Trang Chủ
Theoretical basis for amending the Law on Deposit Insurance
Deposit insurance is a guarantee that insured depositors will be reimbursed up to an insurance coverage limit when an insured institution falls into insolvency or bankruptcy. Insured depositors are individuals at insured institutions whose deposits are protected by deposit insurance policy. These institutions include credit institutions and branches of foreign banks established and operating under the Law on Credit Institutions, which accept individual deposits.
The development of the Deposit Insurance of Vietnam (DIV) contributes to the stability of Vietnam’s financial and banking system and fosters the nation’s socio-economic growth. The main goal of the deposit insurance system is to protect the legal rights and interests of depositors, maintain stability in the system of credit institutions and foreign bank branches, and ensure the safe and sound development of banking activities. The DIV’s role should be further strengthened in the process of restructuring weak insured institutions and resolving non-performing loans.
Amidst the Government's efforts to implement comprehensive measures to promote the National Financial Inclusion Strategy, the DIV plays a key role in protecting financial consumers in general and depositors in particular. The United Nations identifies financial inclusion as a critical solution to achieving 07 out of the 17 Sustainable Development Goals by 2030. The G20 recognizes financial inclusion as one of its main pillars for development. The ASEAN countries also highlight financial inclusion as one of the three pillars in the ASEAN Vision 2025 and established a Working Committee on Financial Inclusion in 2016 to promote collaboration on financial inclusion across member countries. To date, over 80 countries worldwide have been implementing their national financial inclusion strategies.
According to the Core Principles for Effective Deposit Insurance Systems developed by the International Association of Deposit Insurers (IADI), deposit insurers protect depositors' interests through four main functions: (1) public awareness to enhance public understanding, (2) offsite supervision and onsite examination, (3) involvement in special controls, and (4) reimbursement. Thus, deposit insurers promote financial inclusion by strengthening depositors’ confidence in financial institutions, ensuring financial system stability, and encouraging more savings among the population.
On public awareness: Raising public awareness is one of the four core functions of deposit insurers aiming to protect depositors, enhance depositors’ confidence in the financial system, and improve their understanding of deposit insurance benefits. These efforts encourage the use of formal and lawful financial services, thereby fostering financial inclusion.
On offsite supervision and onsite examination: The DIV safeguards the legitimate rights and interests of depositors by implementing specialized deposit insurance operations including constant supervision and periodical examination. These activities help detect violations of deposit insurance regulations and ensure banking operational safety, providing timely recommendations to the State Bank of Vietnam (SBV) for appropriate actions.
On special control: The DIV’s involvement in resolving weak credit institutions should be enhanced via researching and proposing measures to handle underperforming credit institutions. The 2024 Law on Credit Institutions provides clearer stipulations on the DIV's duties and roles in contributing effectively to the restructuring of credit institutions. This serves as a foundation for the DIV to help stabilize credit institutions and ensure the safe and sound development of banking operations.
On reimbursement: In case of arising reimbursement obligations, the DIV will make payouts to insured depositors accordingly.
Political and legal basis and orientation for amending the Law on Deposit Insurance
The National Assembly Party Delegation’s Scheme No. 292-ĐA/ĐĐQH15 dated October 20, 2021, guiding the Legislative Program for the National Assembly - Term XV (2021-2026) states that: "Continuing to improve the legal framework for banking operations, ensuring that the regulations governing the activities of the State Bank of Vietnam are aligned with related laws and meet practical requirements; supporting the restructuring of credit institutions and resolving non-performing loans to enhance the financial capacity, competitiveness, governance, and operational efficiency of credit institutions. Developing policies to promote the development of the credit institution system, especially key domestic credit institutions, aiming to reach the development level of the top 4 ASEAN countries by 2025; accelerating the restructuring of banking services by strengthening the application and development of modern technology, and promoting cashless payments in the economy. The legislative task to be implemented includes researching and reviewing the Law on the State Bank of Vietnam and the Law on Deposit Insurance."
The 2024 Law on Credit Institutions
Based on the provisions of the 2024 Law on Credit Institutions, the initial study and discussion of policies in the proposal to amend and supplement the Law on Deposit Insurance suggest five specific policies as follows: (i) Policy 1: Improving regulations on deposit insurance premium; (ii) Policy 2: Enhancing the financial capacity and operations of the DIV; (iii) Policy 3: Supplementing the powers and duties of the DIV; (iv) Policy 4: Accomplishing legal provisions for the DIV to further participate in the restructuring of weak credit institutions in Vietnam; (v) Policy 5: Accomplishing regulations on reimbursement. However, the promulgation of the 2024 Law on Credit Institutions has significantly affected several proposed policies for the revision of the Law on Deposit Insurance as some issues related to the deposit insurance scheme and the duties of the DIV need to be reviewed, and proposed for inclusion in the Law on Deposit Insurance as a basis for actual implementation.
Based on the provisions of the 2024 Law on Credit Institutions, the DIV should, within its assigned functions and tasks, study and propose amendments and supplements to each policy in the proposal to amend and supplement the Law on Deposit Insurance. This also involves assessing the current situation, challenges, and difficulties in the implementation of the Law, proposing specific amendments and supplements to each article of the Law on Deposit Insurance; evaluating the impact of proposed changes, and compiling international experience. The research results will serve as a basis for the DIV to continue studying and proposing amendments and supplements to the Law on Deposit Insurance as required by the SBV.
Through review, in addition to proposed content to address challenges and obstacles in implementing the Law on Deposit Insurance, some major issues impacted by the 2024 Law on Credit Institutions need to be studied to propose revisions to the policies in the proposal for amending the Law on Deposit Insurance as follows:
* On deposit insurance premiums
The 2024 Law on Credit Institutions stipulates that the DIV shall develop a plan to increase deposit insurance premiums to repay special loans from the SBV in case the DIV’s Operational Reserve Fund is insufficient to reimburse depositors under an approved bankruptcy plan. This issue needs to be studied and proposed for amendments and supplements to the Law on Deposit Insurance due to its direct impact on the operations of insured institutions.
* On trigger time of deposit insurance reimbursement
The 2024 Law on Credit Institutions stipulates that the DIV shall coordinate with credit institutions placed under special control to reimburse the insured depositors according to the approved bankruptcy plan. Therefore, it is necessary to study and propose specific, clear, and consistent amendments and supplements to the Law on Deposit Insurance regarding the trigger time of deposit insurance reimbursement to ensure practical implementation.
* On deposit insurance coverage limit
The 2024 Law on Credit Institutions provides that the DIV shall recommend the SBV to submit to Prime Minister a proposal to set a deposit insurance coverage limit, which may cover the total insurable deposits of individuals at people's credit funds.
Currently, the maximum amount that the DIV reimburses for all insurable deposits (principal and interest) of an individual at an insured institution upon the occurrence of an insurance payment obligation is VND 125 million (under the Prime Minister’s Decision No. 32/2021/QĐ-TTg dated October 20, 2021).
Thus, under the 2024 Law on Credit Institutions, the deposit insurance coverage limit is either VND 125 million according to the Prime Minister’s Decision or a specific case-by-case limit proposed by the SBV and approved by the Prime Minister, potentially covering the full amount of insurable deposits. In case of a case-by-case limit applied, the DIV’s financial capacity might be inadequate.
Therefore, it is necessary to study and propose amendments and supplements to the Law on deposit insurance regarding the coverage limit to ensure suitability, effective implementation of the 2024 Law on Credit Institutions and timely protection of depositors’ rights in alignment with the DIV’s financial capacity as well as with international practices.
* On several tasks of DIV
Certain tasks of the DIV in early intervention and special control of credit institutions as prescribed in the Law on Credit Institutions 2024, include:
- Participating in assessing the feasibility of recovery, merger, consolidation, and capital transfer plans for people’s credit funds.
- Providing special loans to commercial banks, the Cooperative Bank, people's credit funds and microfinance institutions under the Law on Deposit Insurance.
- Purchasing long-term bonds issued by institutions that assume commercial banks under the SBV’s decision on mandatory transfer.
- Participating in developing bankruptcy plans of credit institutions placed under special control.
- Coordinating with credit institutions to reimburse depositors under approved bankruptcy plans.
- Taking special loans from the SBV if the DIV's operational reserve fund is insufficient to reimburse depositors under an approved bankruptcy plan.
- Using credit institutions’ repayments for special loans, revenues from the sale of securities held by the DIV, proceeds from the liquidation of assets owned by credit institutions that take special loans provided by the DIV, and deposit insurance premiums to repay special loans to the SBV as top priority.
To enable the DIV to fulfill its tasks and ensure alignment with the 2024 Law on Credit Institutions, provisions on the DIV’s above-mentioned tasks need to be included in the proposed amendments and supplements to the Law on Deposit Insurance. Specific regulations are required for special loans and long-term bond purchases, including circumstances, conditions, procedures, authorities, funding sources, and loss management, to ensure the DIV’s practical implementation.
For special loans from the SBV in case the DIV’s operational reserve fund is insufficient to reimburse depositors under an approved bankruptcy plan, specific regulations are required as a basis for implementation. These regulations should clearly define the rights and obligations of the DIV related to special borrowing from the SBV to ensure consistency with the 2024 Law on Credit Institutions. Furthermore, it is necessary to explicitly specify the circumstances, conditions, procedures, and processes for obtaining special loans from the SBV, as well as the source of funds for repaying the special loans.
In the coming time, the DIV should continue to study and review the provisions of the 2024 Law on Credit Institutions and update guiding documents to revise, supplement, and issue new internal regulations promptly. It should also coordinate with the Legal Department and relevant SBV units to review and amend policy proposals on the Law on Deposit Insurance, ensuring consistency with the 2024 Law on Credit Institutions, addressing challenges in implementing the Law on Deposit Insurance, and establishing a comprehensive legal framework to ensure optimal protection of depositors’ rights, maintain stability in the credit institution system, and ensure the safe and sound development of banking operations.
Prime Minister’s Decision No. 1660/QD-TTg dated December 30, 2022, approving the Development Strategy for Deposit Insurance through 2025, with a vision towards 2030
The Prime Minister’s Decision No. 1660/QD-TTg dated December 30, 2022, approving the Development Strategy for Deposit Insurance through 2025, with a vision towards 2030 affirms the approach of the Party and the State, which stresses: "Strengthening the research and application of international standards into deposit insurance activities and related operations of insured institutions. The application of modern science, technology, and the encouragement of innovation and creativity alongside the development of high-quality human resources are key elements for the rapid and sustainable development of the deposit insurer."
The key objective is to improve the quality and efficiency of deposit insurance operations, including issuing deposit insurance certificates, reporting information, conducting supervision and examination, participating in special control, detecting and providing early warnings of potential risks to insured institutions, effectively engaging in restructuring weak credit institutions; assessing and collecting deposit insurance premiums, managing capital and investments, communicating deposit insurance policy, and reimbursing depositors in line with international practices and Vietnamese legal regulations. The DIV’s financial capacity should be strengthened to realize the State's commitment and increase depositors' confidence in deposit insurance policy.
The DIV’s goal is to ensure that by 2025, the ratio of fully insured depositors to insured depositors will reach 92% - 95% in alignment with international practices. Another goal is to shorten the actual reimbursement time from the trigger of reimbursement obligation to 30 working days by 2025 and 15 working days by 2030 in order to help depositors access their deposits quickly when the insured institution is being resolved. It is also targeted that 45% (by 2025) and 55% (by 2030) of depositors will comprehend the core contents of deposit insurance policy. Based on these, the Government has outlined key tasks, solutions, and an implementation roadmap for the Development Strategy for Deposit Insurance through 2025, with a vision towards 2030, including the orientation for amending the Law on Deposit Insurance, specifically as follows:
Firstly, amending and supplementing the Law on Deposit Insurance and the system of documents guiding the implementation of the Law on Deposit Insurance. Completing the regulations on the financial regime of the DIV. Completing the legal framework and process for issuing, withdrawing, and managing the certificate of participation in deposit insurance. Improving the deposit insurance certification process to ensure the application of information technology to enhance the efficiency of issuing deposit insurance certificates, guaranteeing the rights and interests of the insured institutions. Proposing amendments and supplements to the listing of the deposit insurance participation certificate to align with common practices. Studying and proposing amendments and supplements to the Law on Deposit Insurance regarding the rights and tasks of the DIV in supporting the examination and supervision functions of the SBV over the people's credit funds.
Secondly, conducting researches and propose amendments and supplements to the Law on Deposit Insurance regarding the responsibility of insured institutions in assessing and paying deposit insurance premiums. Studying and proposing amendments and supplements to the Law on Deposit Insurance to:
(i) Ensure the prevention of deposit insurance frauds, enhancing the responsibility for coordination between the DIV and relevant agencies;
(ii) Create a legal framework for the DIV to participate in the liquidation of assets of insured institutions in order to maximize the recovery value. Studying and proposing amendments and supplements to the Law on Deposit Insurance regarding the responsibility of insured institutions to cooperate with the DIV in promoting the deposit insurance policy. Studying and proposing mechanisms for providing legal protection to organizations and individuals employed by the DIV during the performance of assigned tasks.
Thirdly, researching and proposing relevant authorities to amend and supplement the related regulations to ensure a full legal basis for increasing the DIV’s charter capital to VND 10,000 billion by 2025 and VND 15,000 billion by 2030 from self-accumulated sources and other legal capital sources to ensure the DIV’s financial capacity for realizing the State's commitment and increasing the confidence of depositors in deposit insurance policy, ensuring resources for the effective implementation of deposit insurance activities. Strengthening the DIV’s financial capacity by allowing the DIV to diversify the forms and portfolio of its investment, including:
(i) Buying and selling government-guaranteed bonds;
(ii) Depositing money at commercial banks with high performance;
(iii) Buying and selling bonds, promissory notes, bills and certificates of deposit issued by commercial banks with high performance;
(iv) Buying and selling local government bonds with high credit ratings in accordance with the State Budget Law, Public Debt Management Law and guiding documents. It is necessary to add provisions for borrowing from the SBV when the DIV’s capital is insufficient to reimburse depositors.
The SBV is responsible for coordinating with relevant ministries, agencies, and organizations to propose the Government submit to the National Assembly the amendments and supplements to the Law on Deposit Insurance. The DIV is responsible for reviewing and putting forward to the SBV a report to the Government on amendments and supplements to the Law on Deposit Insurance, which would be then submitted to the National Assembly.
National Assembly’s Judicial Committee
Research and International Cooperation Department (translation)
