DIV helps stabilize financial-banking system

11:31 | 28/12/2015 Finance - Banking

(VEN) - Vietnam and 11 other countries concluded the negotiations of the Trans-Pacific Partnership (TPP). As an agency tasked with protecting the legal rights and benefits of depositors, contributing to maintaining stabilization and ensuring healthy development of the banking and financial system, the Deposit Insurance of Vietnam (DIV) needs to clearly represent its role in the TPP integration process.

DIV helps stabilize financial-banking system

The DIV needs to clearly represent its role in the TPP integration process - Photo: Can Dung

The Vietnamese dong will be more easily affected by foreign currencies in the context of international economic integration. According to the Law on Deposit Insurance, the DIV only insures deposits by the Vietnamese dong, contributing to preventing the dollarization of the economy and enhancing confidence in the national currency. In addition, the financial market has rapidly developed with an increase in numbers of credit institutions, which could mean the public may become more susceptible to rumors.

The protection of inpidual deposits in credit institutions participating in deposit insurance with reasonable limits will help consolidate depositor trust, contributing to accelerating capital accumulation, and downplaying any runs on deposits.

The DIV has also participated in promoting market discipline. Thanks to legal frameworks, market discipline will lead its members to oversee the banking-financial system.

The presence of the DIV has underlined the Vietnamese government’s commitments in protecting the legal rights and benefits of depositors. Participating in deposit insurance will help enhance the prestige of commercial banks, while opportunities to expand its share to foreign markets will be offered thanks to the TPP.

To limit risks and strengthen safety for the banking-financial system, the DIV needs to promote using of overseeing tools. The DIV can soon detect risks and violations, then devise response solutions or report to the State Bank of Vietnam.

After the TPP takes effect, foreign banks will increase their presence in Vietnam. This move could create more difficulties against deposit insurance mechanisms, including cross-border deposit insurance. To resolve such challenges, the DIV will have to promote cooperation with other deposit insurance organizations internationally to adopt agreements and develop response mechanisms in order to protect depositors in an effective manner.

The DIV has also actively deployed a series of basic principles in developing the deposit insurance system conducted by the International Association of Deposit Insurers (IADI).

In the context of international economic integration, with the role as a public policy tool of the government and the State Bank of Vietnam to ensure benefits of depositors and an unit of the national financial supervisory system, the DIV needs to make further efforts to implement strategic targets, improve quality of human resources, modernize the overseeing system and enhance financial and legal capability.

 

Thanh Lich

Theo ven.vn