Trang Chủ
The coverage limit of VND 50 million has been applied since 2005. At that time, this was appropriate, approximately equal to 5 times GDP per capita and fully protected 90% of depositors.
However, the economic situation has had many changes over the past 10 years. According to the DIV, from 2005 to 2011, the number of depositors increased from 10 million to 26 million, total balance of deposit accounts up from VND 700 trillion to VND 2058.9 trillion. As of June 30th, 2011, at the current coverage limit of VND 50 million, only 10.23% of deposits were fully guaranteed, the ratio of the coverage limit to GDP per capita was only 1.73.
According to experts, the deposit insurance coverage limit is the factor which shows the commitment of the Government to protect depositors through deposit insurance organization. The low, long-unchanged limit may result in less capital flowing into the credit system as the public may underestimate the capacity of the deposit insurer, and thus, be less confident in the banking system. The requirement of changing the coverage limit is becoming increasingly urgent. Dr. Tran Dinh Thien - Director of Vietnam Institute of Economics said: "In the context that the world economy’s recovery is unstable, associated with hidden risks, and the Vietnamese economy has just picked up from the bottom of the crisis, the strengthening of depositor confidence is required."
In countries with developed deposit insurance systems like the United States, Canada, South Korea, deposit insurance coverage limits are adjusted flexibly based on changes in socio-economic conditions. Factors to determine the coverage limit include: the ratio of the number of fully insured depositors to the total number of insured depositors (over 80%); the ratio of fully insured deposits to total insurable deposits (about 20-30%), the ratio of deposit insurance coverage limit to GDP per capita ( 2.5 - 5 in normal conditions). If a economic crisis happens, coverage limit can be increased by several times or even change to full coverage to avoid massive money withdrawals and reassure depositors. In this regard, Dr. Tran Du Lich - National Assembly deputy of Ho Chi Minh City stressed that: "When setting a specific coverage limit, it is necessary to take into thorough consideration the above-mentioned factors and create a mechanism to facilitate the adjustment of the coverage limit if necessary and avoid moral hazard. "
Reportedly, DIV have recommended the authorized state bodies to consider and submit the proposal on increasing the coverage limit up to VND 200-300 million to the Prime Minister for decision. In case of bank runs, the coverage limit can be raised up to VND 1 billion, and when a crisis occurs, blanket coverage may be adopted to convey a strong message of the Government to protect the majority of depositors. Hopefully, the Government will soon adjust the coverage limit to better protect interests of depositors, contribute to ensuring the safe and sound operation of credit institutions, thereby enhancing public confidence in the national banking system.
