Deposit Insurance of Vietnam: Steps forward for depositors

09:05 | 26/04/2017 Finance - Banking

(VEN) - Deposit insurance activities in Vietnam have created favorable conditions for the government and the State Bank of Vietnam (SBV) to monitor more effectively as the legislative framework and policies have developed rapidly. Besides, the Deposit Insurance of Vietnam - DIV’s network expansion, management enhancement and financial development have increased DIV’s ability to protect legitimate rights and benefits of depositors and maintain stability of the banking system.  

DIV’s greater participation in the restructuring of credit institutions

Completion of the legislative framework

Decision No. 527/QD-TTg on adjusting and supplementing some articles of the Charter on the Organization and Operation of the DIV was issued on April 1, 2016, following the Prime Minister’s Decision No. 1395/QD-TTg dated August 13, 2013, which clarifies DIV’s operational model, legal framework and mechanism. Accordingly, DIV is a state-run financial institution which is a single-member limited liability company with 100 percent of charter capital owned by the state.

Moreover, the State Bank of Vietnam (SBV) signed Circular No. 34/2016/TT-NHNN on guiding information provision between SBV and DIV and Decision No. 2390/QD-NHNN on December 12, 2016, regarding operational regulations of DIV Controllers. The Ministry of Finance also signed Circular No. 312/2016/TT-BTC on stipulating DIV’s financial regime and Circular No. 177/2015/TT-BTC dated November 12, 2015 on DIV’s accounting regime.

The Ministry of Labor, Invalids and Social Affairs issued Circular No. 32/2016/TT-BLDTBXH on guiding the management of employees and remunerations at DIV. These documents, which are the basis for further internal documents on DIV, have built a comprehensive legal framework for DIV’s operation.

DIV network

Expansion of the depositor protection network

DIV currently has eight regional branches in major economic areas nationwide. The branches contribute to DIV’s full and effective policy implementation and raising depositors’ confidence in more than 1,200 insured credit institutions throughout the country including commercial banks, cooperative banks, people’s credit funds and microfinance institutions.

Effective policy implementation

DIV has effectively implemented deposit insurance policy. As of 31 December 2016, 1,252 institutions were insured including 95 commercial banks, the Co-operative Bank of Vietnam (Co-op Bank), 1,168 people’s credit funds and 3 micro-finance institutions. DIV has effectively carried out deposit insurance operations including granting, reissuing and revoking certificates of participation in deposit insurance and collecting deposit insurance premiums. DIV has also actively resolved problems and violations related to assessing and paying deposit insurance premiums.

Management and investment of temporally idle capital have been conducted safely and effectively as stipulated by law, thus generating additional funds for the Operating Provision Fund and contributing to the enhancement of DIV’s financial capability. As of December 31, 2016, DIV’s total assets amounted to more than VND 33 trillion; invested temporally-idle capital reached over VND 31 trillion, a 23.9 percent increase year on year. Total revenues exceeded VND 6.8 trillion including more than VND 5 trillion in deposit insurance payments and over VND1.8 trillion in investments.

DIV has supervised off-site 100 percent of insured institutions on a monthly, quarterly and yearly basis. Based on information provided by the insured institutions, SBV and other sources, DIV has analyzed the insured institutions and found weaknesses and violations in order to report to SBV. DIV has also paid due attention to on-site examination. By the end of 2016, DIV met its annual plan for on-site examination of 463 insured institutions including 42 commercial banks, 419 people’s credit funds and 2 micro-finance institutions.

The pace of the FSMIMS project was accelerated in order to share experiences and enhance the deposit insurance system in Vietnam, modernize DIV’s operations and apply IT technology, while strengthening governance, management and internal control. Due attention was also given to the management of finance, assets, infrastructure, archives and records, and logistical work.

A seminar on deposit insurance policies

To raise public awareness of DIV and deposit insurance operations, DIV has promoted PR activities. In 2016, DIV organized PR meetings for people’s credit funds and conferences to improve public understanding of the deposit insurance policy at DIV’s regional branches. In attendance were representatives of SBV’s more than 20 branches and more than 400 people’s credit funds nationwide. In particular, DIV held for the first time several seminars to promote the awareness of deposit insurance among lecturers and students at universities including the University of Economics and Business – Vietnam National University and the Hai Phong University. A number of contests on DIV’s policies also took place within the framework of the seminars attracting university students.

In-depth participation in the restructuring of credit institutions

Speaking at the 2017 DIV Meeting, Nguyen Kim Anh – Deputy Governor of SBV underlined DIV’s major tasks for 2017 focusing on restructuring credit institutions.

First, DIV needs to give recommendations on amending the Law on Deposit Insurance and other related legal documents in an aim to strengthen DIV’s role in restructuring credit institutions, resolve non-performing loans and protect organizations and individuals during the restructuring process.

Second, DIV needs to continue cooperating with the Banking Supervision Agency and SBV’s related departments to help the Prime Minister in making decisions on adjustment of deposit insurance coverage limit and approval of strategies for DIV in particular and the banking sector as a whole.

DIV is required to properly use its resources including temporarily idle capital to enhance DIV’s financial capacity and engage in restructuring credit institutions and resolving non-performing loans.

Meanwhile, DIV must continue supervising and examining credit institutions, especially people’s credit funds, in compliance with the Law on Deposit Insurance.

Finally, it is necessary for DIV to maintain close ties with SBV’s departments and related agencies to early detect and warn of risks and violations, especially those related to deposit premium payments.

Ngoc Nhi