Deposit Insurance of Vietnam’s North East regional branch: Actively coordinating with State Bank’s branches in implementing deposit insurance policy
Wed, 14 Jul 2021 10:57:29 GMT

Over the past 20 years, the Deposit Insurance of Vietnam (DIV)’s Northeast regional branch (the Branch) has actively and closely coordinated with the State Bank of Vietnam (SBV)’s provincial and city branches to effectively implement deposit insurance policy, thereby contributing to protecting the legitimate interests of depositors, ensuring the safe and sound development of the banking system in the area.

Monitoring, promptly and actively supportingPeople’s Credit Funds

Since its establishment, the Branch has regularly supervised 100% of insured institutions in the area (273 institutions, consisting of 01 commercial bank and 272 People's Credit Funds (PCFs)). In particular, the Branch has focused on in-depth supervision of PCFs committing serious violations and placed under special control by the SBV, and troubled PCFs.

Specifically, on the basis of monthly data provided by the SBV and insured institutions in accordance with the Circular No. 34/2016/TT-NHNN and regulations on reporting information on insured deposits issued together with the Decision No. 2252/QD-BHTG and the Decision 1248/QD-BHTG on amending and supplementing a number of articles of the regulations on reporting and providing information on insured deposits, the Branch has analyzed and assessed the operational situation of each insured institution, promptly detected signs of weakness, violations of safety regulations  in banking activities; coordinated with the SBV’s branches in the locality to identify the causes and take timely corrective and remedial measures.

In addition, in order to get more information on insured institutions in the area, the Branch has also actively organized direct meetings with the SBV’sprovincial and city branches. Especially, the Branch has increased communication and closely coordinated with SBV branches to monitor activities of weak insured institutions showing signs of violating safety regulations in banking activities so that the Branch could design appropriate measures for each institution.

Closely coordinating with the SBV’s branches in examination

In order to well carry out planned examinations and avoid overlaps between the examinations of the DIV and the SBV, early this year, the Branch has proactively developed work plans, coordinated and communicated with the SBV’s regional branches to agree on the examination plan as well as to adjust the plan properly.

After each examination, the branch has always reported examination results  to the SBV’s provincial and city branches and proposed them direct insured institutions to promptly correct the detected errors, thus helping insured institutions operate safely and effectively. Annually, the Branch has met 100% of the approved examination plan. By the end of the first quarter of 2021, the Branch had implemented 1,307 examinations.

In 2019, under the direction of the SBV’s Governor, the Branch was assigned the task of in-depth examination of 03 PCFs (01 PCF in 2019 and the others in 2020). During that process, the Branch always closely coordinated and received timely support from the SBV’s provincial branches. The Branch directly reported to the SBV branches on its examination plan and proposed the contents that needed the coordination; issued examination decisions and notices; developed examination outlines to send to the SBV’s branches.

The examinations were conducted in accordance with the prescribed time and ensured quality. Besides, the examinations were in accordance with the detailed outlines. Through these examinations, the level of violations and the problems of PCFs were determined. The Branch reported and made proposals to the SBV’s provincial branches, the banking examination and supervision agency and constantly urged insured institutions to correct the shortcomings in accordance with regulations.

Also in 2019, the branch sent officers to participate in joint examinationsat 11 PCFs in Bac Ninh province. The joint examinations with the Banking Supervision Inspector  contributed to enhancing the relation and coordination between the Branch and the SBV’s branches in the area; at the same time, avoided overlaps in inspection, created opportunities for the staff of the Branch and SBV to exchange and share experience with each other in the coordination process.

Strengthening coordination in supervising, examining, handling and supporting weak PCFs

Currently, in the area covered bythe Branch, 10 PCFs have been classified as weak ones through supervision, of which 03 PCFs have been placed under special control by the SBV. Immediately after the classification, the Branch proactively worked directly with the SBV’s branches to promptly grasp the situation and prepare resolution plans for these PCFs. At the same time, the Branch appointed officers to join the Special Control Boards when required to perform tasks at the PCFs placed under special control in accordance with the its functions, duties and powers.

For the PCFs placed under special control in the locality, following the direction of the SBV and through analyzing and assessing the current situation of the institutions, the Branch participated in developingbankruptcy plans for 02 PCFs, whichwere unable to recover and a recovery plan for another; these institutions were exempted from paying deposit insurance premiums (worth more than 300 billion dongsas ofthe end of the first quarter of 2021) according to regulations.

In addition, according to the SBV’sCircular No. 11/2019/TT-NHNN dated August 2, 2019 replacing Circular No. 07/2013/TT-NHNN dated March 14, 2013, the DIV is tasked with more proactive and comprehensive participation in the process of special control. Accordingly, the Branch coordinated with the Banking Supervision Agency, the SBV‘sbranches, Special Control Boards from the beginning to the end of the special control process according to regulations.

Ensuring accurate and efficient reimbursement and liquidation

Reimbursement is one of the important professional operations that need to be implemented quickly and promptly as soon as deposit insurance payment duty arises in order to maintain depositors' trust and prevent incidents affecting local security from happening. Therefore, close coordination with SBV branches is very important.

Since its establishment, the Branch has directly made pay-outs worth 6.41 billion dongs at 06 PCFs, proactively advised the SBV’s branches to carry out dissolution procedures, discussed with the SBV, local authorities and relevant departments to prepare for transparent and secure reimbursement.

During the reimbursement process, the SBV’sbranches appointed staff to coordinate with the reimbursement teams to make payouts quickly and accurately. Since 2014, the DIV has not had to reimburse depositors; however, in order to prepare for possible payout, the Branch has cooperated closely with the SBV’s branches to keep abreast of the situation of weak PCFs placed under special control; monitored the SBV’s branches’ handling of legal entities  in the locality and the conclusions and directions of the SBV Governor to take timely  measures.

After reimbursement, the DIV became a creditor of the insured institutions. Accordingly, the Branch has appointed staff to directly participate in the liquidation boards, closely coordinated with the liquidation supervision teams of the SBV’s branches to grasp the liquidation situation, and at the same time, requested the liquidation supervision teams to direct the liquidation boards to follow correct liquidation and reimbursement procedures  according to regulations.

For cases where it is difficult to recover debts or customers deliberately refused to pay debts, the Branch has actively cooperated with the SBV’s provincial branches, local authorities and relevant agencies to propose solutionsto recover the full amounts. Up to now, the Branch has recovered 100% of the amounts of deposit insurance paid at 2 PCFs and has been monitoring 01 liquidation board with the recovered amount reaching 97% of the paid amount.

Communicating deposit insurance policy, strengthening depositors' confidence

A part of the target public audience of the DIV is  depositors at PCFs - a group of people with weak financial capacity, limited access to information and knowledge of finance - banking - deposit insurance, thus vulnerable to negative information and developments. Accordingly, since 2016, the DIV has issued Guidelines on implementing communication activities at PCFs. The Branch has creatively and diversely used different communication forms, targeted different audience groups, and coordinated direct communication and indirect communication.

Especially, the Branch has collaborated with theSBV’s branches to organize events to disseminate deposit insurance policy to depositors, leaders and staff of PCFs.

By the end of the first quarter of 2021, the Branch had disseminated deposit insurance policy at the annual/termsgeneral meetings of 30 PCFs withthe  number of members and depositors directly participatingin at these events and receivingcommunication items oftotaling 5,941 ; hosted communication eventsforPCFsin 05/7 provinces in the area covered by ​​​​the Branch (Thai Binh; Nam Dinh; Bac Ninh; Hai Duong and Bac Giang) with nearly 1,000 participants. During that process, a number of theSBV’s branches in the area actively cooperatedwith the Branch to communicate and explain the regulations on deposit insurance to credit institutions when they had problems, thereby creating favorable conditions for the Branch.

In addition, the Branch also actively developed a communication script for disseminating deposit insurancepolicy, especially information on the rights and interests of depositors to respond promptly to various situations. Over the past time, the Branch has closely coordinated with theSBV’s branches in the area to smoothly handle incidents at a number of PCFs, jointly participating in the "Conference for direct dialogue with depositors" to maintain people's confidence, ensure public safety in the locality, and helpingPCFsgradually resume their normaloperation. It can be said that the close coordination with the SBV’s provincial and citybranches in communication activities has made an important contribution to the handling of problematic PCFs.

Some suggestions and recommendations

It can be said that the coordination between theBranch and the SBV’s branches in the area has created favorable conditions for the Branch to effectively implement deposit insurance policy.

However, currently, the coordination between the DIV and the SBV has only been formalized through the Circular 34/2016/TT-NHNN, so there are still many limitations and difficulties. Therefore, in the coming time, it is necessary to soon develop and issue regulations on cooperation, coordination and information exchange between the SBV’s provincial and city branches and the DIV’s Branches, focusing on:

(i) Enhancing the proactiveness of the DIV in receiving information in accordance with the regulations of the SBV, especially in receiving written information from the SBV’s branches. Currently, through exchange and cooperation, the Branch has received some information from a number of the SBV’s branches, but it is not regular and complete. It is proposed that the SBV should consider sharing information in confidential documents such as: reports on classification of insured institutions; annual examination plans of the inspector and supervisior of the banking industry; general reports on results of implementation of conclusions, recommendations and decisions on handling after inspection; results of the SBV’s macro-monitoring of insured institutions …so that DIV has an appropriate mechanism for receiving and using this information according to regulations, facilitating the development of plansfor accurate and comprehensive examination, supervision and evaluation of insured institution;

(ii) Considering supplementing regulations on the coordination mechanism to share information on a case-by-case basis as information on the operation of credit institutions isreceived by the DIV is often not up-to-date, affecting the coordination from the DIV;

(iii) Issuing specific instructions on methods and processes of coordinating with the SBV (Banking Examination and Supervision Agency, the SBV’s provincial and citiy branches) in examinations and the handling of post-examination results at the request of SBV Governor to ensure that  examinationsare carried out in accordance with regulations and with high efficiency;

(iv) Promptly informing the DIV of examination plans under the direction of the theSBV’s Governor, as well as requests for coordination in examinations of the SBV’s provincial and city branches so that the DIV can be proactive in allocating human resources and time ;

(v) Building and strengthening the relationship and coordination mechanism with the SBV to facilitate effective communication, especially, considering developing regulations and a specific mechanism for communication coordination between the SBV and the DIV when a credit institution is placed under special control.

Hai An – Deposit Insurance of Vietnam’s North East regional branch

Research and International Cooperation Department