Minh also said authorities were considering a new proposal to create a General Deposit Insurance Corporation.
The current regulatory set-up for deposit insurance is characterized by gaps, conflicts and inconsistencies with other regulations and a lack of enforceability
The need for a secure deposit insurance system was illustrated in the past couple of weeks in Viet Nam , when commercial banks were mired in an interest war.
Depositors created a run on some banks as they withdrew money from low interest accounts to those offering higher interest.
Two State owned banks saw with draw of VND 20 trillion (U$$1.25 billion) in a very short period, challenging their payment capacity and indicating weak points in the ability of banks to maintain sufficient capital against outstanding loans.
Many commercial banks have reported outstanding loan balances greater than existing deposits.
In early January, Southern Bank got into trouble when its former chairman, Lê Anh Kiệt, was arrested on an attempted murder charge.
Depositors were spooked about the solidity of the bank if depositors rushed to withdraw funds.
Deposit insurance would minimize risks for depositors and avoid domino effects on the enter financial system.
The facts show that building better regulations for deposit insurance is necessary, said Trần Xuân Châu, deputy head of the State Bank of Viett Nam`s Department of Banks and Non banking Credit Institutions.
In the 1990s when nonperforming loans became a critical concern in Japan financial market, the deposit -Â insurance system there had to be adjusted to support financial institutions facing trouble, said Kawabata Toshiyuki, deputy director of the Financial Services Agency of Japan.
When a bank failed, it was important to choose a measure with minimum cost and minimal negative effects, said Miyuki Chiba from the Deposit Insurance Corporation of Japan (DICJ). The focus should be on financial support for ailing banks, rather than paying off deposit insurance premiums.
DICJ used a bridging bank to cover business at the failed bank for six months, she said.
The model, which could bi applied in Việt Nam, would mean the Ministry of Finance working with financial institutions to avoid difficulties, while the DIV would provide loans and guarantees to assist banks short of capital.
The State Bank of Việt Nam could then act as a lender of last resort to banks facing failure.
(Vietnam News)