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Choose the right investment method
Ms. Bui Thi Thanh in Hanoi, after retiring, has saved several hundred million dongs for old age care. Although some friends persuaded her “to lend money to my family members” or "invest in my children's company" with attractive interest rates that are many times higher than that of credit institutions, she insisted on depositing at the banks. According to her, credit institutions participating in deposit insurance means that there is a guarantee by the Government, the SBV, the deposit insurer. If unfortunately, the credit institution fails, she will still be insured.
In fact, today, when depositing money into credit institutions, people are not only interested in high or low interest rates, but also want to balance and harmonize profits, deposit safety and possible risks. In particular, deposit insurance is one of the last protection measures for depositors from the risks of deposit loss. In addition to the deposit protection measures of the authorities in accordance with the law, in the context of the volatile financial market, people have become more responsible for their hard-earned money, become "wise depositors", "choose to deposit money" into credit institutions licensed to operate legally instead of chasing high interest rates. Deposit insurance is one of the important factors motivating people to seek formal banking services. Statistics of the SBV show that residential deposits into the banking system for many consecutive years tend to increase and continue to rise recently. Only in September 2022, banks' deposits increased by 6.38% compared to the end of 2021 (with more than 5.6 million billion VND). Previously, in August of the same year, this number also increased by 6.35% compared to the end of 2021.
In a recent report to the National Assembly, SBV Governor Nguyen Thi Hong said that over the past time, the network of credit institutions has developed very diversely with branches and transaction offices all over the country. Not only credit institutions, financial companies but also microfinance institutions have been present in almost all districts and communes across the country. Therefore, when people need to send or borrow money, they can easily access these official channels. The whole system now has 124 credit institutions and nearly 1,200 people's credit institutions; 16 financial companies with 17 branches, 41 representative offices and 74,337 service introduction points nationwide; 4 microfinance institutions are licensed to operate with 64 branches and 59 transaction offices in 24 provinces and cities.
Going to the transaction points of depository institutions participating in the deposit insurance, it is easy to see that the Certificate of participation in deposit insurance is displayed in an "eye-catching" position, attracting the attention of customers. This is a sign that the deposit receiving organization has joined the deposit insurance, which means that people's deposits at these institutions are automatically insured.
Currently, the DIV is protecting depositors' deposits at 1,283 participating institutions, including 97 banks and foreign bank branches, 1,181 people's credit funds, 1 cooperative bank and 4 microfinance institutions.
The secretive companion
Deposit insurance is considered as an "extension arm" of the Government in protecting depositors and ensuring social security. Where there are deposits of people, there is deposit insurance. Deposit insurance organization with a network of operations in all key economic regions, ensures to reach out and deploy deposit insurance policies to all depository institutions across the country, thereby well protecting the interests of depositors’ rights.
Not only directly protecting depositors through paying insured deposits when credit institutions are resolved or bankrupt, monthly, quarterly and annually, the deposit insurer also supervises 100% of these insured institutions. DIV closely follows the cash flow of the credit institution throughout the "lifecycle" of the credit institution, from the time it is licensed to operate, or the ups and downs, or when the credit institution has to withdraw from the market, it is also handled smoothly without negatively affecting the whole system. All is done for the highest goal: to ensure the safety of the people's deposits and the healthy operation of the deposit insurance participating organizations.
In addition, the deposit insurer also conducts other operations such as examining the organization participating in the deposit insurance periodically as planned, in-depth examination under the direction of the Governor of the SBV, granting deposit insurance certificates, collecting deposit insurance premiums, investing capital, participating in special control of weak credit institutions...
Under normal market conditions, DIV is likened to a “secretive companion” that closely follows the activities of the insured institutions. But the results of the implementation of the deposit insurance professional activities were not quietly implemented but were converted into reports and recommendations to the SBV to take measures and correct, promptly handle the organizations participating in the deposit insurance with unsafe operations or directly recommend to the deposit insurance participants to re-evaluate themselves.
The limitations for the deposit insurer’s operations
Since the introduction of the Law on Deposit Insurance - the highest legal basis governing deposit insurance activities in Vietnam - along with the documents under the Law, especially the documents of the SBV on deposit insurance, deposit insurance activities have been gradually renewed, aiming to better meet the aspirations of depositors and depository credit institutions.
However, practice is always changing faster than legislation. According to experts, after 10 years of implementation, the Law on Deposit Insurance needs to be revised and supplemented to keep up with reality and ensure the synchronization of legal regulations related to banking activities, especially to create legal framework so that the DIV can well undertake the new task of effectively participating in the process of restructuring credit institutions. For example, according to the revised Law on Credit Institutions in 2017, the DIV was assigned a number of new tasks such as: Coordinating with the Special Control Board to evaluate the feasibility of the plan to recover financial companies, people's credit funds, and microfinance institutions that are specially controlled; coordinate with the Special Control Board to develop a plan for bankruptcy of the specially controlled credit institution; provide special loans to specially controlled credit institutions; and buy long-term bonds of supporting credit institutions. Meanwhile, the provisions on the powers of the deposit insurer in the Law on Deposit Insurance are not consistent and in sync with the current legal document system on restructuring, which is a barrier for the deposit insurer to participate in the restructuring process.
Recently, the National Assembly, the Government, the State Bank of Vietnam all mentioned the need to quickly amend the Law on Deposit Insurance. Decision No. 986/QD-TTg dated August 8, 2018 of the Prime Minister approving the development strategy of Vietnam's banking industry to 2025, with orientation to 2030. It is emphasized that among the three Law projects that the Government assigns the SBV to develop and deploy in the period of 2015 to 2025, there is the Law amending and supplementing a number of articles of the Law on Deposit Insurance. Under Directive No.06/CT-TTg dated March 12, 2019 on strengthening solutions to ensure operational safety and firmly strengthen the People's Credit Fund system, the Prime Minister assigned the SBV to study and propose amendments to the Law on Deposit Insurance, using deposit insurance premiums to deal with weak credit institutions. Under Decision No.1382/QD-NHNN dated 2/8/2022 of the SBV on promulgating the Action Plan of the Banking sector to implement the Scheme on restructuring the system of credit institutions associated with bad debt settlement in the 2021-2025 period, as specified in the Prime Minister's Decision No.689/QD-TTg dated June 8, 2022 approving the Scheme on restructuring the system of credit institutions associated with bad debt settlement in the period of 2021-2025, it is clearly stated to "research to amend the Law on Deposit Insurance to use the deposit insurance premium to deal with weak PCFs". Resolution No. 62/2022/QH15 on questioning activities at the 3rd session, the 15th National Assembly also requested to continue to review, amend and complete the legal framework, organize the effective implementation of the monetary policy and banking activities, including the Law on Deposit Insurance. In the content of Report No.302/BC-NHNN dated September 19, 2022, assessing the implementation of the 2022 socio-economic development plan and the implementation of National Resolution No.43/2022/QH15 Association, Socio-economic Development Plan 2023 sent to the Economic Committee of the National Assembly, the SBV also emphasized that amending the Law on Deposit Insurance is one of the important tasks in the coming time to improve the monetary legal system of currency and banking activities…
Thus, it can be seen that the amendment of the Law on Deposit Insurance is really urgent, which is a push from practice and from the authorities with the desire to raise the level of deposit insurance activities as well as raise the position and role of the deposit insurance organization. Deposit insurance policy in Vietnam is on par with a new mission – like changing a shirt that is too tight for the size of its wearer.
Guideline for deposit insurance activities
Creating a clear legal framework for deposit insurance activities, specifically revising the Law on Deposit Insurance in accordance with practical requirements and international practices, not only helps to change the quality of deposit insurance activities in our country, but also elevates the status of the the role of the deposit insurer. As a result, this organization can contribute more to the national banking system, better protect the interests of depositors.
Along with that, it is necessary to quickly issue the deposit insurance development strategy and urgently implement it in relation to the strategy and development orientation of the banking industry so that the deposit insurer can well fulfill its role as a safety tool for the sustainable development of the national banking system. The development strategy of deposit insurance up to 2025, with orientation to 2030, has an important meaning, which is the guideline, the basis for raising the level of deposit insurance activities in the future, to meet the requirements of international integration of Vietnam's banking and financial system. The special feature of the Strategy on deposit insurance development to 2025, with orientation to 2030 is that the DIV has set specific goals, closely and quantified the deposit insurance professional activities to better protect the legitimate rights and interests of depositors. The Chairman of the Board of Directors of DIV expressed his belief that the objectives, groups of tasks and solutions set out in the deposit insurance development strategy of will have a positive impact, helping the DIV promote its strengths and overcome the limitations and bottlenecks in the development of the deposit insurance system, implement the deposit insurance policy, protect the legitimate rights and interests of depositors, strengthen public confidence in the financial-banking system and contribute to the stable development of the socioeconomic.
Along with that, the DIV has actively and regularly coordinated with the Legal Department, the Banking Inspection Agency and functional departments of the SBV to carry out all tasks according to the regulations of the SBV plans and tasks, at the request of the Drafting Committee to amend and supplement a number of articles of the Law on Deposit Insurance. Units in the whole system have contributed comments and proposed policy contents to amend and supplement a number of articles of the Law on deposit insurance, with a sense of responsibility, the proposed contents are guaranteed closely with the reality in the stage of making the proposal to develop the Law amending and supplementing a number of articles of the Law on Deposit Insurance.
On the other hand, improving the financial capacity of the DIV so that it has enough resources to implement the deposit insurance policy - depositor protection policy, contributes to ensuring the safe operation of depository institutions. At the time of establishment, DIV was allocated 1,000 billion VND of charter capital from the State budget, by 2015 it was added another 5,000 billion VND. The charter capital of DIV needs to be increased to match the growth trend in the size of the system of credit institutions and the growth of insured deposits. Ensuring the financial capacity of the deposit insurer also affirms the State's strong commitment to prioritize depositor protection and improve people's confidence in the deposit insurance policy.
