Deposit Insurance of Vietnam: Rising confidence

10:07 | 24/11/2016 Finance - Banking

(VEN) - This October, the Deposit Insurance of Vietnam (DIV) inaugurated and put into operation two new branches, one in the northwestern region, and one in the city of Da Nang. Apart from its head office in Hanoi, the DIV currently has eight regional branches based in major economic zones throughout the country.

The DIV was established in 1999 and commenced operations in 2000. Over the past 16 years operating, it has significantly contributed to the restructuring of credit institutions and protecting legal rights and interests of depositors, contributing to maintaining stability of credit institutions, ensuring safe and sound development of banking activities.

The DIV currently works to protect more than VND3,000 trillion of deposits at 1,252 insured institutions, including 92 commercial banks, cooperative banks, 1,156 people’s credit funds, and three microfinance institutions. Since it was established, the DIV has reimbursed 1,793 depositors at 39 people’s credit funds which have dissolved compulsorily, and periodically inspected/supervised the operations of all insured institutions. The Law on Deposit Insurance promulgated in 2012 indicated the important role of the DIV in maintaining the stability of credit institutions and protecting legal rights and interests of depositors in Vietnam.

To contribute to the development of the banking sector, the DIV has taken the initiative in working out its development strategy in accordance with the master plan for banking sector development, proposing measures to enhance its financial capacity and strengthen its operations. The strategy will be submitted to the prime minister for approval.

In the past, deposit insurance for DIV’s customers in northwestern provinces was provided by its Hanoi branch, while the branch in the south central region and the Central Highlands was responsible for serving customers in five provinces in the central region. Geographical distance to some extent affected the effectiveness of deposit insurance in these provinces. Meanwhile, credit institutions in these localities have grown rapidly. The establishment of new DIV branches marked a new step forward in its development process, helping the DIV ensure the stability of local credit institutions and contribute to strengthening depositor trust. With its expanded operation network covering eight north central provinces (Phu Tho, Vinh Phuc, Yen Bai, Lao Cai, Tuyen Quang, Ha Giang, Lai Chau, and Cao Bang), and five provinces in the central region (Binh Dinh, Quang Ngai, Quang Nam, Da Nang, and Thua Thien Hue), the DIV is confident of its ability to effectively implement the government’s deposit insurance policy in accordance with international practices.

According to Phu Tho People’s Committee Vice Chairman Hoang Cong Thuy, the establishment of the DIV branch in the northwestern region, which is based in the city of Viet Tri, reflects the care of the State Bank of Vietnam (SBV) and the DIV for credit institutions in this region and Phu Tho Province in particular. The branch will contribute to strengthening people’s trust in credit institutions in Phu Tho and other provinces in the region, promoting safe and sustainable development of local banks and people’s credit funds in the context of the restructuring of the entire economy and credit institutions in particular.

Tran Van Mien, Vice Chairman of the people’s committee of the city of Da Nang, said the opening of the DIV branch in Da Nang showed the SBV and DIV’s appropriate policy towards credit institutions in coastal provinces of the central region. Working to protect the interests of depositors and contribute to maintaining safe, healthy operations of the banking system, the branch is expected to contribute to strengthening people’s trust in the banking sector in order to attract their idle capital for investment in economic development and ensuring social security.

SBV Da Nang Branch Director Vo Minh believes DIV Da Nang will help promote the coordination between concerned parties to ensure effective inspection of credit institutions in order to maintain their safety and protect depositor interests. SBV Da Nang will coordinate tightly with DIV Da Nang in disseminating the government’s deposit insurance policy among local people in five provinces of the central region.

Many other countries have established deposit insurance institutions with the aim to minimize risks for credit institutions and banks. In Vietnam, deposit insurance has proved to be an important policy that would help improve the Vietnamese banking system in accordance with international standards. Deposit insurance not only protects the legal rights and interests of depositors in cases insured institutions become insolvent, but also helps prevent risks for the entire banking system. The establishment of the two DIV branches is expected to enhance the capability of this special financial institution, helping it better protect depositor interests and significantly contribute to the development of credit institutions.

 

Ngoc Anh

 

 

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