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Deposit insurance (DI) is the deposit insurer’s commitment to reimbursing depositors when an insured institution is closed or becomes insolvent.
Before the Law on DI was enacted in 2012, the role of the deposit insurer had not been clarified. Many people did not know about their interests when they deposited their money with credit institutions as well as about the DI coverage limit. Therefore, any information about an underperformed or risky credit institution could lead to bank runs which cause serious consequences.
Since 1st January 2013 when the Law on DI came into effect, DI policy has had a firm background, rights and obligations of depositors are stipulated clearly in the Article 1 – the Law on DI. This helps people more confident in putting their money in banks. Besides, DI member institutions are obliged to follow regulations on supervision and examination within the DI policy framework. Thanks to this, the effectiveness of banking supervision and examination will be improved; problems will soon be detected so that warnings can be sent in a timely manner. This is one of the factors that make a safer banking system.
When a weak bank is no longer viable, the deposit insurer will help it exit the banking sector smoothly and exert no adverse impact on other institutions. Through supervision and examination, the deposit insurer can assess member institutions and make reports to the State Bank of Vietnam on any violations for measures.
In order to better promote the effectiveness of DI policy in ensuring the safety of the banking system, public awareness is an important operation that draws much attention. In recent years, DIV has often held talk shows among experts in finance, economics and at the same time, tried to bring DIV’s image closer to ordinary people. DIV’s website has been being enriched and diversified. As a result, public awareness of DI policy is increasingly upgraded. Promoting people’s knowledge of DI regulations and policy to enhance public confidence in the banking and financial system and avoid disturbances is considered an important and useful task that needs to be paid due attention.
In summary, ensuring the safe and sound banking system in the current difficult period is an important mission of DIV. Therefore, popularization of DI policy is one of the goals that DIV is striving for. Once every citizen knows, understands and supports DI policy, public confidence in the banking system will be significantly strengthened, bank runs will unlikely happen and the banking system will then be safer.
Reference:
- Law on Deposit Insurance, approved by the 8th National Assembly – 3rd session, dated 19 June 2012;
- Decrees and circulars issued by the Government on deposit insurance
