● Online broadcast
But now, most people have not been consulted and fully understood DIV as well as how the nature of their deposits are insured.
The online exchange held by the Government Web Portal provided information and contributed to solving problems that people were interested in.
The exchange was attended by:
- Dr. Bui Khac Son - General Director of the Deposit Insurance of Vietnam, a member of the National Advisory Council for Monetary Policies.
- Dr. Nguyen Manh Dung, Deputy Director of the Deposit Insurance of Vietnam.
- MA. Nguyen Linh Nam, Executive Deputy Director of the FSMIMS Project Implementation Unit (PIU), the Deposit Insurance of Vietnam.
MC: There are more readers submitting questions about deposit insurance to the Government Web Portal. The first question of Thanh Huyen reader is please sent to Mr. Bui Khac Son by huyen511@yahoo.com email address: I have not really quite understood deposit insurance. Whenever I go to the bank for depositing savings, I have never heard bank staff talk about how my deposits will be insured? So could you please speak more clearly about this?
Dr. Bui Khac Son: it can be said, recently, in the process of economic transformation from the centrally planned economy to the socialist-oriented market economy, the banking and financial system also shifted correspondingly and appropriately. Also, in the period of transition, the risks to the economy, business, people and depositors also occurred, which demanded the attention of the State and the relevant authorities.
This is a new issue in Vietnam profoundly impacting on the banking and financial system as well as consumers of financial services. Generally, financial service consumers have not fully understood the banking credit system, for example, depositors have not understood how the State protects their rights and interests.
Therefore, how will people be protected? Generally, the State protects them by the law and specific policies on deposit insurance.
The Deposit Insurance of Vietnam is a State financial institution founded by the Government to protect the legitimate rights and interests of depositors and contribute to ensuring the safe and sound development of the banking system, enhancing public confidence in the national financial system.
DIV is a non-profit institution which not only protects the depositors but also ensures the social security. Depositors can trust DIV led by the State. All deposit taking institutions must participate in compulsory deposit insurance. Thus, the lawful rights and interests of Huyen’s deposits at the deposit taking institutions are protected by the State.
Tran Van Toan, Song Cong town, Thai Nguyen: Does DIV provide additional insurances for automobile, motorcycle, life or other insurances for my children to learn? Where can I buy these deposit insurances and start an agency for them? How much must I pay to benefit from DIV?
Dr. Nguyen Manh Dung: Before 2000, if you deposited at the bank, your money would not be protected when the bank failed.
However, from 2000 to the present, when the Deposit Insurance of Vietnam has come into operation, deposits will be protected when a bank fails.
I confirm that DIV does not provide life, auto, motorcycle insurance services.
I’ll mention the difference between the two types. Life, motorcycle insurances are profitable business and commercial insurances operating under the Law on Insurance Business.
Deposit insurance that is a non-profit type operating under the decrees will soon operate under the Law on Deposit Insurance.
Referring to fees, you can rest assured that your deposits in banks are protected without paying premiums. This is a big difference compared with other commercial insurances. You are entitled to use services without paying money.
Regarding an agency, I confirm that there is no form of deposit insurance agency.
Nguyen Van Ha, Lane 366 Nguyen Trai, Thanh Xuan, Hanoi: I sent two bank savings books, a book in VND and the other in foreign currency. Therefore, am I paid insurance for the both books? Could I ask you more whether a savings book in gold is insured?
MA. Nguyen Linh Nam: Now, DIV only insures savings books in VND. There is no insurance policy for savings books in foreign currency and gold.
MC: So are there any disadvantages for people to open savings accounts in foreign currency and gold?
MA. Nguyen Linh Nam: DIV carries out the Government policies which may be changed in different stages. In fact, many countries implement deposit insurance in foreign currency. Some countries even reimburse in the original currency, for example the United Kingdom, which means that the amount of money is deposited in one kind of foreign currency, it will be paid in the same foreign currency.
In addition, many countries do not have foreign currency insurance, including the U.S., Japan and Vietnam. It is the Vietnamese Government’s policy at this moment.
Tran Quoc Nghia, Hoa Vang district, Da Nang: Dear Dr. Son, I have also learned about the finance and banking faculty. Could I ask you if it is the time we needed to reimburse depositors for the deposit insurance price fluctuations? Avoid the fact that the bank deposit is enough to buy a buffalo, but the withdrawn amount is only enough to buy a buffalo calf.
Dr. Bui Khac Son: I think this is a very interesting question, because it has also been the question of many Vietnamese people so far.
How people can trust the National Financial System and Government to best protect people's rights is a matter for the Government and the relevant authorities to be interested in and find the best answer.
As DIV, we also have a role and responsibility for the National Financial System. As we have stated, DIV will protect the legitimate rights and interests of depositors.
In my opinion, the currency value fluctuation is the responsibility of the concerned agencies such as the monetary and fiscal policy agencies. However, the currency stabilizes and ensures effective value, which relates to the nature of the country and social production.
For DIV, we think the most important thing is that the Government issues policies to protect people by reimbursing deposit insurance through how much its coverage is. Finally, people have money to deposit in the bank, if there are any risks, the State will protect them.
Indirectly, DIV contributes to stabilizing currency values by the policy which people trust. It encourages them to deposit money in the bank and make payment transactions through the bank.
Hoang Thi Kieu - Long An and Nguyen Huong (mimoda-dalat1805 @ ...): As far as I know, my savings are insured for VND 50 million. But how can we get our insurance money when there is a risk? How will the excess of VND 50 million be resolved?
Dr. Nguyen Manh Dung: First, when the problem occurs, DIV will coordinate with concerned agencies to reimburse deposit insurance to you.
You will have two types of deposits. The first type is that you will get a transaction document. For example, when you open a 12- month-savings account with a certain amount of money, you will receive a savings book. The other one is that you deposit money in the bank account without a transaction document.
Referring to the first one, you only give the document and present an identity card or passport to prove that you are the owner of the document.
In regard to deposits without documents, DIV and deposit taking institutions will be responsible for coordinating together to verify if this is your money and post your money in the list. Then, when you give the documents to prove that you are the owner of the deposits, we will reimburse deposit insurance to you.
MC: Could I ask you more? For example, in case the deposit is VND 70 million and the deposit taking institution is in trouble, DIV will reimburse VND 50 million. Therefore, by whom will the remaining VND 20 million be paid?
Dr. Nguyen Manh Dung: VND 50 million will be paid immediately and the remaining money will still be paid by DIV, but it needs to wait for the results of liquidation of the deposit taking bank. DIV will coordinate with concerned agencies to withdraw and liquidate the remaining assets of the bank with the highest value, then pay the remaining amount to you.
Ngoc Nam, Hanoi: Could I ask Mr. Son whether my bank savings have been insured or not? Do all banks facing credit risks are paid for insurance or only banks facing credit risks that have signed an insurance contract with DIV are insured?
Dr. Bui Khac Son: Your question is related to deposit insurance policies in each country. There are countries issuing optional deposit insurance policies initially.
After decades, the deposit insurance has become popular and mandatory for the institutions that take deposits from people.
Any institutions are licensed to conduct banking and financial services, receive deposits from people. After being licensed, they must submit documents to DIV so that we consider issuing deposit insurance certificates.
Based on issuing deposit insurance certificates, institutions are allowed to mobilize money from depositors. Of course, all insured institutions where Mr. Nam deposits money are issued with the deposit insurance certificates.
Regarding insured rights, of course, you are entitled to receive VND 50 million/ person in any institutions where you deposit money.
We do not sign any insurance contracts with any banks because this is a mandatory deposit insurance.
Tra My, in Germany: I am Vietnamese and working in Germany, my family still lives in Vietnam. I want to know whether I am participated in deposit insurance in Vietnam. In order to deposit money, do I have to complete procedures that differ from ones required for people living in the country? Why doesn’t Vietnam apply insurance policy on foreign currencies to attract money sent from overseas compatriots?
MA. Nguyen Linh Nam: The Government has adopted policies to encourage overseas Vietnamese to send money to Vietnam for investment. As mentioned above, the deposit insurance policy is mandatory in Vietnam, all deposit taking institutions must buy insurance for you. So, when you deposit money in VND in Vietnam, that amount of money is, of course, insured and you do not need to do anything else.
Dr. Bui Khac Son: Foreign currency deposit is a specific policy of each Government. In studying the experience of South Korea, at that time the Government encouraged overseas compatriots to send money and open domestic bank accounts. However, it is not necessary to have foreign currency deposit insurance in other countries such as the U.S. and Japan.
The Vietnamese Government has a consistent policy. That is to mobilize the resources of people, including those living in Vietnam or living and working abroad to contribute to building the country. This is an entirely appropriate policy. And in fact, it proves that the amount of money sent from overseas Vietnamese is more and more increasing.
Deposit insurance policies are related to monetary policies. The Vietnamese Government defines development of sovereign independent policy on currency: Payment is only made in VND in the Vietnamese territory.
We have a policy on gradually transferring deposits from foreign currency to VND by trading foreign currencies according to market exchange rate. This is a long-term measure to support the country's economic development. Referring to foreign currency deposit insurance, in my opinion, in a short time, we don’t need to make this insurance policy. When it is necessary to make it, the Government will study and have specific policy changes.
Nguyen Mai Phuong, Financial Department of Hatay Brewery Ltd.: Now, is the insurance coverage of VND 50 million relevant any more when people's living standards improve and the amount of money deposited in banks increases? In fact, many people have deposited more than VND 50 million in banks, it means that they will hardly be reimbursed for deposit insurance when the risks occur?
Dr. Bui Khac Son: Now, DIV is a State financial institution representing and protecting the rights of tens of millions of depositors. Through monitoring and researching activities, the balance of individuals’deposits is increasing. In recent years, deposit insurance policy has been adjusted. And we are still studying whether adjustment is appropriate or not.
Previously, when DIV was newly established, deposit insurance coverage was VND 30 million. By August, 2005, this coverage was increased to VND 50 million.
According to our calculations, then, it was equivalent to five times Vietnam’s per capita income. From 2005 to the present, income has changed a lot (currently about $ 1,100 / year). Thus, the coverage of VND 50 million is equivalent to only $ 2,400.
Thus, perhaps, it is time to need to review and adjust this coverage in accordance with the reality of our income. This coverage can be adjusted in case of systemic risks. As we know, in the recent financial crisis, many countries have raised coverage, even some countries have transferred to unlimited deposit insurance coverage.
We think that the coverage of VND 50 million should be reviewed. But according to the experience of countries, as stipulated in the Indonesian Deposit Insurance Law, if the CPI changes to certain levels, deposit insurance coverage will be adjusted accordingly in line with the rules of market economy.
Duong Thu Nga-Nghia Lo, Yen Bai (bienxanh.1784 @ hotmail.com): I am a former student of the banking faculty. By practical working experience, I realize that many people know the banking system very much but they are apparently unaware of the DIV. When they don’t know it clearly, it is difficult for them to enhance confidence in the banking system. Because sometimes, bad people spreaded an unfounded rumour about banks, which caused bank runs. People will not do like that if their deposits are insured completely. Thus, the role of the DIV’s PR activities does not seem to perform its functions to the full? And how can people living in remote areas also understand the nature of the deposit insurance?
MA. Nguyen Linh Nam: We all know that banking business is based on trust. The cases of bank failures in the world have recently been caused by a collapse of public confidence. In 2007, the Northern Rock bank in Britain failed, thousands of people queued to withdraw money.
At the same time, in the U.S., there were hundreds of bank failures, but no one queued to withdraw money. That is because the U.S. has a transparent deposit insurance policy and system. Any depositors always understand the policy that any deposits are insured up to $ 250,000. And the payment is made quickly and efficiently: on Friday, a failed bank is closed, on Monday, deposit accounts are transferred to ones in another bank, and depositors can transact normally.
In Vietnam, DIV is promoting PR activities to broadcast deposit insurance policies to all people, even in remote areas.
In addition, we have coordinated with banks and credit institutions to explain and broadcast deposit insurance policies to depositors.
Moreover, we are developing a universal education programme on the basic knowledge of finance for people and depositors in order to help them manage their money most effectively, including the choice of which organizations to deposit money safely.
Dr. Bui Khac Son: People’s beliefs, from which the word "credit" is derived, are the basis of financial and banking activities. When I have faith, I will send you money, gold for your business, and be shared a certain part of your profits.
This belief is not a personal thing. For example, how to build the confidence of tens of millions of depositors in the banking system, with the amount of up to VND 900 trillion, and nearly VND 200 trillion exchanged from foreign currency.
As I said initially, the DIV’s operational objectives are to contribute to improving the public's trust. Public relation activity is a DIV’s professional activity. If there is faith, when the risks occur, people will calm themselves and wait for policy response, the resolution of relevant authorities, even the Government when there is a crisis.
In fact, as we know, in the past 2008-2009 financial crisis, people trusted the Government's policy very much. The number of deposits and bank accounts continued to increase, specifically the average balance increased to 30% per year based on our calculations.
Obviously, confidence is important. In the coming years, we are developing and implementing a strategic plan as well as synchronous PR solutions with the press - media, banking and financial institutions. Even, it needs to educate students when they are young so that they know how to use banking services in the best way. Of course, this relates to financial resources and we will work with the Ministry of Finance to have appropriate budget sources.
Immediately after this discussion, we will coordinate with the People Newspaper and other media agencies, the Vietnam Banking Association to hold a competition of learning about deposit insurance so that not only urban residents but also people in deep remote areas can better understand and implement their rights.
Hoang Vu (hoangvu1252@yahoo.com): I am a retired official of the Transport Development and Strategy Institute. I have been very interested in ensuring the safety of banking and financial sector since the past global financial crisis. Could I ask you whether model of the deposit insurance activity is now designed in line with the trend of the world or not?
Dr. Bui Khac Son: This question is related to many relevant authorities. Like any financial systems, it is necessary to design the model, the structure of national financial systems, including banks, leasing companies, credit funds, securities companies, investment funds, insurance company systems as well as other financial institutions.
I think this is a matter of common financial system structure in the transition from the centrally planned economy to the socialist-oriented market economy.
Referring to how the model of deposit insurance works well to ensure the integration in the coming time, at last ADB meeting, participants also discussed post-crisis issues very much, the standards to ensure the safety of financial system, how to enhance the quality of supervision.
For deposit insurance, there are also appropriate models. Please tell me more clearly, Mr. Nguyen Linh Nam.
MA. Nguyen Linh Nam: Your question is a very broad issue, but based on 2006-2007 studies of the IMF, deposit insurance is divided into three types.
Firstly, the simplest model is made purely to pay when institutions go bankrupt. A number of countries such as Laos, Bangladesh, Sri Lanka follow this model.
Secondly, in charge of paying with expanded powers: both pay and perform a part of supervision activity, resolution of failed institutions to recover the property. This model is applied for Malaysia, Japan.
Thirdly, the most advanced model - risk minimizing one - performs all the powers based on the principle of minimum costs to bring maximum benefits to deposit insurers and depositors.
This model is designed for countries including the United States, Korea, Canada.
In Vietnam, according to regulations and the current legal framework, we are applying the model of both conducting reimbursement and performing several powers such as supervision and inspection as well as participation in receiving and resolving failed institutions.
However, in the future, DIV’s model will be a more advanced one in accordance with the principles of the market. It is a risk minimizing model. And this is the trend of several deposit insurers in the future.
Khac Hieu - Hanoi National University (navnhieu73@yahoo.com): I think that DIV emphasises its role in the credit system. But the most important thing is to promote the untapped capital sources of people and put them into circulation in the market, has DIV carried out this mission?
MA. Nguyen Linh Nam: In order that people deposit money in credit institutions, first of all, they must have faith in those institutions. In addition, they must receive a certain benefit. Last but not least, the country must have a safe, stable, healthy financial and banking system.
To solve all the above factors, it requires the efforts of all relevant ministries, in which DIV plays only a certain role.
However, I’d like to confirm that DIV is always aware of the role and responsibility in enhancing people's confidence in the system, as well as contributing to the stability of the banking system. We are implementing a project funded by the World Bank for the State Bank and DIV in order to modernize operations and contribute more to the stability of the banking system.
I’d like to say some more things, in 1999, there were only a few million depositors. So far, there have been tens of millions of depositors. The growth of people’s capital mobilization in the banking system increases by an annual average of 30%. This shows that people trust our banking and financial system and they continue depositing money into the system.
Le Thu Trang, Giang Van Minh Street, Ba Dinh District, Hanoi: How does DIV supervise and inspect the lending process, loan use and reimbursement of people's credit funds? How will DIV solve if their violations are discovered, for example false information, no payments on schedule, etc?
Dr. Nguyen Manh Dung: The DIV will supervise more than 1,000 insured institutions including three types: banks, financial companies and people's credit funds. When these institutions operate incorrectly and get into trouble, DIV will take two actions:
Firstly, based on the results of supervision, the notices are sent to the institutions committing violations to clearly indicate how violations are and how to solve, correct and curb them since their early occurrence in order not to increase violations so highly that they are irreparable and can lead to collapse.
Secondly, we will also report to the concerned management agencies such as the State bank, Ministry of Finance, the National Financial Supervisory Commission to effectively manage the financial and banking system and ensure its safe, efficient operations. Therefore, the interests of depositors are protected.
MC: In addition to reimbursement, which responsibilities does DIV have when people's credit funds go bankrupt?
Dr. Nguyen Manh Dung: As I said the main objective of the DIV is to warn insured institutions of their violations and shortcomings to prevent failures. Therefore, we have supervisory divisions for each type of banks, credit funds and financial companies.
Regarding the credit funds, we have our own supervisory division, all officials and employees in charge of supervising must have the highest responsibility.
In case it is proved that failure of the credit fund is caused by the fact that the supervisory division does not give timely warnings, its employees must be the most responsible according to DIV’s regulations.
Tran Thuy Linh – Lao Cai Vietnam Posts and Telecommunications Corporation: When credit institutions fail, where is the amount of money taken from for reimbursing depositors? Is it taken from the State budget or DIV? Is the amount of deposit insurance deducted from the State budget? We are taxpayers in the budget with no intention of using tax money to relieve unprofitable credit institutions.
Dr. Nguyen Manh Dung: I think this is a profound question. It also mentions the DIV’s high responsibility.
Firstly, since DIV’s establishment, one of its targets is that when there are incidents that need to be resolved, we will avoid the maximum use of the budget, ie taxpayers' money. And we have seriously carried out this policy.
Over the past 11 years, there have been 39 insured institutions in troubles, failures or with their licence withdrawals. We have reimbursed depositors VND 20 billion in 18 provinces and cities. No reimbursement has been conducted from the initial capital source funded by the State budget. It has fully been reimbursed from DIV’s fund after 11 years of establishment.
Secondly, for larger incidents, as stipulated, we are allowed to borrow from other organizations or issue bonds to fulfil our obligations. Then, there will be technical measures to recover this amount of money, definitely not to use the budget.
MC: Now, I’d like to ask you more how the capital, which was initially granted VND 1,000 trillion, has increased after 11 years of DIV’s establishment.
Dr. Bui Khac Son: When any Deposit Insurers are established, any States and Governments have expected a maximum limit of using the budget. To do this, deposit insurance funds must be big and self-sufficient enough.
Referring to international experience, most countries have clear mechanisms to limit the use of funds for deposit insurance, although they can borrow from the Central Bank and the budget... For example, in 1996, South Korea established Korea Deposit Insurance Corporation (KDIC). But in 1997, it suffered from crisis and did not set up the fund. In fact, KDIC borrowed money from domestic institutions. In case there was not enough money, the Government would borrow about $ 60 billion from the International Monetary Fund and gave it to KDIC for resolution. After a year, KDIC raised its capital, repaid money and ended the crisis.
This was the best experience in solving the crisis. Therefore, where was the amount taken from for paying debt? KDIC issued government-guaranteed bonds in a term of 30 years, i.e. the debt will be fully paid to people by 2027.
Thus, despite using very large amounts of money from domestic or international sources, deposit insurers must borrow and pay money but do not use the State budget, taxpayers' money to pay.
In fact, in Vietnam, when DIV was established, the Government granted the initial chartered capital of VND 1,000 billion. Because it was newly established, we had to handle several incidents. We guarantee that this chartered capital is still intact. Besides, at the end of 2010, it increased approximately VND 6,000 billion more and in the first months of the year, it increased a few hundred billion more. Thus, DIV’s fund has about VND 7,500 billion. This amount is purely self-sufficient without borrowing or using the budget.
MC: Over VND 7,000 billion is an impressive figure. But as far as I know, according to international practices, the total balance of insured deposits, i.e. the reserve ratio is always between 2-3%. But with more than VND 7,000 billion, this ratio is just over 1%, is it slightly low?
Dr. Bui Khac Son: As I mentioned, even though KDIC had nothing, it handled very large incidents well. VND 7,000 billion figure is very important to create confidence for depositors. Afterwards, money can be borrowed from credit institutions. For example, in the U.S., FDIC collects fees in advance and the government provides guarantees. It means that there are a lot of ways.
In Vietnam, the ratio is not 1% yet. But in fact, to be more suitable, fee policies can be changed to increase the ratio to 2-3%.
Nguyen Thai Hoang (Vung Tau): I worked for a financial company in the U.S. for two years, I understand the fact that deposit insurers not only reimburse customers for deposit insurance but also bring a great responsibility as one of systematic supervisory agencies in order to ensure the safe operation of financial markets, or rather, supervise 100% of insured institutions and conduct on-site examination in these institutions. But in Vietnam, how does this supervision bring transparency and cause no difficulties for the financial market - a fully sensitive one?
Dr. Nguyen Manh Dung: You are right, Now, in addition to reimbursement, DIV conducts more important second mission, i.e. supervision of more than 1,000 insured institutions. The goal of supervision is to protect depositors by not letting deposit taking institutions get into trouble and go bankrupt.
However, in order to make this issue clear and transparent, it will be stipulated in details in the forthcoming Law on Deposit Insurance.
Dr. Bui Khac Son: This question is related to the financial system structure, roles, mandates and functions of each different agency.
In financial activities, referring to the protection of depositors’ right, it is surely the responsibility of deposit insurers. But other agencies perform their tasks of coordinating and supporting.
When mentioning risk or loss of liquidity, we will think of the first role of the State Bank.
As for the coordination, to ensure the sufficient capital for the financial system in order to serve economic and social development, we look at the role of the Ministry of Finance.
Returning to issues of systematic transparency, firstly, the role of each agency must be clear, relative, co-ordinative and standard enough to supervise and coordinate. DIV conducts its supervision to protect the interests of depositors.
MC: Please ask for more, there are two forms of supervision: off-site and on-site ones. Could you tell me how they are different?
Dr. Bui Khac Son: Based on international experience, we have researched, developed and implemented a supervisory system.
In supervision activity, off-site supervision is based on the data and status, information reported by insured institutions such as banks, financial companies, people's credit funds, which helps to assess the current situation of each organization, group of organization or the whole system as well as be able to provide early warning of risks in the next periods (1 month, 3 months or 6 months). If the data is much enough, it can give one-year warning.
In case off-site supervision division detects risks, normally DIV will send a message, written documents to organizations in order to require appropriate corrective measures. Simultaneously, we also send a copy to the concerned agencies such as the State Bank... I think that this activity is different from inspection and DIV never does the inspecting work.
In case we detect risks and cannot check the accuracy based on documents, we will send our team to examine them on the spot. On-site examination is rare. We will examine institutions only when it is absolutely necessary.
Thus, they can realize the transparency of DIV’s measures.
Vu Nam – Vietnam Academy of Science and Technology:
In regard to the function of supervising credit institutions, could you tell me whether DIV transparently and openly discloses the business results of the credit institutions and let people know the true capacity of each credit institution to avoid the risk posed to people and institutions?
MA. Nguyen Linh Nam: Firstly, we should separate the rankings of financial institutions made by local and foreign companies, institutions from the results of supervision activities given by DIV.
In market economies, and in the process of equitization, in the stock market, all financial institutions, banks must transparently disclose operation data, the audit results. Now, local and foreign companies are also openly ranking these institutions.
However, by law, DIV is responsible for ensuring the confidentiality of customers’ information, similar to the confidentiality of patients’ private information in the health sector. However, this does not affect the transparency of the system, because all information and our supervision results are shared with other financial supervisory authorities of the Government.
MC: Is transparency of DIV’s supervisory system completely different from the open assessment, rankings of the State Bank for credit institutions?
MA. Nguyen Linh Nam: We do not want to say that DIV’s supervision is completely different from the State Bank’s assessment for credit institutions. Because as Mr.Bui Khac Son stated that criteria for supervision and safety in the operation of financial institutions are public. If there are any differences between the assessment of DIV and the State Bank for credit institutions, it's just a difference of opinion between an organization protecting the interests of depositors and the State administrative supervisory agency. It is the only difference.
Luong Tuan Khanh (Rehabilitation Department, Bach Mai Hospital): Please let me know whether we are completing the Law on Deposit Insurance? Therefore, is this Law helpful for DIV to conduct reimbursement, especially supervision because the current financial markets are extremely sensitive?
Dr. Bui Khac Son: On February 10, 2010, the National Assembly held a session and issued the resolution on legal documents, ordinances and laws that need to be promulgated and approved in 2011, 2012, consisting of studying and drafting the Law on Deposit Insurance. We base on the reality of Vietnam as well as try to use international experience to build an effective deposit insurance system.
There are 18 core principles for effective deposit insurance systems developed by the International Association of Deposit Insurers that draw on experience of 106 countries having deposit insurance systems. These 18 core principles are also thoroughly discussed, unanimously agreed on and fully implemented by the International Monetary Fund (IMF) or Bank for International Settlements (BIS).
This year, the Prime Minister approves the National Banking and Financial System Assessment Programme, including activities related to deposit insurance. We think that, firstly, that the Law should be promulgated, which reflects the financial system structure, the clear assignment to protect the financial consumers’ interests and ensure the safe and sound development of the banking system.
As we discussed, each agency has its role and responsibilities. And so is deposit insurance agency. It needs to consider risk factors, how to prevent and avoid risks. To do so as well as protect the interests of tens of millions of depositors, it is necessary to have the specific methodology, organizational method, measures and professional process of supervision activity.
Afterwards, the Drafting Committee, the Government and the National Assembly will consider and put them into law in the most appropriate way. In case supervision activity is put into law, it will be much better than now and we will better protect the rights of people and insured institutions.
MC: Ladies and gentlemen, due to the importance of deposit insurance agencies, there are hundreds of countries having deposit insurance agencies in the world. Deposit insurers are much contributing to ensuring the National Financial and Monetary System. And they have helped to increase the people’s confidence in the banking system.
It should be understood that deposit insurers protect not only depositors but also the financial system and stabilize the economy, politics and society in the long run.
Moreover, deposit insurers will encourage people to trust the banking system more and feel secure about their deposits. This is also the key point for people’s untapped money to be circulated.
In order to correctly conduct reimbursement as well as the financial risk supervision, DIV should have an important legal basis, e.i. the Law on Deposit Insurance.
Because of limited time, we will end the program here. We would like to thank Dr. Bui Khac Son and his colleagues for participating in the program. /.