This article analyzes the necessity of amending the Law on Deposit Insurance, outlines the viewpoints and orientations for the amendment, and highlights key policies that need to be considered to ensure that the deposit insurance system operates efficiently and transparently, thereby enhancing the stability of the banking system in Vietnam.
The necessity of amending the Law on Deposit Insurance
The Law on Deposit Insurance No.06/2012/QH13, passed by the 13th National Assembly at its third session on June 18, 2012, and effective from January 1, 2013, is the highest and most comprehensive legal document governing deposit insurance in Vietnam. It clearly defines the position, functions, and duties of the deposit insurance organization, concretizes the rights and obligations of insured institutions, identifies insured depositors and insured deposits, and regulates premium collection and insurance payouts.
Along with the development of the banking system, the number of insured institutions and depositors has increased rapidly over time. At present, the Deposit Insurance of Vietnam (DIV) insures 123 million deposit accounts at 1,277 insured institutions.
Pursuant to the Law on Deposit Insurance and in compliance with the instructions of the State Bank of Vietnam (SBV), DIV has proactively performed supervision and examination tasks, particularly in-depth examination of people’s credit funds, identifying potential risks and violations of DI regulations and banking safety regulations. DIV has begun participating in the restructuring of weak credit institutions by monitoring and appointing staff to the special control boards at people’s credit funds under special control, coordinating with SBV’s provincial and municipal branches to propose resolution plans, and participating in the governance of those institutions.
By the end of 2024, the financial capacity of DIV has significantly improved. From an initial charter capital of VND 1,000 billion, its total assets have grown to over VND 126 trillion, with the professional reserve fund reaching over VND 119 trillion. This financial resource plays an essential role in providing insurance payouts and effectively participating in the restructuring of credit institutions. However, in comparison with the total insured deposits across the system, DIV’s financial capacity remains modest. The professional reserve fund accounts for only about 1.3% of total insured deposits system-wide, posing a major challenge for DIV in fulfilling its mandate to participate in the restructuring of credit institutions, especially in the context of increasing potential risks and rapid growth of banking activities.
According to the report "Deposit Insurance in 2024 – Global Trends and Key Issues” by the International Association of Deposit Insurers (IADI), deposit insurers worldwide are being given an increasingly important role in supporting bank resolution processes. In Vietnam, the Law on Credit Institutions was passed by the National Assembly on January 18, 2024, which amended and supplemented provisions regarding DIV’s rights and obligations in early intervention and special control of credit institutions. In line with global trends and Vietnam’s specific conditions, the Law on Deposit Insurance needs to be revised to ensure consistency with related legislation and establish a clear and complete legal framework for the deposit insurer to enhance its financial capacity and engage more deeply in credit institution restructuring.
Viewpoints and Orientations for Developing the Amended Law on Deposit Insurance
The amendment of the Law on Deposit Insurance is necessary and should adhere to the guidance of the Government on economic development and banking sector reform. This includes concretizing tasks outlined in important policy documents such as:
- First, Resolution No.50/NQ-CP dated May 20, 2021, by the Government on the Government’s Action Program which emphasizes the need to improve institutions in the monetary and banking sectors in accordance with market principles, ensuring safety, soundness, and stability of the system; promoting transparency, competitiveness, and alignment with international practices and new development trends.
- Second, the Prime Minister approved the “Strategy for Development of Vietnam’s Banking Sector to 2025, with Orientation to 2030” under Decision No. 986/QĐ-TTg dated August 8, 2018, and the “Deposit Insurance Development Strategy to 2025, with Orientation to 2030” under Decision No. 1660/QĐ-TTg dated December 30, 2022. These are guiding documents to enhance operational capacity and ensure system safety.
- Third, on June 8, 2022, the Prime Minister issued Decision No.689/QĐ-TTg approving the Scheme on “Restructuring the System of Credit Institutions Associated with Bad Debt Resolution for the 2021–2025 Period.”
- Fourth, the Law on Credit Institutions was passed by the National Assembly on January 18, 2024, and takes effect from July 1, 2024.
Based on this, the SBV has submitted to the Prime Minister for approval the proposal to amend the Law on Deposit Insurance, focusing on revising major policy areas, including: Deposit insurance premiums; Improving the financial mechanism to enhance operational efficiency and financial capacity of the deposit insurer; Rights and obligations of the deposit insurer; Legal provisions enabling DIV to participate in the restructuring of weak credit institutions; Regulations on deposit insurance reimbursement.
In line with the mission of the banking sector development strategy in general and the deposit insurance development strategy in particular, and pursuant to the Law on Credit Institutions 2024, DIV is assigned to participate in resolution processes throughout the operational cycle of credit institutions, including normal operations and situations of difficulty or insolvency. Therefore, one of the key goals of amending the Law on Deposit Insurance is to establish a legal framework to strengthen both financial and operational capacity, ensuring that DIV can meet these responsibilities.
On Strengthening Financial Capacity:
The amended Law on Deposit Insurance should define a clear and transparent financial mechanism for the deposit insurer as a special State financial institution. In addition, the law should provide mechanisms to enhance financial resources by allowing diversified investment forms to increase the professional reserve fund on the principles of safety, liquidity, and profitability.
On Enhancing Operational Capacity:
The amended law should include provisions to expand the rights and obligations of the deposit insurer to support the SBV in the examination, supervision, and resolution of credit institutions. It should also revise and supplement regulations governing the participation of the deposit insurer in restructuring weak credit institutions, ensuring consistency with the Law on Credit Institutions 2024 and promoting the role of DIV as envisioned in the Deposit Insurance Development Strategy. Moreover, it should include mechanisms and measures for crisis resolution with the involvement of the deposit insurer.
Conclusion
Over the past years, the deposit insurance policy has proven essential in protecting the legal rights and interests of depositors, maintaining financial system stability, and reinforcing public confidence in the banking system. However, amid the rapid evolution of the economic and financial environment and the demands of international integration, amending the Law on Deposit Insurance is not only urgent but also a strategic step toward improving Vietnam’s legal framework on finance and banking.
In the context of an urgent need for effective mechanisms to address current and potential risks and weaknesses for a healthier banking system, the Law on Deposit Insurance must be updated to clearly define the responsibilities and powers of the deposit insurer. The inclusion of provisions on financial support measures—in any form—serves the ultimate goals of protecting depositors’ interests, maintaining the stability of the banking system, and strengthening public confidence.
Currently, the State Bank of Vietnam is soliciting feedback on the proposal to draft the amended Law on Deposit Insurance, with the plan to submit it to the National Assembly for review and adoption in 2025. This reflects the strong political will and sound strategic direction of the Government in improving the legal framework on deposit insurance, aiming toward a modern, transparent, and practical deposit insurance system that better protects the legitimate rights and interests of depositors and contributes to the safe development of the banking sector.
Pham Bao Lam – DIV Chairman of the Board of Directors
Communication Department (Translation)