Ratification of the law on deposit insurance will be good for administration at macro-level

Thus far, this institution has paid insurance to nearly 2,000 depositors at approximately 20 people’s credit funds dispersing across the country; thus no depositors has ever lost their deposited money. This helps avoid bank runs leading to bank failures and ensures public confidence in the banking system, especially in the context that the international financial markets are undergoing complex changes. If deposit insurance policy is designed properly, it will be beneficial to not only people but also administration at marco-level as the core mission of the DIV is to protect depositors and to maintain the safety of the banking and financial system.

Deposit insurance policy should be developed in compliance with the international practices

Concerning this issue, Mr. To Ngoc Hung, General Director of Banking Academy said:
The DIV has achieved a lot of successes in many aspects and we should follow the international trend. We must not be an outsider while the entire world is engaging in the globalization process. Many activities carried out presently by the DIV are based on international experiences. The DIV is not a political or policy making organization but a state-run financial one which brings benefits to people, businesses and the nation.

Also, according to Mr. Hung, for the development of the DIV, human resources are the decisive factor. Thus, the DIV’s staff should be strengthened in terms of quality and capability through domestic and international training in order to meet the demands of the development of the financial and banking sector. This is a long-term task. However, another important factor contributing to good implementation of deposit insurance policy is the proper adjustment of the current mechanism. Mr Hung went on to say that the model for organization and operation of the DIV has been basically strengthened, but a review of its 10-year operation is needed. We should assess whether the regulations on deposit insurance which have been promulgated for 5 or 10 years are still suitable and what model is relevant. In the context that the economy in general and the financial and banking system in particular have been continuously changing over past years, at present deposit insurance has shown a number of shortcomings, especially, low insurance limit, financial capability, functional model and unclear coordination between the DIV and other organizations specializing in financial supervision. Legal stipulations on bank failures resolution regarding the role of the DIV are not well suited to reality and not in compliance with the international practices. All the above have adversely affected the effectiveness of deposit insurance policy and public confidence in the financial and banking system. Therefore, it is necessary to adjust the policy through the Law on Deposit Insurance.

The DIV is pro-active and responsible for building the Law on Deposit Insurance

Mr. Bui Khac Son – The DIV’s General Director said: the DIV has obtained good results in implementing deposit insurance policy thanks to efforts made by the DIV’s staffs to overcome difficulties and look forwards to future. One of remarkable results is the DIV’s operational capital has increased sixfold compared with the charter capital of 1000 billion VND originally allocated by the Government. To ensure its financial capability, the DIV will ask the Prime Minister for permission to supplement its charter capital. According to the international practice, the DIV’s insurance fund has not reached the standard despite annual increases. The DIV has conducted off-site supervision as annually scheduled and achieved positive results; initially carried out Project on Financial Sector Modernization and Information Management System (FSMIMS) to improve its operation towards a advanced model meeting international standards; information, education, and communication work has been carried out in a more professional manner in order to enhance public confidence in the financial and banking system;  other assistance activities have ensured effectiveness with increasingly higher quality. Especially, the DIV has promoted the completion of the legal basis for deposit insurance in Vietnam and spent a lot of time, efforts on making reports, taking part in restructuring the banking industry. In the new year, the DIV will be proactive and responsible for participating in the Law on Deposit Insurance of Vietnam.