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The Law on credit institutions 2024 stipulates the duties of DIV when participating in the process of early intervention and special control of credit institutions such as: participating in assessing the assessments of recovery plans, merger and consolidation plans, transferring the entire capital contribution of the People's Credit Fund (CPFs); providing special loans for commercial banks, cooperative banks, PCFs, microfinance institutions (MFIs) according to the provisions of law on deposit insurance; buying long-term bonds from credit institutions that receive compulsory transfer from commercial banks according to the decision of the State Bank of Vietnam (SBV); participating in developing bankruptcy plans for specially controlled credit institutions, coordinated with credit institutions to reimburse depositors according to bankruptcy plans approved by authorized authorities...
The contents stipulated under the Law on credit institutions 2024 pose new requirements in implementing the tasks of DIV. DIV has issued a plan to implement regulations in the Law on credit institutions in 2024; research, review, and propose amendments and supplements to Law on deposit insurance (attached to Notice No. 200/TB-BHTG dated March 1, 2024 of General director of DIV). The plan includes two main parts: (i) Implementation plan prescribed in the Law on credit institutions 2024; (ii) Plan to research, review, and propose amendments and supplements to Law on deposit insurance. elaborate, research, review, and speculate amendments and supplements to the Law on deposit insurance is one of the most important tasks to implement the Law on credit institutions in 2024.
The process of researching and discussing the proposed policies in the proposal to develop a Law amending and supplementing the Law on deposit insurance is initially expected to include 05 specific policies as follows: (i) Completing regulations on deposit insurance premium; (ii) Improve the financial and operational capacity of the deposit insurance; (iii) Supplementing the rights and obligations of the deposit insurance; (iv) Improve legal regulations so that DIV can participate more deeply in the process of restructuring weak credit institutions in Vietnam; (v) Complete regulations on insurance reimbursement.
However, the promulgation of the Law on credit institutions in 2024 has had a major impact on some contents of the 5 proposed policies expected in the proposal to develop a Law amending and supplementing the Law on deposit insurance mentioned above due to a number of related contents. The duties of the deposit insurance need to be reviewed and proposed to be included in the Law on deposit insurance to have a basis for implementation as follows:
Provide special loans
The Law on credit institutions 2024 stipulates that DIV decides to grant special loans to: (i) commercial banks, cooperative banks, microfinance institutions to support the implementation of recovery plans according to the provisions of Law on deposit insurance; (ii) Commercial banks are transferred compulsorily according to the provisions of law on deposit insurance; (iii) Commercial banks, Cooperative Banks, CPFs, and MFIs were withdrawing money in large numbers according to the provisions of law on deposit insurance.
The provision of special loans by DIV has been regulated in the Law on credit institutions 2010, amended and supplemented in 2017 (hereinafter referred to as the Law on credit institutions 2010). However, the Law on credit institutions 2024 stipulates that the DIV provides special loans according to the provisions of the law on deposit insurance (no regulations on money sources, loan interest rates, resolve loan losses, etc.).
Therefore, it is necessary to research and propose amendments and supplements to the Law on deposit insurance in the direction of supplementing regulations on special lending cases and conditions; authority, source of money, special loan interest rate; resolve losses in case special loan capital cannot be recovered.
Purchase long-term bonds
The Law on credit institutions 2024 stipulates that the mandatory transferee is the credit institution that issues long-term bonds to the deposit insurance according to the decision of the SBV.
The purchase of long-term bonds by DIV according to the decision of the SBV has been regulated in the Law on credit institutions 2010. However, the purchase of long-term bonds according to the provisions of the Law on credit institutions 2024 have been adjusted in terms of object, stage of purchase (Law on credit institutions 2010 provisions that supporting credit institutions can issue long-term bonds for DIV according to the regulation of the DIV). In addition, the Law on credit institutions 2024 does not regulate the source of money, term, interest rate for purchasing long-term bonds, or resolving losses from purchasing long-term bonds.
Therefore, it is necessary to research and propose amendments and supplements to the Law on deposit insurance in the direction of supplementing regulations on cases, conditions, order and procedures for purchasing long-term bonds ; authority, source of money, term, interest rate to buy long-term bonds; resolving losses on long-term bond purchases.
Borrow special loans from the SBV
The Law on credit institutions 2024 stipulates that DIV can: (i) Borrow special loans from the SBV in case the amount in the operational reserve fund of DIV is insufficient to reimburse depositors according to the approved bankruptcy plan ; (ii) Use money to repay special loans of credit institutions, revenue from selling valuable papers held by DIV, from liquidation of assets of special lending credit institutions, and deposit insurance premium should be prioritized for repayment of special loans to SBV.
This is new content, therefore, it is necessary to research and propose amendments and supplements to the Law on deposit insurance in the direction of supplementing regulations on the rights and obligations of deposit insurance organizations ; cases, conditions, order and procedures for special loans from the SBV; special loan repayment source from the SBV.
About insurance payment
>Regarding the time when the reimbursement obligation arises
Currently, Article 22 of the Law on Deposit Insurance 2012 stipulates the time when the reimbursement obligation arises as follows: "The reimbursement obligation arises from the time the SBV issues a special control or written termination applies, or the document does not apply measures to restore solvency if the insured institutions still go bankrupt or the SBV has a document identifying a foreign bank branch is unable to deposit payors.
However, the Law on credit institutions 2024 stipulates that DIV coordinates with specially controlled credit institutions to reimburse to depositors according to the approved bankruptcy plan. Thus, after the bankruptcy plan is approved, DIV will reimburse depositors. Therefore, it is necessary to research and propose amendments and supplements to the Law on deposit insurance regarding the time when the payment obligation arises specifically, clearly, and consistent with the provisions of the Law on credit institutions 2024, to have a basis for implementation in order to declare in practice.
Coverage limit
The Law on credit institutions 2024 stipulates that DIV participates in objection the SBV to submit to the Prime Minister to decide on deposit insurance coverage limits for depositors, up to a maximum of the amount of deposits of recognized individuals at PCFs.
Currently, the maximum amount of the deposit insurance reimburses for all insured deposits under the provisions of the Law on deposit insurance (including principal and interest) of an individual at a public institution when a payment obligation arising is 125 million VND (according to Decision No.32/2021/QD-TTg dated October 20, 2021 of the Prime Minister).
Thus, with the provisions of the Law on credit institutions 2024, the insurance coverage limit will both comply with the Prime Minister's Decision (125 million VND) and comply with the limit submitted by the SBV to the Prime Minister, applicable in each specific case, maximum reimbursement can be made in full. In case of full reimbursement, DIV's financial capacity may not be able to meet the demand.
International experience shows that the application of a full coverage is implemented in crises or in cases of systemic impact through the Government's commitment. However, when applying full deposit insurance coverage, there needs to be a clear plan for limited deposit insurance coverage.
Therefore, it is necessary to research and propose amendments and supplements to the Law on deposit insurance on suitable deposit insurance coverage to be consistent and implement the Law on credit institutions 2024 effectively, promptly protect the interests of depositors, and appropriate to the financial capacity of DIV, in accordance with international practices.
Deposit insurance premium
The Law on credit institutions 2024 stipulates that DIV develops a plan to increase deposit insurance premium to compensate for the special loan from the SBV in case the amount of money in DIV's operational reserve fund is not enough to reimburse depositors according to the bankruptcy plan has been approved.
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