan, the pre-special control supporting plan, the forced transfer plan, etc.
It can be said that, with the addition of the deposit insurer's participation in the early intervention process, the role of the deposit insurer in ensuring the safety of the system as well as participating in the restructuring process of credit institutions is increasingly becoming apparent. In order to make the most of the deposit insurer's resources, it is necessary to amend the Law on Deposit Insurance as soon as possible and improve the financial capacity as well as resources for the DIV.
The need to diversify investment portfolio
In fact, compared with regulations and implementation practices, the DIV has been facing many problems such as the possibility of capital stagnation, difficulty in finding opportunities to choose and implement investment - which may affect the effectiveness of the investment results - especially in the portfolio, there is only one instrument that can generate revenue, which is "buying Government bonds and hold to maturity". In the condition that there is only 1 periodical Government bond auction session per week with different bidding volume, if the temporary idle capital of DIV is large at the time when there is no bidding session, DIV will be at a disadvantage in the settlement of capital.
The current regulation of the Law on deposit insurance only allows DIV to buy and not to sell, which is also a major legal flaw and contrary to the law of supply and demand, does not create liquidity for the market.
Therefore, diversifying the investment portfolio to enhance financial capacity is a specific content that is decisive in ensuring the development and accumulation of capital, increasing financial resources for reinvestment, and creating stable and efficient investment and sustainable growth of capital. Through a diversified investment portfolio, the DIV has well developed plans to allocate and use capital appropriately for investment in order to increase revenue to fulfill its objectives and tasks, thereby helping to realize the goal of “improving financial capacity” as stated in the Strategy.
In the Strategy for deposit insurance development to 2025, with a vision to 2030, it also provides solutions to improve financial capacity for deposit insurers. Accordingly, strengthening financial capacity is done by allowing the deposit insurer to diversify investment forms and portfolios including: (i) Buying and selling of Government-guaranteed bonds; (ii) Putting deposited money at a commercial bank with good operational quality; (iii) Buying and selling bonds, promissory notes, bills, certificates of deposit issued by commercial banks with good operating quality; (iv) Buying and selling local government bonds in accordance with the Law on State Budget, Law on Public Debt Management, guiding documents and get high credit rating.
Besides, it is necessary to supplement the form of borrowing from the State Bank of Vietnam in case the capital of the deposit insurer is not enough to reimburse; develop a scheme on access to support capital in case the deposit insurer's capital is temporarily insufficient to reimburse.
Communication Department
