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Maintaining the safety of the system of CIs and protecting the interests of depositors
The State Bank of Vietnam (SBV) stated that, in 2023, the SBV drastic and synchronously implemented measures to ensure the safety of the CI system, enhance credit capital access and absorption, and promptly meet capital needs for production and business, which serves the legitimate living needs and consumption of people and businesses, and supports the process of economic recovery and development. The credit structure continues to focus on allocating capital to priority areas and growth drivers according to the Government's policies, thus actively supporting the process of socio-economic development and recovery.
The stability and safety of the CIs system continued to be maintained, and the legitimate rights of depositors were guaranteed. Credit to sectors with potential risks was strictly controlled. The restructuring of the CIs system linked to bad debts handling and the handling of weak CIs was also implemented drastic and achieved positive results.
In addition, efforts were made to enhance monetary policies in order to ensure the safe operation of the banking system, closely adhere to practical requirements and meet international standards and practices. structured, the SBV coordinated with relevant agencies to focus on completing and submitting to the National Assembly for approval the amended Law on CIs with the goal of improving the mechanism for restructuring weak CIs; improving the administrative and operational capacity of CIs; Strengthen measures to prevent manipulative and dominating actions in the operations of CIs, prevent the risk of credit concentration, and ensure safety in the operations of CIs.
According to SBV's leaders, the overall results of the banking industry in 2023 were positively contributed to by the DIV - a state-owned financial institution operating not-for-profit with the mission of protecting the legitimate rights of depositors, contributing to maintaining the safe and sound of banking operations.
Specifically, the DIV proactively commented on the draft of the revised Law on CIs and reported to the SBV on summarizing the implementation, considering amendments and supplements to the Law on Deposit Insurance (DI) , focusing on key contents: improving the DIV's financial and operational capacity; supplementing its authority and mandates; completing regulations on DI reimbursement and premium.
In the Action Plan to implement the DI Development Strategy until 2025, with an orientation to 2030, the DIV set specific goals such as: striving to reach the ratio of fully published depositors out of total insured depositors to conform to international practice; striving to shorten the actual reimbursement time, and increase the ratio of depositors who grasp the core contents of the DI policy.
In 2023, the DIV focused on synchronously and effectively implementing the following operations: regularly monitoring to detect and give early warnings for insured institutions at risk of endangering system safety; conducted on-site examinations for 100% of public institutions and ad-hoc examinations according to the direction of the SBV Governor; actively communicating DI policies at live events and on mass media channels; completing the target of DI premium assigned by the SBV, exempting DI premium for a number of public institutions that are under special control as regulated by law; advise and respond that the SBV submit to the Prime Minister for approval the charter capital of the DIV to VND 5,281 billion, an increase of 6% compared to 2022.
Also, as assessed by the SBV leaders, the DIV exceeded the assigned business plan and financial plan. By the end of 2023, the DIV's total temporary idle capital and operational reserve fund increased by 14.68% and 15.7% respectively compared to the same period in 2022. This is an important resource for the DIV to better protect the interests of depositors, and readily participate in restructuring credit institutions through financial assistance in the near future.
>Enhancing the role of DIV in protecting depositors and restructuring CIs
In 2024, the global economic outlook and international markets have been continuing to be complicated; and the domestic economy is expected to face many difficulties and challenges. In that context, the SBV will closely monitor developments and the situation to proactively, flexibly and cohesively manage monetary policy tools to support economic growth while controlling inflation, contributing to macroeconomic, monetary market, foreign exchange and banking system stability.
Besides, credit management ensures timely meeting of the capital needs of the economy. The SBV has regularly directed CIs to prioritize credit for production and business areas, priority areas and growth drivers according to the Government's policies; strictly controlled credit in potentially risky areas; create favorable conditions for businesses and people to access bank credit; promoted the expansion of consumer credit accompanied by the safety and soundness, contributing to limiting "black credit"; drastic and effectively implemented the Project on restructuring the system of CIs associated with handling bad debts in the 2021-2025 period; focused on effectively implementing resolution plans for weak CIs; directed CIs to promote the handling and recovery of bad debts.
Regarding the completion of the legal framework for DI activities, the SBV will urgently complete the review of the Law on DI in the first quarter of 2024 and continue to implement the roadmap and plan on Amending this Law in the 2024-2025 period as registered and approved by the National Assembly. This was also one of the important tasks highlighted by the SBV Standing Deputy Governor – Mr. Dao Minh Tu at the recent conference on implementing the DIV’s tasks.
Accordingly, the SBV Standing Deputy Governor requires the DIV to focus on implied amendments to the Law on DI in line with international practices and supplementing mechanisms for the DIV to effectively participate in the process of handling weak CIs. The DIV continues to implement the detailed action plan to implement the DI Development Strategy until 2025, with a vision to 2030; report to the SBV on the results of implementing tasks, solutions, and objectives of the Strategy so that the SBV can report to the Prime Minister as regulated; strengthen examination and supervision, expand the scope of examination as directed by the SBV; promote the role of protecting the legitimate rights and interests of depositors, contribute to maintaining the safe and sound development of the system of CIs – an important and consistent mission of the DIV.
At the same time, the DIV needed to promote communication about the process of amending and supplementing the Law on DI; conduct programs to raise public awareness about DI and its role; actively coordinate with CIs to enhance dissemination of DI and banking operation policies to depositors, especially in rural, remote and remote areas and at people’s credit funds (PCFs).
To contribute together with the banking sector to successfully fulfill the assigned political tasks, Mr. Pham Bao Lam –Chairman of the Board of Directors of the DIV said that among assigned tasks in 2024, DIV would especially pay attention to tasks directed by the SBV’s leaders, specifically, prioritizing the implementation of the Action Plan to implement the DI Development Strategy; improving DI policy and strengthening the role of DIV through research and amending amendments and supplements to the Law on DI; completing the periodic examination and supervision plan for public institutions and the examination plan according to the direction of the SBV Governor.
On January 18, 2024, the 15th National Assembly passed the amended Law on CIs with renewed provisions to ensure a clear, transparent legal basis, address difficulties and obstacles in CIs’ operations. In addition, the Law clearly stipulates liquidity support measures for CIs to ensure system safety and protect the interests of depositors.
Many existing regulations in the Law on CIs aim to strengthen the role of DIV in restructuring the PCF system, such as: participating in the Special Control Board for PCFs; giving opinions on recovery plans for the specially controlled PCFs; participating in developing bankruptcy plans, handling/liquidating assets to pay creditors according to the legal provisions; providing special loans for PCFs under special control, etc. The amended Law on CIs will create momentum for hurriedly the process of amending and supplementing the Law on DI to be consistent with the Law on CIs; thereby helping the DIV to have a clear legal basis to participate more deeply and effectively in the process of restructuring CIs in the coming time, especially in carrying out the important and consistent mission assigned by the Government and the SBV – that is to protect the legitimacy rights and interests of depositors and contribute to ensuring the safety and soundness of banking operations.
Department of Research and International Cooperation (translation)
