Trang Chủ
Offsite supervision has been conducted since 2002 with an aim to overseeing the compliance with either the deposit insurance (DI) or prudential regulations on the basis of input data submitted from insured institutions and other sources set out in law. DIV actively carries out research activities, applies practical and efficient overseeing model which is compatible with Vietnam’s typical situation. Supervisory tasks are consistently performed from the Head Office to regional branches to avoid overlap and to meet the demand of management and administration process. Supervisors are recruited and trained with sufficient banking and DI competence, therefore, the quality of reports improved and the offsite supervisory reporting system became an important information channel for financial managing agencies. As of June 2012, DIV periodically supervised 100% of insured institutions including 90 commercial banks, 11 non-bank financial institutions, and 1128 people credit funds with the total balance of 1400 trillion VND. It consequently detected several cases of violation and sent timely warning to insured institutions. DIV’s offsite supervision is regularly renovated and enhanced to meet the standards of international practices, creating sound footing for other activities of DIV.
However, off-site supervision has confronted difficulties such as: (i) legislation framework lacks coherence and does not conform with DIV’s powers and mandates; (ii) lack of necessary coordination and information sharing arrangement among DIV, SBV and insured institutions; (iii) poor quality of input data from insured institutions. They remain hard challenges for DIV to improve the offsite supervisory activity.
The economic integration has created favorable opportunities for the flourishing development of the banking-financial sector. The larger scale, more complicated and risky operation of insured institutions require better adjustment of deposit insurance generally and offsite supervision particularly to fulfill its mission. International experiences proves that inconsistent legislation will restrain the development of deposit insurers. In fact, DIV’s function of protecting depositors is stipulated in Decree while the one of overseeing financial institutions is set out in Law. The disparity was amended in the newly approved Law on DI. Making a progressive legislation is the inherent requirement of development, providing an adequate, coherent legal framework for DIV to improve its performance. The supervision of DIV will thereby be carried out with efficiency, quality and punctuality. The new law has legally facilitated DIV’s operation which includes the offsite supervision.
The Law on DI basically retains previous objectives and methodologies, namely: overseeing insured institutions as specified in DI and prudential regulations to detect the breaches of law or risks, then report to SBV for timely solution, protect the legitimate rights and interests of depositors, maintain the stability of financial institutions and guarantee the safe and sound development of banking sector. Meanwhile, differences as regards supervisory regulations between the Law and existing legal documents are :
(i) Membership: Institutions and branches of foreign banks that accept deposits from individuals must be insured. While the membership remains the same, the beneficiaries are narrowed with priority given to individuals. It is compatible with the objectives of protecting the rights of small depositors who prefer savings and lack of access to market information as well as the performance of insured institutions, therefore deemed most in need of protection. Surveys on deposits of insured institutions show that 95% of individual depositors are insured which is in line with the popular trend in many countries. However, the narrow scope prohibits the wide participation of other financial institutions. Under 2010 Law on Credit Institutions, non-bank institutions (finance companies and financial leasing companies) are not empowered to accept deposits from individuals, thereby they are not subject to compulsory membership of the deposit insurance system. It thus requires amendments on the internal supervisory documents of DIV to make them binding to the Law on DI and other relevant regulations.
(ii) Information sharing and reporting: Previous regulations specifies two main sources of input data for DIV’s supervision: Directly from insured institutions (financial reports, statistic reports, reports at request and others) and from SBV. In fact, DIV’s primary yet limited source is from insured institutions. In case of PCF, DIV merely receives balance sheets with poor quality and inadequate details. This problem roots from the absence of sanctions regulating the violation to provide information to DIV. The new Law fixes it by setting out that while DIV receives deposit balance information directly from insured institutions, it has privilege to get data from SBV. This provision helps converge information into one single source and avoid overlap, at the same time facilitate DIV to access data systematically, timely and adequately. Notwithstanding, the allocation of information sharing mechanism between DIV and SBV, DIV and insured institutions in the bylaws will remarkably improve the supervisory quality.
(iii) Warnings to insured institutions: Previously, DIV was conferred to send direct warnings to insured institutions violating deposit insurance and prudential regulations. The Law on DI, however, narrows DIV’s responsibility to solely send report to SBV and warn about the violation. It perhaps undermines the position and activeness of an organization incumbent with protecting the rights and interests of depositors.
(iv) Onsite examination supplements and supports offsite supervision in overseeing the institutions which is in breach of prudential and deposit insurance regulations. However, under the new Law, offsite supervision will merely cover the compliance with DI regulations, yet prudential regulations. As a result, inputs from offsite supervision will not be sufficient for onsite examination, which pose disadvantages and inconsistence between the two activities of DIV.
Generally speaking, the adoption of Law on DI helps improve the standing of DIV in the national financial system. However, there are still restrictions that need further work to promote the efficiency of offsite supervision:
- Develop bylaw documents specifying the information sharing arrangement between SBV and DIV, facilitating DIV’s access to data for offsite supervision.
- DIV should take initiatives in making the Supervisory Standard which is compatible with the input data received from SBV and insured institution, consistent with the onsite examination, to make the set of Standards and Documents as regards overseeing the deposits at insured institutions.
- Review the compulsory membership and scope of insurance in Law on DI and other relating regulations.
- Take initiative in coordinating with SBV, warning and solving the ailing institutions.
- Adopt a new supervisory model which is appropriate with the mechanism of providing input data and warning as set out at Law on DI.
