Trang Chủ
From the allocated initial capital of 1,000 VND billion, by the end of June 2024, the total capital of the DIV reached more than 117 VND trillion, an increase of nearly 15% over the same period in 2023 and more than 7% compared to December 31, 2023. This is an available resource for the DIV to reimburse depositors when obligations arise and effectively participate in restructuring the system of CIs through financial assistance.
The legal framework for the DIV’s roles and operations has been gradually improved. In addition to the Law on Deposit Insurance promulgated in 2012, the functions and tasks of the DIV are also regulated in the Law on Credit Institutions. The Law on Credit Institutions 2024 took effect on July 1, 2024, containing many new positive contents. It is expected to exert a great impact on ensuring the healthy and stable development of the CIs’ financial performance. In particular, there is an additional chapter that stipulates early intervention of public institutions, which was developed from previous regulations together with research and evaluation of practical situations for more than five years (from 2018 to the present).
More specifically, the Law on Credit Institutions 2024 amends and supplements cases where early intervention must be undertaken; at the same time, it stipulates specific requirements and plans for CIs to apply during the intervention period. This regulation is expected to contribute to stabilizing the operations of CIs in particular and the process of restructuring CIs in general. This is also a tool to support the State Bank of Vietnam (SBV) and other related agencies and organizations in managing CIs and the whole financial market. However, the relevant agencies also need to promptly issue guiding documents for practical implementation.
The role of the deposit insurer in early detection and timely intervention in insured institutions
According to international experience, early detection and timely intervention of insured institutions is very important for the effective and stable operation of the deposit insurance system. This process helps the deposit insurance thoroughly prepare for a bank failure by accumulating and allocating finance, human resources, and other necessary resources to make payouts to depositors or negotiate the transfer of deposits as part of a Purchase and Assumption transaction. Timely intervention at an early stage can reduce the likelihood of bank resolution, thereby contributing to maintaining systemic stability and public confidence, enhancing depositor protection, and minimizing losses to deposit insurance funds.
In Vietnam, when a CI is defined to need early intervention, the SBV sends a written notice to the CI, clearly stating the requirements and limitations applied to that CI. The requirements include developing and updating recovery plans to promptly address any concerns in the institution's operations. The DIV supports the SBV in the early detection and timely intervention process through off-site supervision, on-site examination, and participation in the special control process. Depending on specific circumstances, the nature and level of risks requiring early intervention for credit institutions and foreign bank branches, the DIV may participate in one or several early intervention measures such as coordinating the development of DI payout plans, providing special loans to support liquidity when CIs face the risk of insolvency or fall into insolvency, thereby threatening systemic stability, and supporting the implementation of remedial plans and support plans before special control, or forced transfer plans, etc.
Fulfilling the legal basis for the DIV's early intervention
The Law on Credit Institutions 2024 upgrades the position and responsibility of the DIV in early intervention and resolution of insured institutions. It ensures that the DIV will continue to promote its role in the context that the restructuring of CIs and the handling of bad debts are underway in the 2021-2025 period. The changes also serve as an important premise for the process of amending the Law on Deposit Insurance to ensure the consistency with the Law on Credit Institutions. The Law on Credit Institutions 2024 clearly orients the use of deposit insurance scheme in the early intervention process through specific regulations on the rights and obligations of the deposit insurance and additional powers for the DIV to participate in the restructuring and handling of people's credit funds (PCFs) ).
On the DIV side, the amended Law on Deposit Insurance is one of the important tasks set out in the Deposit Insurance Development Strategy to 2025, with orientation to 2030 approved by the Prime Minister. It states that amendments and supplements to the Law on Deposit Insurance include improving the effectiveness of examination, supervision and early warnings; regulations on the rights and obligations of the deposit insurance in supporting the SBV’s examination and supervision functions over PCFs.
More specifically, the DIV needs to effectively improve its coordination and information sharing with the SBV and relevant agencies; build a reliable, complete, integrated information and data system; regularly evaluate the public institutions' current situation to forecast the reimbursement, and have plans to mobilize resources if public institutions go insolvent or bankruptcy.
In addition, the DIV needs to improve the efficiency of examination, supervision, and early warnings through conducted in-depth examinations of declared deposits at 100% of declared institutions according to supervision results; improve risk monitoring methods and sets of monitoring indicators, focusing on detecting and giving early warnings on potential risks for public institutions, to accord with market developments and the SBV’s requirements in each period between 2025 - 2030; apply advanced supervision models to ensure that insured institutions comply with legal regulations on insured deposits, detect and give early warnings on potential risks to insured institutions for promptly protecting the rights and interests of depositors.
In addition, the DIV participates and coordinates closely with the SBV in the special control process over troubled institutions to ensure the rights of depositors; implement functions and tasks specified in the Law on Credit Institutions 2024; and develop projects to apply additional methods and measures to handle troubled institutions which are consistent with international practices and Vietnam’s actual conditions.
In the future, the DIV will strengthen the efficiency of deposit insurance payouts and assets liquidation through extensive research and proposals for amendments and supplements to the Law on Deposit Insurance to prevent deposit insurance profiteering and enhance the responsibility of coordination between the DIV and related agencies; create a legal corridor for the DIV to participate in liquidating assets of public institutions to maximize recovery value; develop contingency plans and reimbursement simulations for each type of public institutions; develop a manual for each type of public institutions to standardize the payout process, diversify payout methods shorten, and apply information technology to actual payout time.
Department of Research and International Cooperation (translation)
