DI’s key role in socio-economic life
Mr. Dao Minh Tu - Deputy Governor of the State Bank of Vietnam (SBV):
Since establishment in 1999, the DIV has successfully performed its role in ensuring the legal rights and interests of depositors at insured institutions, thereby contributing to maintaining the safe and sound operation of the financial and banking system.
Over the past 14 years of operation, DI’s important role has been realized in enhancing depositors’ awareness and confidence in the credit institution system. It is the Law on DI passed by the National Assembly (NA) that creates an indispensable legal framework to increase the DI’s role, which is expected to help the banking system’s restructuring process.
Mr. Tran Du Lich - Deputy Head of the Ho Chi Minh City NA Delegation:
DI organization is the State-owned financial institution, with its activities associated with the development of the banking system in particular and the credit system in general. In particular, DI policies aim at protecting deposit of depositors in credit institutions, targeting at socio-political goals which help ensure the safety of people’s property in the market of increasing potential risks, and contribute to minimizing risks of the banking system. DI acts as "safety valve" for the nation’s financial and banking system.
Mr. Nguyen Duc Kien - Deputy Chairman of the NA Committee for Economic Affairs (NACE):
Referring to the national monetary security strategy, DI policy is an indispensable component in the currency market. DIV and SBV as the state management agency along with the National Financial Supervisory Commission (NFSC) are 3 members of the currency market security net.
Mr. La Van Bao – Chairman of Lien Nghia People’s Credit Fund in Lam Dong:
It is necessary to build up public confidence if wishing to mobilize deposits. Public confidence indicates that depositors not only pay attention to flexible interest rates but also seek safe places for their money. Thanks for DI policies that have helped us do this.
Ms. Nguyen Thi Thuy Quynh – a client of ACB living in District 8, HCMC:
When people coming from large cities, rural and remote areas bank with any credit institution, they only feel assured if seeing DI Certification on display. In fact, not all clients are concerned about interest rates, especially in such a complex financial and economic context. What we really need is a guarantee made by the Party, State and relevant bodies, in which DIV is a representative agency, for their deposits.
DI coverage limit up - public confidence further enhanced
Mr. Dao Minh Tu - Deputy Governor of the SBV:
In my opinion, DI coverage limit worth of VND 50 million to the maximum is out of date. Adjustments to it in line with the current conditions of the country will no sooner have been made to submit to the Prime Minister for consideration and approval. It is necessary to logically propose an appropriate DI coverage limit in accordance with macroeconomic criteria and the DI organization’s capabilities. It is also urgent for the DIV to do research on an effective reimbursement scheme in case of bank failure. It is advised that the DIV should pro-actively learn the international experience to propose such an appropriate DI coverage limit in such a manner that can meet depositors’ expectations.
Mr. Cao Si Kiem - Member of the NACE, Chairman of the Association of Small & Medium Enterprises (SMEA):
It is the fact that there is an increasing amount of deposit in comparison with the modest coverage limit worth of VND50 million. The DI coverage limit should be adjusted in accordance with the economic development and the banking system based on different scenarios. It is the task of the DIV that consults with the SBV on proposal of DI coverage limit adjustment to be submitted to the PM for approval, thereby contributing to enhancing public confidence in the banking system.
Mr. Nguyen Duc Kien - Deputy Chairman of the NACE:
The DI coverage limit is advised to adjust up to respective amount of VND100, VND200 million or more with logic calculation and firm foundation. For instance, macro-economic instability makes an increase in CPI; while in fact, the CPI accumulated has seen sharp hikes over the past few years, the amount of coverage limit should be soon increased, aiming at protecting people’s rights.
Mr. Tran Du Lich - Deputy Head of the HCMC NA Delegation:
In response to the global financial crisis, many countries in the world increased DI coverage limit to much higher level or even applied the mechanism of blanket guarantee in order to enhance public confidence.
In 2005, the Government of Vietnam adjusted the DI coverage limit to VND50 million from the previously set VND30 million to protect the majority of depositors in case of bank failure, with the level reaching 5-6 times higher than GDP per capita. The move is said in line with the international practice. Based on the economic growth, CPI, etc…such an amount of VND50 million is now much less than individual deposits reported. In case of bank failure, quite many people will lose money. Therefore, the Government should consider increasing the DI coverage limit 3 times higher than the current limit to make depositors feel secured.
Mr. Ninh Quoc Chinh – Director of Bao Tin People’s Credit Fund in the northern province of Ha Giang:
Locals in Ha Giang are mainly small merchants making businesses in various sectors and have decent income. Statistically, such amounts of deposit worth of more than VND50 million make up 70% of the fund. Thus, the DI coverage limit worth of VND50 million has been no longer appropriate. In order to lure idle capital and enhance depositors’ confidence in People’s Credit Funds, it is suggested that the Government should consider adjustment of the DI coverage limit up to some VND200-300 million.
Ms. Nguyen Thi Thuy Quynh living in HCMC’s District 8:
The VND50-million level is quite low in the current situation, with higher income of people and higher demands for depositing. I think the limit should be raised to VND200-300 million.
Mr. Nguyen Xuan Truong living in the northern province of Ha Giang:
In terms of the economic conditions and people’s living standards in Ha Giang, the VND 50-million level is not appropriate. I suggest the DI coverage limit increasing up to about 3-4 times higher than the current level of VND50 million to help depositors feel secured when sending money in People’s Credit Funds.
Mr. Do Cao Cuoc - Tran Cao living in the northern province of Hung Yen:
The DIV has fully reimbursed the depositors in Tran Cao People’s Credit Fund after its failure with high sense of responsibility. We strongly believe in the DI policies. Those of having deposits worth of VND100-200 million are increasing, it is necessary to consider raising the DI coverage limit to VND100-200 million, making us feel assured to deposit in People’s Credit Funds.
It is necessary to soon implement the risk-based differential premium assessment model
Mr. Dao Minh Tu - Deputy Governor of the SBV:
The flat-rate premium system is not smart in the current situation. However, the new model is a rather complex one. The application of such a model without clear explanation and public awareness may make people misunderstood of weakness of a credit institution, giving negative impacts to public confidence. Therefore, it is vital to set up a roadmap for the implementation.
Mr. Nguyen Duc Kien - Deputy Chairman of the NACE:
The Law on DI has clearly stipulated that the adoption of risk-based differential premium assessment is a must for credit institutions, which is perfectly reasonable and also in accordance with market rules. If credit institutions have low safety factors, high bad debt, a high level of cross ownership, it is inevitably subject to pay higher premium. It is essential to establish a competitive environment.
Mr. Cao Si Kiem - Member of the NACE, Chairman of the SMEA:
Absolutely, adoption of risk-based differential premium assessment goes in line with international practices, which helps the DIV and regulatory agencies to evaluate banks accurately, thereby creating a fair competitiveness among credit institutions, which, in turn, will improve efficiency of operation and minimize risk.
Besides criteria used for evaluating and rating credit institutions as stipulated by the SBV and in accordance with international standards, it is necessary to strengthen coordination and information sharing among the DIV and other regulatory agencies - including the SBV, NFSC, Ministry of Finance (MOF) – as steady foundation to credit institution ratings. This will help determine an appropriate DI premium applied to each of insured institutions.
Mr. Nguyen Xuan Thinh - Director of the Ha Giang-based SBV’s Branch:
In the short term, the Government should consider the adoption of a risk-based differential premium system instead of the current flat-rate one required to all – including institutions of good and bad performance.
Such application will enhance transparency of credit activities and promote fair competitiveness among credit institutions; while it will also help them operate more effectively and avoid systemic risks.
Mr. Hoang The Cuong – Chairman of Lam Viet People’s Credit Fund:
DI premium assessment should be based on risk levels of each of credit institutions or based on classification, assessment on credit quality.