Experts' opinions: Building an effective Deposit Insurance system in Vietnam

1) Mr. Tran The Vuong - Head of the People’s Claims and Petitions Department of the National Assembly: It is necessary to set up a Committee responsible for Drafting the Law on Deposit Insurace.
Protecting the legitimate interests of depositors also means protecting the interests of the society and the State. The issuance of the Law on Deposit Insurance plays a crucial role in protecting depositors.The timely issuance of the Law on Deposit Insurance is badly needed. However, it has been delayed many times. This law should have been isused immediately after the collapse of some People’s Credit Funds in the late 1990s.

Currently, the Law on Deposit Insurance has been added to the law – building program of 2011 and need to be issued in accordance with the route set by the National Assembly’s Standing Committee. Building laws in general and the Law on Deposit Insurance in particular is a painstaking and time – consuming process. Therefore, the government is expected to set up the law-drafting committee as soon as possible.
The government should steer relevant agencies to establish the law – drafting board. This board is tasked with researching and summerizing current legal documents related to deposit insurance. Based on the legislative activities, it is widely agreed that the law – drafting board plays a key role in the quality of the Law. However, in the field of deposit insurance, there are so many relevant Ministries, agencies and sectors in charge of managing the field. This poses a problem that which agency should preside over the law – drafting program in order to make sure that the Law on Deposit Insurance is objective and does not give preference to any agency.
I strongly believe that the government will take this issue into thorough consideration. The Minister of Justice, as a high – ranking official responsible for creating laws, is expected to make specific and strong recommendations to the Government in order to promulgate a Law on Deposit Insurance of high quality.

2) Dr. Bui Khac Son – General Director of Deposit Insurance of Vietnam: “The document named “Core principles for effective Deposit Insurance Systems” is an important and valuable source for reforming and developing a Deposit Insurance system in Vietnam”
The “Core principles for effective Deposit Insurance Systems” offers valuable recommendations for developing Deposit Insurance system in Vietnam with a view to turn Deposit Insurance of Vietnam into an indispensable and prominent member of  a strong financial safety net, thus making contributions to keeping the Vietnamese financial sector stable and making the Vietnamese economy develop rapidly, specifically:
Firstly, the “Core principles for effective Deposit Insurance Systems” is an crucial framework for policymakers and Deposit Insurance organizations to establish or reform a country’s Deposit Insurance system.
Secondly, a Deposit Insurance organization always plays an important role in the country’s financial safety system as well as in dealing with crises. Therefore, it is easily seen that the importance of an effective depositor-protecting system is increasingly recognized and affirmed.
Thirdly, based on international experiences and realities in Vietnam, it is necessary to build the Law on Deposit Insurance following the route adopted by the National Assembly. The Law on Deposit Insurance shall clearly stipulate that Deposit Insurance of Vietnam is run in accordance with risk-minimizing model.
Fourthly, those issues that are non-compliant or only partly-compliant with the “Core principles for effective Deposit Insurance system” should be included in the Law on deposit insurance.
Finally, Deposit Insurance operations are unique and new to Vietnam. Therefore, drawing and learning from international practices and experiences play an key role in reforming and developing an effective Deposit Insurance system in Vietnam.
 
3) Mr. David Walker - Managing Director of the Policy, Insurance & International Affairs Department - Canada Deposit Insurance Corporation and Chairman of the Research and Guidance Committee of the International Association of Deposit Insurers on core principles for effective Deposit Insurance Systems: Some issues that need to be improved at Deposit Insurance of Vietnam.
The first step when designing a Deposit Insurance system or reforming the current one is to clearly define public policy objective that we need to achieve. In this case, our public policy objective is to make contribution to maintaining the stability of the financial system as well as protecting depositors. On the other hand, powers and responsibilities of the Deposit Insurance system must be clearly defined in the Law on deposit insurance. On the management of the Deposit Insurance organization, it is critical for a Deposit Insurance organization to work quite independently. This means that this organization should be able to exercise their powers and tools without too much influence and intervention from outside agencies including political organizations, the financial services sector or other members of the financial safety net. On the inter-relationship among members of the financial safety net, it is critical to build an appropriate framework for Deposit Insurance organization and other members of the financial safety net to closely cooperate and regularly share information. It is also strongly recommended that an effective mechanism be created in order to make it possible for a Deposit Insurance organization to early detect, timely intervene and adequately resolve troubled banks.
In the case of Vietnam, the Deposit Insurance system in Vietnam has complied with certain principles for effective Deposit Insurance Systems. However, there are some shortcomings that need to be surmounted. Firstly, the laws on Deposit Insurance should be concrete and accountability ones, especially the Law on Deposit Insurance should be designed with a view to best protecting depositors.
Secondly, the cooperation and coordination among Deposit Insurance of Vietnam and other supervisory agencies such as the State Bank of Vietnam or the Ministry of Finance must be clearly defined.
Thirdly, it is necessary to found a mechanism on the effective resolution of failed banks. This mechanism needs to be well – suited to the current situation that the banking system is growing rapidly but it also associates with uncertainties in risk management.

4) Ms. Phan Thanh Ha – Deputy Head of the Banking and Finance Department of the Ministry of Planning and Investment: the Law on Deposit Insurance needs to ensure the independence and accountability characteristics of a Deposit Insurance organization.
In my opinion, it is highly important to promulgate the Law on Deposit Insurance as soon as possible because there has been no mechanism clearly delegating the responsibility of State agencies involved in the examination of banks. Therefore, it is badly needed to adequately define the inter-relationship among supervisory agencies, the coordinative and information-sharing mechanisms... Also equally important is that the Law on Deposit Insurance needs to make the Deposit Insurance organization adequately independent and accountability. On the one hand, it is necessary to ensure the adequate independence of a Deposit Insurance organization to make it able to operate effectively. However, it is equally important to make it compulsory for a Deposit Insurance organization to release statements fully explaining the use of the money in the Deposit Insurance fund paid by financial and credit organizations.
In comparison with international principles, from my point of view, we have only followed nearly 50% of those principles and there are many unfulfilled ones such as the current organization model is the payout model with extended functions and the low supervision level.