Legal basis for deposit insurance in Vietnam should be improved soon

The year 2010 also marked a new stage of Deposit Insurance of Vietnam (DIV)’s development after 10 year old operation. The DIV has deployed effectively the deposit insurance policy in order to protect the interests of depositors and to contribute actively to the safe and sound development of the banking industry. Policy and assistance activities have been implemented synchronously and uniformly, thereby helping increase operational effectiveness and complete assigned tasks. The risk supervision has adopted some international standards suitable to Vietnam’s condition. Applied research has played an important role in performing and renewing professional activities. Many research projects have been already completed and applied in reality, bringing about practical results. The Project on Financial Sector Modernization and Information Management System (FSMIMS) has been being implemented effectively in accordance with international model and standards.

Looking back at the year of many positive changes, the achievements can be seen in the impressive figures highlighting and recognizing the efforts made by all leaders and staff throughout the organization. The DIV protected more than 10 million depositors through supervision and inspection of over 1,000 insured institutions; newly issued, re-issued, additionally issued and replaced certificates for over 1200 credit institutions, reaching an increase of 402 certificates compared with the year 2009.

Supervision work- a primary and important channel of information for accurately assessing the real situations of insured institutions, warning against and giving advice in a timely manner on threats of imprudence to the insured institutions as well as making recommendations to the DIV’s General Director in order to work out measures dealing with problems and the best protecting depositors  -  met 100% of the set plan with the periodic monitoring of 1,072 local people's credit funds  and the central people's credit funds, 88 commercial banks,  and 12 non-banking credit institutions.

Besides the supervision, the examination work is always considered as one of the top tasks of the DIV. A number of 42 commercial banks, 249 local people's credit funds , 03 non-banking credit institutions which were examined in 2010 show the fulfillment of the examination plan. With regard to on-site examination, DIV has been being studied to compile prudence examination documents, keeping the exchange and discussion of updated documents on laws and policies related to banking, finance and deposit insurance.

Having a different purpose from inspection and supervision which aim at assessing the operation of and the potential risks to institutions in order to give out warnings requesting them to take responding measures and to propose proper solutions, premium collection is another important task to generate primary financial resources for the operational reserve fund which helps the DIV to fulfill its mission. The DIV’s total collected premium in 2010 was 1,200 billion VND, an increase of 248.2 billion VND against 2009. Generally, insured institutions have observed regulations on premium payment fairly well. Also in 2010, the DIV recovered an amount of 1.373 billion VND by participating in liquidation committees, increasing the recovered amount up to 7,578 billion VND in total, comparing with 20 billion  VND paid by the DIV to the depositors of 37 closed insured institutions.

International cooperation was highlighted with a series of events, of which, the noticeable event was the conference on “Core principles for effective deposit insurance systems and a comparison to Vietnam’s practice” These principles have been jointly developed by International Association of Deposit Insurers (IADI) and the Basel Committee on Bank Supervision (BCBS). Based on the core principles, the DIV intends to make comparison with Vietnam’s reality for taking full advantage of the 18 principles in best protecting depositors and ensuring the safety of the banking system. Modernization of the DIV has been pushed up with the deployment of a consultative package. Upon the kick-off of this package in 2010, consultants will assess the current professional procedures, based on which, to develop a proper IT structure for an advanced model of a deposit insurance institution. Besides, training officers and staff, organizing conferences and international cooperation have been also paid a great attention.

The year 2010 ended with the summarizing of 10-year information, education, and communication (E.I.C) work of the DIV. Over the last 10 years, thanks to the attention of the leaders, the efforts of E.I.C staff, the DIV has utilized this tool as a bridge between it and insured institutions, depositors and relevant authorities, thereby contributing to maintaining depositors’ confidence and ensuring no panic or bank runs. Also in 2010, the Project on improvement of DIV website was completed and attracted more visitors to log on.

Entering the year 2011, as per forecasts, the world economy will continue to show positive signals of recovery. However, the recovery will not be stable and threatened by high inflation. As for Vietnam, the domestic financial markets still have to face with quite a number of hidden systemic risks. Therefore, the goals for the DIV in 2011 are to strengthen and enhance the operational efficiency, improve the quality of professional activities towards the long-term and sustainable development and meet the international practices.

Based on the directions set by the Government as to “enhancing the quality of the development of socio-economics fields, improving living standard for people and ensuring social security…”The DIV has identified its focal tasks in the new year as upgrading legal basis, improving organizational structure, professional activities and technical infrastructure for the new phase of development. In order to implement these tasks, the DIV has specified them as follows:
- Increasing effectiveness of governance, strengthening the leadership, improving the organization in accordance with centralized management model,
- Being actively involved in building the draft law on deposit insurance together with relevant ministries to submit to the Government, National Assembly for ratification as scheduled,
- Promptly improving infrastructure: basic construction and IT system,
- Actively implementing the 1st phase of the DIV component of the Project on Financial Sector Modernization and Information Management System (FSMIMS) funded by World Bank
- Promoting the international cooperation in order to renew and develop the deposit insurance system.

With such tireless efforts, the DIV has every reason to believe in successes in the new year as well as sizable successes in the future in its mission of protecting depositors, ensuring soundness and safety of the banking and financial sector.