Mr. Vu Viet Ngoan asked the DIV to report on banking activities such as liquidity, interest rates, and prudence standards for the banking system and core issues concerning the Law on Deposit Insurance.
The Director of Supervision Department 1 reported on supervision and research results for assessing interest rate trends, liquidity of the banking system, the relation between raising capital and effectiveness of banks as well as the effects of raising capital ….
In addition, the DIV also presented the overview on and assessment of the implementation of the current deposit insurance policy including kinds of insured depositors, insured depositions, maximum deposit insurance coverage, insurance premiums, basic operations of the DIV (examination, supervision, financial assistance, pay-out, public relation) as well as relations between the DIV and relevant authorities.
A representative of Research and International Cooperation Department made a presentation on international experiences in developing an effective deposit insurance system including constructing steps (identifying public policy’s objectives, building the law which stipulates the establishment, functions and tasks of the deposit institution, the implementation of public policy and assessment of the implementation); deposit insurance models (risk-minimizer, pay-box with extended powers and pay-box); development trends; supervisory function of a deposit insurance system; bank failure resolution, moral hazard; the role of the deposit insurance institutions in resolving bank failures in the world; core principles for effective deposit insurance systems and methodology for compliance assessment.
The DIV put forward some recommendations including the deployment of the draft bill on deposit insurance in accordance with the approved plan; the law on deposit insurance should inherit strong points of Decree No 89 and No 1009 as well as other legal documents regulating deposit insurance. The Law should have all necessary contents in order to effectively implement deposit insurance policy, to best protect the interests of depositors, to clearly identify a model and to develop a relatively independent deposit insurance institution in compliance with international practices. The DIV also answered some questions posed by the Committee on Economy such as the necessity of the promulgation of the Law on deposit insurance; the organizational model of the DIV; deposit insurance coverage; insurance premium calculation methods; and whether deposits denominated in foreign currencies should be insured.
Concluding the meeting, Mr. Vu Viet Ngoan said for 12 years since its establishment, the DIV has been developed in terms of size and types of activities, achieving important tasks such as setting up a warning information system, actively applying prudence standards in accordance with international experiences, through which the role and the necessity of the DIV has been highlighted. Since the financial crisis systemic safety has been being discussed extensively worldwide, Vietnam, thefore, could acquire a lot of both practical and theoretical knowledge regarding this including the role of deposit insurance system in maintaining systemic safety.
The biggest challenge in building the Law on deposit insurance in Vietnam is that there are still many different points of view. In the law building process, some groups of issues need to be clarified such as the necessity of the deposit insurance institution for the economy, the safety of the financial and banking system and people; the functions, organizational structure of the deposit insurance institution; whether the DIV should engage in financial warning and supervision system or not; the legal position of the DIV (independent to what extent? relations with other organizations?); designing deposit insurance instruments to contribute to keeping the banking industry’s operation in accordance with market principles; determining deposit insurance coverage, insurance premiums, proper types of insured deposits; bank failure resolution process and the role of the DIV.