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Under the amendments, it is expected that the specification of the bylaws will help DIV accelerate its fulfillment of the ultimate goal: protect the right of depositors, contribute to ensuring the safety and stability of the credit institutions. Unless the clauses are made concrete with detailed guidance, the conduct of DIV’s activities will be abandoned.
To begin with, the structure and organization of DIV were not promulgated in Decree No. 89/1999/ND-CP and Decree No.109/2005/ND-CP. The Law on Deposit Insurance, Clause 1, Article 29 states: “The deposit insurance organization is a financial institution established and assigned functions and duties by the Prime Minister”. Over recent years, DIV has implemented effective deposit insurance policy in Vietnam in response to the objectives and demands from the Party and Government, for example, to promote the confidence of depositors and increase the capital inflows of the banking system, stabilize the performance of credit institutions. In the meantime, the Social Insurance of Vietnam, Vietnam Development Bank and the Social Policy Bank apply the same operating model in executing public policies as DIV. The Prime Minister issued the Decision of establishment, defined mandates and responsibilities as well as signed the Decree with regard to the organization and operation charter. As the result, that the Government establishes and approves DIV’s Charter of operation is compatible with common practices and previous legal documents.
Regarding the information disclosure and reporting mechanism, the Law on Deposit insurance defines the information disclosure of the insured institutions to DIV and SBV at Clause 6, article 13 and article 34. Even though the Law specifies the related institutions’ obligations, it does not contain types of information, data and means of information sharing. It is therefore necessary to provide guidelines and details to facilitate DIV to overcome existing problems.
Regarding the insured deposits, Article 18 includes “other types” as referred from the Law on credit institutions, however, it does not clarify “other types” (Clause 13, Article 4 and Clause 1-2 Article 98). In fact, there are deposits other than individual deposits at credit institutions. Individual registered bonds which are issued by credit institutions and allowed to convert to shares by SBV are insurable individual deposits. However, the Law on Deposit insurance insures certificates of deposit, bills and notes rather than these bonds. As the result, the lack of guidance makes the credit institutions confused and hinders DIV’s examination and definition of the insured deposits. It is also considered the reason for incorrect calculation of premiums.
Article 14 stipulates the granting of certificates of deposit insurance participation. In fact, DIV has granted thousands of certificates (newly issue, supplement, reissue, and change for the newly established credit institutions) as well as changed the business portfolio, name, recovering operation or the damaged Certificate of participation or changed the deposit insurance policy. The bylaws therefore should define these contents to facilitate the law enforcement.
Article 16 regulates the revocation of deposit insurance participation certificates; however, it does not cover the credit institutions’ branches, transaction offices and saving funds whose operating licenses have been revoked by the State Bank. Apart from this, the dossiers, procedures, and responsibilities of the related parties in the revocation process are not clearly provided.
Article 21 describes the underpayment, deferred payment of deposit insurance premium; however, it excludes the causes of force majeure like: natural disaster, war, third party, strikes, etc., The Law prescribes penalties for violation of payment deadline or failure to pay in full. It may lead to the insured institution’s speculation to calculate incorrectly or fraudulently seize the deficit during the time DIV yet examine. The bylaws should take this issue into account with proper specification.
Article 26 defines the procedure of payment; however, dossiers to request payment are not detailed together with the absence of regulations regarding authorized deposits, inherited deposit, deposits belonging to the missing people.
In fact, the violation of deposit insurance regulations have been found regularly in several insured institutions and handled slowly due to the absence of detailed penalty regulations, especially when DIV – the institution in charge of law enforcement – is not authorized to handle violation. DIV is barely restricted to sending recommendations to SBV.
Under the Law on deposit insurance and the enforcement practices, in order to make it effective and appropriate, the bylaws should describe and provide detailed guidance of DIV’s functions and responsibilities such as: to grant, display, revoke the certificate of participation; rules of premium calculation and payment, coverage limit, to examine and offsite supervise; roles of DIV during the process of special control, reimbursement and resolution, recovery; public awareness; information disclosure of the insured institutions. They will facilitate DIV implementing its policies and bring the policies into life. Following are my own points of view:
Firstly, as stipulated by the Law on deposit insurance, DIV is established by the Prime Minister, thus this helps bring into full play the position and roles of DIV in conjunction with international standards and enhances the effectiveness of DIV’s performance. The Charter of operation, organization and responsibility of DIV are defined by the Prime Minister which ensures the consistency of deposit insurance legislation as well as the Decree No. 99/2012/ND-CP dated November 15, 2012 of the Government on assignment, decentralization of the implementation of the rights, responsibilities and obligations of state owner for the state-owned enterprises and state capital invested in the enterprises.
Secondly, to identify the basis for insured deposits and accurate premium assessment, types of deposits must be defined clearly and concretely. The by-laws should verify “other types” of deposits as provided by the Law on credit institutions. Also, the authorities should supplement deposits in the form of convertible bond and provide guidance for “other types of deposits” including: deposits to secure the depositor’s responsibilities like deposits to secure cheque payment or card payment; deposits to open credit letter, security, security for financial leasing, security for other payments.
Thirdly, in the meantime, a majority of people is concerned about the Law on deposit insurance, the operation of the financial banking system as well as the credit institution’s health. The determination of general premium frame for insured institutions will serve as the basis for setting the risk-based premium which takes into consideration each credit institution’s performance. And so, the premium frame should be based on concrete rules, conditions and the time frame. The time frame for changing premiums should be made appropriate to allow DIV and the insured institution to change the calculation software accordingly. The bylaws should verify the formula of calculation to facilitate the insured institution’s implementation and consider following cases: if the expired date of payment is on weekend, it will be delayed to the next business day which is initiated from the economic efficiency of using capital in business. In case the delayed payment is attributable to external or irresistible reasons or the amount of penalty is less than 1 million VND, the bylaws should allow the insured institutions to pay a supplement in the next period and create favorable conditions for the insured institutions.
Fourthly, in case the credit institutions are placed under special control and fail to recover, the bylaw should clarify the responsibility of DIV – member of the special control panel – in examining and determining the pay-out to wrap up dossiers and protect the rights of depositors. Apart from this, the bylaws should also include the procedure to pay for cases such as: authorized deposit beneficiary, inherited deposit beneficiary, deposits of the missing people as well as the responsibilities and rights of DIV which is entitled to organize and guide the reimbursement process.
Fifthly, so as to fulfill the role of a supervisor and examiner of DIV, the bylaws should clarify the obligations of information disclosure and reporting mechanism of the insured institutions and SBV as well as the types, forms and data eligible to be shared and provided.
Finally, to improve the efficiency and enforcement of deposit insurance legislation, the bylaws should also define the penalties and DIV’s authorization in handling the violation in deposit insurance. Deposit insurance violation is considered administrative violation in banking and finance, therefore, the penalty in the deposit insurances should be coherent with the financial and banking legislation concerning administrative punishment.
But for detailed guidance, the deposit insurance bylaws will lead to different applications and enforcement due to diverse comprehension, even failure to implement in reality. That is why inevitably, they must be made concrete and explicit so that the participants are regulated consistently as required by the law and practice. Alternatively, the conformity with practice of the legal documents is also assessed on its economic efficiency. It helps save the cost of examining, consulting, time and even the capital of concerned agencies when the documents are given detailed guidance. This issue should be focused on since the authorities are working on the bylaws of the Law on deposit insurance.
