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Deposit insurance activities in the new situation
Currently, in the world, there are nearly 100 countries that have a deposit insurance system and nearly 30 other countries are studying and preparing to establish this organization. The recent increase in the number of deposit insurances confirms the clear trend that seems to have considered deposit insurance as an effective tool for risk prevention, crisis prevention, depositor protection and reduction for the burden of handling failures on the national budget. Particularly, in most countries, especially those with strongly developed economies in general and banking systems in particular (typically the US, Japan, etc.), deposit insurance is highly valued and used effectively. The law on deposit insurance is often promulgated before the establishment of the deposit insurance, which means that from the beginning, such countries have a solid legal foundation for deposit insurance activities. Deposit insurers have been strengthened in their duties and powers, especially in dealing with weak financial institutions; Adjust the deposit insurance policy to better protect depositors or facilitate institutions participating in the deposit insurance; Promote international cooperation and exchange on deposit insurance in order to strengthen the protection of depositors' interests and maintain financial stability.
In the context of the complicated development of the Covid-19 epidemic spreading globally, the world's political and economic situation has fluctuated, with the trend of increasing indirect investment capital, foreign debt and free trade financialization, deep opening of banking and financial services; increasing pressure to improve efficiency, service quality and enhance competitiveness of domestic institutions. With the change in scale, structure of international investment capital flows and the increasingly fierce competition in attracting FDI among countries, it is required to perfect the legal basis and build a development strategy in order to more and more enhance the position, strengthen the expertise and financial capacity as well as the authority for the deposit insurance to effectively respond to possible difficulties to the national financial-banking system that has become increasingly urgent. In other words, continuing to improve the legal basis, increasing financial capacity and early building and well implementing the development strategy are three important conditions for the DIV to improve its role and operational efficiency in the context of new economic and banking situation.
Developing and applying a deposit insurance development strategy is inevitable
Development strategy is a set of development goals and key policies, plans, and ways to achieve those goals. The strategy is overall, covers all areas of business activities and has a long-term vision, orienting the future development of the business or organization. Development strategy plays a very important role for the existence and development of the business and organization. The right development strategy will create a right direction for the organization or business, the development strategy can be considered as a guideline for that organization or business to go in the right direction.
After 23 years of operation, the formulation and promulgation of the deposit insurance development strategy to 2025, with orientation to 2030 is urgent in terms of legality and practical requirements in the context of deeper international integration that is more and more complete.
According to Clause 1, Article 13 of the Law on Deposit Insurance, the deposit insurance has the right and obligation to formulate a development strategy for the State Bank of Vietnam to submit to the Prime Minister for approval and organize the implementation.
On August 8, 2018, the Government issued Decision No.986/QD-TTg on the development strategy of Vietnam's banking industry to 2025, with orientation to 2030. legible, domestic credit institutions have diversified structures in terms of ownership, size, type; play a key role; have transparent, dynamic, creative, competitive, safe, and effective operations based on technology, advanced banking management, in line with international standards and practices, towards achieving the highest development level of the group of 4 leading countries in the ASEAN region by 2025; meeting the economy's growing demand for financial and banking services, moving towards financial inclusion by 2030, ensuring that all people and businesses have the opportunity to fully and conveniently access financial services in quality banking and financial services, making positive contributions to sustainable development.
In particular, the Banking sector strategy has clearly defined the requirements for the DIV. specifically, developing DIV in the model of a one-member limited liability company in which 100% of charter capital is held by the State, with the State Bank of Vietnam as the owner's representative agency; fulfill the objective of protecting the legitimate rights and interests of depositors, contributing to maintaining the stability of the system of credit institutions, ensuring the safe and healthy development of banking activities; Strengthen financial capacity and participate in effective restructuring of weak credit institutions; Calculate and collect deposit insurance fees, management of investment capital, promotion of deposit insurance policies, insurance payments in accordance with international practices and the provisions of Vietnamese law, improving operational capacity, completing improve the organizational model, improve staff qualifications, apply modern technology to well perform the tasks of supervision and examination, participate in special control, detect and early warn potential risks to with deposit insurance participating organizations; Formulate and implement the deposit insurance development strategy to 2025, with orientation to 2030.
On June 8, 2022, the Prime Minister signed Decision No.689/QD-TTg approving the Project "Restructuring the system of credit institutions associated with non-performing loan settlement in the 2021-2025 period", which requires DIV to continue to review, research, amend and perfect the Law on Deposit Insurance and related legal documents in the direction of supplementing the functions and tasks of the deposit insurance to participate in restructuring weak credit institutions; study and amend the Law on Deposit Insurance to use the balance of premiums to deal with weak PCFs... DIV is able to grant special loans to specially controlled credit institutions; buy long-term bonds of supporting credit institutions; participate in assessing the considerations of the plan to restore the People's Credit Fund, microfinance institutions, financial companies; participate in the formulation of the bankruptcy plan of the specially controlled credit institutions, participate in the Special Supervisory Board...
On August 2, 2022, the Governor of the State Bank of Vietnam signed and promulgated Decision No.1382/QD-NHNN on the Action Plan of the Banking sector to implement the Project of "Restructuring the system of credit institutions associated with non-performing loan settlement for the period of 2021-2025” in order to implement the direction of the State Bank of Vietnam to units in the industry in organizing the implementation of goals, tasks and solutions on restructuring the system of credit settlement institutions associated with non-performing loan for the period 2021-2025 is specified in the Prime Minister's Decision No. 689/QD-TTg dated June 8, 2022 approving the Project of " Restructuring system of credit institutions associated with non-performing loan settlement in the period of 2021-2025" and the contents of the project.
Accordingly, the units of the State Bank of Vietnam, including the DIV, need to study, review, amend and supplement the Law on the State Bank, the Law on Credit Institutions, the Law on Deposit Insurance and other relevant legal documents in the direction of supplementing the support mechanism for credit institutions participating in weak restructuring credit institutions to minimize negative impacts on finance and operations; supplementing the functions and duties of the DIV to participate in restructuring weak credit institutions, studying and reflecting amendments to the Law on Deposit Insurance to use the deposit insurance premium balance to deal with weak people's credit funds. In addition, the DIV is also tasked with coordinating with the Cooperative Bank to participate in and support the examination and supervision function of the State Bank of Vietnam at the People's Credit Funds.
This is an opportunity for DIV to demonstrate its role and capacity, and at the same time poses challenges that require DIV to have an appropriate strategy and roadmap to meet its assigned tasks in the new context as a special financial institution of the State, operating not for profit purpose.
The deposit insurance development strategy will be the guiding foundation and provide the necessary framework solutions to strengthen the legal basis, restructure the apparatus, improve financial and governance capacity, and develop information technology infrastructure , diversifying and improving the quality of products and services and international integration of DIV, contributing to the effective implementation of the tasks specified in the Law on Deposit Insurance and additional tasks in the new period, as well as the orientations in the medium and long term , better protect the legitimate rights and interests of depositors in the process of restructuring and developing credit institutions in the coming time.
Urgently promulgating and consistently implementing the views, goals, tasks and solutions of the deposit insurance development strategy is absolutely necessary to implement activities in a synchronous, consistent and systematic manner, bringing the banking industry in general and the DIV in particular to new heights on the path of development and integration, fulfilling the task of protecting the legitimate rights and interests of depositors, and contributing to maintaining stability of the system of credit institutions, ensuring the safe and healthy development of banking activities.
At the same time, the deposit insurance also needs to actively grasp and develop its specific action plan, coordinate with SBV branches in provinces, cities and related units, strengthen promotion and dissemination of policies, laws and regulations to get ready to effectively implement the contents set out in the Strategy approved by the Prime Minister.
