The latest draft of a first-ever law on deposit insurance which aims to better protect depositors’ rights and ensure healthy operations of the banking system has been recently introduced by its drafter, the State Bank of Vietnam, for public opinions.
Currently, deposit insurance is governed by Government Decree No. No. 89/1999/ND-CP of September 1, 1999, which was amended and supplemented under Decree 109 of 2005.
According to the draft law, deposit insurance institutions would be established by the State Bank of
According to deputy director of the Government Office’s Law Division Dinh Dung Sy, in the short term, a deposit insurance company may operate as a not-for-profit financial institution. But in the long term, it should gradually become a profit-making enterprise.
Meanwhile, Drik Cupei, vice chairman of the European Forum of Deposit Insurance, said the new law should allow deposit insurance for foreign currencies instead of just
“Without foreign-currency insurance, a fluctuating market would see people making a run on the banks, which could lead to a financial crisis. In addition, there is also another amount of foreign currencies which is yet to enter the banking system.
“If the law allows deposit insurance for foreign currencies, the State can take advantage of that inactive money to supply to the banking system,” he added.
Regarding deposit insurance fees and deposit insurance limits, DIV’s general director Bui Khac Son said that these matters were involved in tight relation and played an important role in protecting depositors and helping stabilize the banking system. However, current regulations on these issues have revealed shortcomings which need to be reconsidered.
Insured credit institutions are now required to pay a flat rate annual deposit insurance premium of 0.15% of their total insured deposit amounts. Meanwhile, each depositor is entitled to a maximum deposit insurance coverage of VND 50 million (approximately USD 2,400) per each credit institution.
According to statistical data, the total amount of deposit insurance premiums collected from partaking institutions by late 2010 reached VND 4,484 trillion and this amount, according to the DIV’s head, was insufficient for handling arising problems if two medium-sized banks are collapsed. Therefore, the flat rate should be scrapped and the new law should design a fee system based on risk levels instead, he suggested.
“Moreover, as the accumulated inflation rate from 2005 till now is 50% and per-capita GDP is now 2.2 times higher than in 2005, the maximum deposit insurance level of VND 50 million is no longer appropriate and should be increased,” he added.
The draft law is scheduled for submission to the XIIIth National Assembly for discussion at its 2nd session in October.-