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At each transaction point of a people's credit fund or commercial bank, depositors will see the Certificate of Deposit Insurance (DI) participation in the most recognizable locations. That is a sign to identify credit institutions that have participated in deposit insurance, and depositors here will be protected under the provisions of the Law on Deposit Insurance. But is displaying a Certificate of DI participation enough to boost depositors' confidence?
According to the Law on DI, in order to be officially put into operation, a credit institution must have a certificate of DI participation issued by the Deposit Insurance of Vietnam (DIV). The credit institution must publicly post a copy of the DI participation certificate at all transaction points that receive deposits.
However, it is a fact that so far, apart from the DI participation certificate, the existence of a deposit insurance policy in activities related to deposit transactions is still low. Within the content of the Certificate, depositors can only know about the current deposit insurance limit, while there are many other issues about the deposit insurance policy that need to be brought to the depositors to build public confidence in the banking system.
Article 12 of the Law on DI stipulates that the deposit insurer is responsible for disseminating policy and law on DI to the public. This is a huge responsibility that requires constant communication measures. However, for credit institutions, in addition to displaying the DI participation certificate, the Law on DI does not stipulate their responsibility to coordinate with DIV in communication strategy. Currently, credit institutions participate in DI policy dissemination mainly on a voluntary basis, but without any legal binding.
Meanwhile, the credit institution is one of the beneficiaries of the policy. The more depositors have faith in the system of credit institutions in general and each credit institution in particular, the more motivated they will be to choose that institution to deposit their savings. In addition to policies to ensure the safety of the banking system, the DI policy protects depositors, especially small depositors who have little conditions to update information and knowledge of banking and finance.
Credit institutions have an advantage in disseminating DI policies, which is frequent transactions, contact with depositors, understanding of customers’ needs. However, in general, with the current limitations of legal regulations, it is difficult to achieve synchronous and unified communication among credit institutions, in different provinces and cities, and throughout the country in general.
Leaders of a number of credit institutions admit: They are concerned that if there is strong communication about the DI policy at their institutions, some depositors with large-scale deposits may feel worried because their deposit is higher than the coverage limit. In this regard, DIV has proposed to the competent authority to increase coverage limit of DI. The coverage limit is expected to be VND 125 million per depositor at a credit institution. In the coming time, the deposit insurer will regularly re-evaluate the effectiveness and suitability of the deposit insurance coverage limit to promptly propose adjustments.
In addition to improving the effectiveness of the DI policy to foster depositors' confidence, it is necessary to add a specific regulation that the credit institutions have the responsibility to coordinate with the deposit insurer in the communication activities. Thereby, the credit institutions are the bridges for the policy to be more practical and approach depositors in a more effective way.
The IADI Core Principles for Effective Deposit Insurance suggests that: “The deposit insurer works closely with banks and other safety-net participants to ensure the consistency and accuracy of the information provided to depositors and to maximise awareness on an ongoing basis. Law or regulation requires banks to provide information about deposit insurance in a format/language prescribed by the deposit insurer.”
Establishing a legal framework for credit instiutions to closely coordinate with deposit insurers in a unified and synchronous manner in both content and forms of promoting DI policy will not only raise public awareness directly but also ensure the public confidence. On the other hand, the DIV also needs to regularly and continuously have specific guidelines on public awareness programs for credit institutions to implement.
