Trang Chủ
Completing the legal framework after 12 years
In her presentation of the Government's proposal at the meeting, Governor of the State Bank of Vietnam (SBV), Ms. Nguyen Thi Hong noted that the drafting of the Law on Deposit Insurance (revised) was driven by urgent political, legal, and practical needs. On the political and legal front, this task was set forth in the Standing Committee’s Plan No. 81/KH-UBTVQH, which aims at institutionalizing the Politburo’s Conclusion No. 19-KL/TW on improving institution and renovating law-making activities. The Revised Law also aligns with policies for private sector development and the strategies of the banking sector and the deposit insurance system.
SBV Governor Nguyen Thi Hong speaks at the session.
After 12 years in force, the 2012 Law on Deposit Insurance has yielded significant results, playing a crucial role in protecting depositors and stabilizing the CI system. However, the practical implementation revealed shortcomings that need to be addressed. For instance, the rights and obligations of both insured institutions and the deposit insurer itself require adjustments to be compatible with current legal provisions and reality. The insurance premium mechanism lacks flexibility and does not incentivize CIs to operate safely. Furthermore, the deposit insurance coverage limit and triggers for payout are not synchronized with relevant laws, thus failing to maximize depositor protection. Notably, the current regulation only allows for payouts when a CI has been declared bankrupt, risking significant delays and undermining the deposit insurance’s role as a psychological "shield" for depositors.
In addition, the 2024 Law on CIs introduced key provisions regarding early intervention, special control, and the deposit insurer’s expanded role in handling weak CIs. However, some provisions of the Law defer implementation to the Law on Deposit Insurance, creating an urgent need to amend the latter. This revision is critical to ensure consistency and provide a legal basis for the Deposit Insurance of Vietnam (DIV) to perform its assigned tasks effectively.
In light of these requirements, Governor Nguyen Thi Hong stated that the Government had assigned the SBV to take the lead in preparing the policy dossier, gather relevant opinions from other agencies, and provide comprehensive responses and clarifications. The Ministry of Justice has appraised the Draft Law, and the Government’s law-building meeting agreed to submit it to the National Assembly for consideration at its 10th session.
Major Innovations to Strengthen Depositor Protection and Systemic Risk Handling
The Draft Law on Deposit Insurance (revised) consists of 8 chapters and 44 articles. This includes amendments to 28 articles, the addition of 7 new articles, the repeal of 2 articles, and the retention of 9 articles unchanged. The comprehensive revision introduces breakthrough provisions, primarily focused on the following key areas:
Expanding rights and obligations of the deposit insurer
The deposit insurer shall have the right to examine insured institutions according to plans assigned by the SBV; borrow special loans from the SBV; participate deeply in restructuring CIs, such as appointing qualified personnel to management boards of people's credit funds placed under special control; engaging in assessing restructuring plans; purchasing long-term bonds from CIs receiving mandatory transfers; or providing special loans to insured institutions.
Flexible deposit insurance premium mechanism
The Draft Law empowers the SBV Governor to set either a flat premium rate or differentiated premium rates tailored to the specific circumstances of different periods. It also introduces a mechanism to temporarily defer premium payments for CIs placed under special control, supporting their financial recovery while ensuring repayment obligations are met.
Accelerated timing and increased the deposit insurance coverage limit
The deposit insurance payout obligation can be triggered earlier. This can occur immediately upon the approval of bankruptcy plans, when the SBV confirms the foreign bank branch’s insolvency, or suspends deposit acceptance by a CI when cumulative losses exceed 100% of its charter capital. In special cases, the SBV Governor may decide to pay all insured deposits. These regulations significantly increase depositor protection and prevent chain failures.
Expanding investment activities and strengthening the financial capacity of the DIV
The Draft Law allows the DIV to buy and sell bonds and certificates of deposit issued by commercial banks with state capital or state-owned enterprise capital exceeding 50%, place deposits with these banks, and engage in other investments as regulated by the Government. It also clearly defines risk control and management requirements, with the SBV being tasked to issue investment methods and governance processes to ensure capital safety and efficiency.
Participating in handling weak CIs and crises
The DIV is authorized to provide special loans without collateral and interest to CIs experiencing mass deposit withdrawals, or to facilitate recovery and mandatory transfer plans. In the event of an incident or crisis posing a threat to systemic safety, the Government is empowered to decide on necessary measures, including extraordinary ones, and must report such actions to the National Assembly at its nearest session. This mechanism is crucial for the DIV to serve as the ultimate “backstop” in protecting national financial stability.
Defined decentralization and authorization aligned with the Party’s policies
The Draft Law continues to assign the Government the responsibility to regulate the DIV’s organization, operations, management, and capital investment; vest the Prime Minister with the power to approve the deposit insurance development strategy; and delegates a number of specific responsibilities from the Government and the Prime Minister to the SBV Governor, such as stipulating information provision procedures, deposit insurance certificate re-issuance, premiums and the deposit insurance coverage limit. Furthermore, it transfers some functions of the SBV to the DIV to enhance the DIV’s autonomy and accountability. The Draft Law also includes transitional clauses governing the handling of financial instruments issued prior to the Law’s effect date and CIs placed under special control to ensure policy continuity and stability.
Continuing the drafting of the Law
In his preliminary appraisal report, Chairman of the Economic and Financial Committee, Mr. Phan Van Mai, affirmed the necessity of the Draft Law based on political, legal, and practical justifications outlined in the Government’s submission and the accompanying dossier. According to Mr. Mai, the dossier fundamentally complies with the Law on Promulgation of Legal Documents. However, he requested the lead drafting agency continue reviewing the Draft to ensure alignment with the Party’s views, constitutionality, legality, and legal system consistency, and to assess resources and conditions necessary for the enforcement of the Law.
Regarding specific provisions, the appraisal agency emphasized clarifying the rights and obligations of the DIV (Article 14). Key points include: defining the role of the DIV and insured institutions in assessing premiums, determining the premium base used for payment; clarifying the scope, subjects and content of examination to avoid duplication with the functions of relevant supervisory agencies; stipulating specific cases for the DIV to receive state budget support, borrow from other CIs with government guarantee, or obtain special loans from the SBV; and clearly delineating the SBV’s authority, the DIV’s tasks and powers, and the roles of the Co-operative Bank of Vietnam in arranging personnel to participate in the management of CIs placed under special control.
Regarding deposit insurance operations (Chapter III), the Committee endorsed the proposed premium regulations but recommended carefully studying premium levels to balance stable revenue and insured institutions’ financial capacity; a roadmap for adopting a differential premium system based on CI classification; a premium sharing mechanism with People’s Credit Fund System Safety Guarantee Fund to reduce financial burdens; and premium deferment policy for CIs placed under special control integrated into approved restructuring plans, in which the deferral period, interest calculation and handling plans in case of failure to repay are clarified.
Regarding the deposit insurance coverage limit (Article 24), the Committee agreed that entrusting the SBV Governor to set period-specific limits is appropriate. However, specific adjustment principles and a transparent approval process for payouts exceeding the limit should be established. Furthermore, the alignment between the deposit balance used for premium assessment and the insured amount payable must be clarified. It is advisable to avoid stipulating detailed payout procedures within the Law itself.
Concerning the organization of deposit insurer (Chapter IV), the appraisal agency recommended reviewing and assessing the legal framework for organizational models and operations, identifying obstacles; for investment activities (Article 31), it is necessary to identify and assess risks, develop plans for prevention, control, and risk management, analyze capital efficiency, ensure mechanisms for capital preservation, liquidity, and safety, clarify the role of the SBV as the representative owner in deciding investment criteria, portfolios, and structures as well as risk control, and stipulate the responsibilities of related parties in risk handling. As for financial regimes, accounting, bookkeeping, and auditing (Article 32), it is necessary to ensure consistency with the Law on Accounting and accounting standards suitable for the model and nature of the deposit insurer’s activities.
For contents related to participating in the resolution of CIs placed under early intervention, special control, and crisis handling (Chapter VII), the Economic and Financial Committee recommended specifying the maximum scale of special loans as a percentage of the total Operational Reserve Fund, developing transparent approval criteria, strengthening supervision of loan use, clarifying cases of special loans from the SBV and from the deposit insurer, along with guidelines for conditions, interest rates, and collateral; at the same time clarifying the political, legal, and practical grounds for regulations on payouts in special cases (Article 38) and participation in crisis handling (Article 41), ensuring alignment with resources and avoiding overlaps with the Law on CIs, and considering removing the provision for the Government to decide on other extraordinary measures as these are already stipulated in Clause 4 of Article 162 of this Law.
Department of Research and International Cooperation (translation)
