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Inadequacies in current regulations
The Law on Deposit Insurance, which took effect on January 1, 2013, plays an important role in building a solid legal framework for deposit insurance activities in Vietnam. However, after more than 12 years of implementation, the review of the law has identified several shortcomings, including issues with insurance payments.
Accordingly, regarding the time when the obligation to pay insurance arises, Article 22 of the Law on Deposit Insurance stipulates: The obligation to pay insurance arises from the time the SBV issues a document terminating special control or a document terminating the application or a document not applying measures to restore solvency while the credit institution is an insured institution and is still in a state of bankruptcy; or the SBV issues a document determining that the foreign bank branch is an insured institution and is unable to pay insurance to depositors.
Clause 4, Article 168 of the Law on Credit Institutions 2024 stipulates that at the time the SBV terminates special control (in the case of credit institutions implementing bankruptcy plans), the judge shall appoint an administrator or an enterprise to manage and liquidate assets to carry out bankruptcy procedures for the credit institution under special control.
Clause 1, Article 190 of the Law on Credit Institutions 2024 stipulates: " After the bankruptcy plan has been approved, the deposit insurer is responsible for coordinating with the specially controlled credit institution to reimburse insurance to depositors according to the bankruptcy plan".
At the same time, Article 188 of the Law on Credit Institutions 2024 stipulates that, in the process of developing and approving bankruptcy plans, the SBV shall submit to the Prime Minister a decision on the coverage limit for depositors, up to the maximum deposit amount of insured individuals at credit institutions.
"Therefore, it is necessary to consider adding regulations on the time when the obligation to pay insurance arises and the coverage limit consistent with the Law on Credit Institutions," the SBV stated.
The SBV believes that the current regulations on the time of insurance payment obligations do not ensure timeliness, and there is no basis for the Deposit Insurance of Vietnam (DIV) to make reimbursement earlier, as soon as a credit institution experiences an event that risks causing system insecurity. The fact that the DIV can only make insurance payments after a credit institution has decided to go bankrupt will not ensure the DIV's role in stabilizing depositors' psychology, preventing collapse, and best protecting their interests.
Therefore, amending the Law on Deposit Insurance to improve regulations on insurance payments is required to ensure fairness, transparency, and efficiency, especially in light of the Law on Credit Institutions 2024, which introduces many new regulations on handling weak and bankrupt credit institutions that cannot be recovered.
Improve the efficiency of insurance payments.
The draft Law on Deposit Insurance (amended) proposes policies that directly address the limitations of current regulations and improve the efficiency of the insurance payment process.
Specifically, the draft Law stipulates the time when the obligation to pay insurance premiums arises from one of the following times: The bankruptcy plan of a credit institution is approved or the SBV has a document confirming that the foreign bank branch is an insured institution and is unable to pay deposits to depositors; The SBV has a document suspending the deposit-taking activities of a credit institution under special control so that the deposit insurer can reimburse depositors when the credit institution has accumulated losses greater than 100% of the value of its charter capital and reserve funds; Belongs to the case of reimbursement in special cases.
The mechanism to support depositors' reimbursement is a new provision added to the draft Law, creating a basis for the deposit insurer to make earlier payments to depositors, thereby ensuring safety and system stability and protecting depositors' rights. Specifically, the draft Law stipulates that to ensure system safety and social order and safety as prescribed in Clause 4, Article 162 of the Law on Credit Institutions, the SBV shall report to the Government to decide on requesting the deposit insurance organization to make payments in case a specially controlled credit institution is lost or at risk of losing its ability to pay. The deposit insurer shall be granted a special loan by the SBV with an interest rate of 0% in case the amount in the operational reserve fund as prescribed in Clause 2, Article 30 of this Law is not enough to make payments; The deposit insurer shall develop a plan to increase the deposit insurance premium to pay for the special loan portion, use the money to repay the special loan of the credit institution, the revenue from the sale of valuable papers held by the deposit insurer, from the liquidation of assets of the credit institution with special loans, and deposit insurance premium to prioritize the repayment of special loans to the SBV. The draft law also assigns the Governor of the SBV to guide the SBV in providing special loans to the deposit insurer.
In addition, the draft Law shortens the time limit for insurance payment compared to the current Law. It adds a provision that, in special cases, the Prime Minister may, at the request of the SBV, decide to reimburse all insured deposits of depositors at the insured institution when the obligation to pay insurance arises. The draft Law also adjusts the provisions on the amount of insurance paid in cases where multiple depositors jointly own insured deposits, in line with international practice.
The proposal to amend the regulations on insurance payments in the draft Law on Deposit Insurance (amended) is an important step forward to overcome the limitations of the current law and to align with the deposit insurer's resources. It is expected that, when the National Assembly passes the draft Law, it will create a legal basis for the DIV to further enhance its role, innovate, increase operational efficiency, proactively participate in restructuring weak credit institutions, and better protect the rights of depositors.
Communication Department (Translation)
