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Mr. Mai Minh De: The field of banking and finance is a highly sensitive one in which depositors are the most vulnerable to any fluctuation in the financial market. Sometimes, only a unfounded rumour could cause a bank, even the banking system to collapse because it can lead to widespread bank runs. Worse still, it may also threaten socio-economic stability. The recent global financial crisis is a clear example. After the crisis, nations have been trying to further strengthen and accelerate financial supervision activities. For example, the United States approved the Dodd-Frank Wall Street Reform…
On the other hand, it should be widely agreed that deposits at financial institutions are not “brutal” numbers. They are funds that people have saved, even during their life. Therefore, protecting depositors plays an important role in terms of both economic and social security issues.
Reporter: Behind the success of credit institutions and the vibrant growth and development of the banking sector, people have come to realize the crucial and indispensable role of a “quiet” financial institution named Deposit Insurance of Vietnam (DIV) parallel to other credit institutions. As the Vietnam’s financial market has been undergoing ups and downs, how does DIV fulfill its role?
Mr. Mai Minh De: The Government tasks us with special responsibility to protect depositors and make contributions to cooperation with other functional agencies to maintain the safety and soundness of banking activities. The burst of banking activities in particular and the strong and rapid development of the Vietnam’s financial market in general, especially the recent ups and downs in the world financial markets, have posed numerous and serious risks as well as widened the risks among credit institutions. In the face of this situation, DIV has made great efforts to heighten the quality of its supervision activities.
Besides receiving information from insured deposit-taking institutions and the State Bank of Vietnam, DIV also collects customers’ information from the Credit Information Centre, credit-rating agencies and other sources to analyze, evaluate customers’ risks; reforms the supervisory system in order to make it more consistent with international norms and practices and Vietnam’s realities. DIV has also been actively trying to diversify its activities focusing on forecasting and early warning. Specifically, we have done research on and submitted to functional agencies the risk-based premium project, the assumption and resolution project…in order to create a level playing field in banking activities as well as set up a mechanism for active and effective risk prevention and reduction.
Generally speaking, after more than 10 years in operation, DIV is self-confident that we are fully qualified to better protect depositors’ legitimate rights. Due to the implementation of the deposit insurance policy, our people’s deposits are fully protected, tens of millions of depositors are adequately protected by DIV (on behalf of the government) through professtional operations such as payout when there is a failed credit institution, receivership and resolution, off-site supervision, financial assistance… with a view to reducing risk and maintaining the safety and soundness of the banking system, thus better hedging against crises, making great contributions to preserving the confidence of depositors and investors in the banking system in particular and the national financial market in general.
Reporter: Reality clearly shows that deposit insurance system is playing an increasingly important role in the world not only in normal conditions but also in the toughest and most difficult stage of the world financial system. How do you evaluate this?
Mr. Mai Minh De: Deposit insurance is a totally new field in Vietnam. It is in stark constrast with the nearly 100-year-long history of development of advanced deposit insurance systems in various countries such as the United States, Canada, South Korea… Deposit insurance is and will be the effective tool used by governments in many countries to restore confidence in the banking sector. In fact, a country that has effective deposit insurance system is able to recover quickly from the global financial crisis and the trend of establishing new deposit insurance agencies is gaining momentum.
DIV is fully aware of its responsibility to protect depositors and the health of the banking sector and view its responsibility as more important than ever. This means that in its new phase of development, DIV must try to control, manage and reduce risks more effectively.
The public, especially more than 30 millions of depositors are patiently waiting for changes in the policy on deposit insurance. Specifically, we should issue the Law on Deposit Insurance in order to best protect depositors and maintain the sound and safe development of the financial system. We do hope that positive trends in deposit insurance, advanced international practices will be studied and detailed in this law in order to make it quickly go into life and produce good effects.
