Trang Chủ
Since the enforcement of the DI Law, the detailed guidance of the offsite supervision has yet to be issued, the information exchange and disclosure mechanism between DIV and the State Bank of Vietnam (SBV ) has not yet been made. Consequently, the DIV’s offsite supervision is still regulated by previous legal documents in either the methods or the indicators. As of the first quarter, 2014, the DIV supervised 99.9% of the announced institutions including: 92 commercial banks, 01 cooperatives bank, 1144 people’s credit funds (PCFs), of which 01 PCF ceased operation to stabilize its organization. The offsite supervision results showed that several PCFs violated DI policy and prudential regulations on banking activities, therefore the DIV promptly sent risk warnings to these institutions, especially those small-scaled ones like the local PCFs. The offsite supervision results are considered the important base and reference for DIV's other functions such as: onsite examination, payout, especially the roadmap for risk-based premiums implementation, etc., Consequently, the DIV always aims at reforming and renovating the procedure of carrying out offsite supervision to meet the international standards. The DIV has successfully obtained the objectives and perhaps made it an effective instrument for early detection, prompt prevention and risk management in the banking activities.
However, the DIV’s offsite supervision is embedded with abundant of disadvantages and disadvantages such as:
Firstly, the ability to satisfy the demand for supervising information is limited due to the shortage of information and lack of detailed procedures and regulations to access the SBV’s database. The input information comes largely from the balance sheets of DI member institutions. The quality of information depends on each institution, especially in the PCF system. The lack of sufficient statistical reports perhaps affects the prudential supervision of the banking operation.
Secondly, the lack of software in the whole DIV system to scientifically, modernly and consistently supervise the people’s credit funds leads to the ineffective supervision results. In the future, when the risk-based premiums as provided by the Law on DI and the CAMELS-based credit institution rating system which is under improvement by the SBV are implemented, the current supervision method will become outdated;< /o:p>
Thirdly, even though the supervision method has been improved to meet the international standards, it still focuses on supervising the compliance of the insured institutions with the prudential regulations on the banking system instead of assess the market risks and detecting potential risks. In the trend of international economic integration, since the credit institution system is growing in both quantity and scale, the supervision method should be renovated and shifted from compliance supervision to compliance supervision combined with risk-based supervision in order to assess potential risks of credit institutions . It will serve as the important baseline for the roadmap for risk-based premium assessment and collection as provided by the Law on DI.
The following recommendations are expected to promote the offsite supervision to support early warning, risk prevention and management in the banking activities and contribute to the common objectives of the DIV:
Firstly, to bring the deposit insurance policies into life, facilitates the deposit insurance to enhance its role in protecting the legitimate rights of depositors and public confidence, the DIV should take initiative to request the governmental authorities to consistently issue bylaws and guidance, thus put forward directions to implement effectively and properly all mandates including the offsite supervision;
Secondly, to request the SBV to issue the detailed guidance to regulate the information sharing mechanism among the DIV, SBV and the announced institutions, of which they will clarify the scope, rights, responsibilities of the concerned parties in information using and processing, types of information, sharing mechanism and cooperation.
Thirdly, the DIV should take initiative to make supervision criteria and a supervision model closely consistent with the Law on DI and the international standards. Risk-based supervision will be gradually favored over compliance supervision.
Fourthly, to organize professional training courses in compliance with the Law on DI, including the risk supervision; focus on improving the quality of supervisors, especially on their analytical ability, potential risk assessment in the banking activities.
Quynh Huong, Thu Huong
(DIV’s North Central Regional Branch)
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REFERENCE
1. Law on Deposit Insurance
2. Decree No.68/2013/ND-CP detailing and guiding the implementation of the Law on Deposit insurance
3. Basel's supervision principles
4. div.gov.vn.
