State Bank of Viet Nam Deputy Governor Dang Thanh Binh spoke with Thoi bao Kinh te VIet Nam (Viet Nam Economic Times) about upcoming adjustments to deposit insurance policies.
What is the general role of the Deposit Insurance of Viet Nam?
Most countries with deposit insurance policies have two clear aims: to protect depositors and secure the banking industry. Public trust in the banking system is an important commodity and can be significantly improved by implementing deposit insurance policies.
Courtesy of Article 29 in the Deposit Insurance Law, deposit insurers were established by the Prime Minister following proposals from the Governor of the State Bank of Viet Nam. They are not-for-profit and self-financed institutions.
Deposit Insurance of Viet Nam will oversee deposit insurance policy and protect the legal rights and interests of depositors in an effort to foster public trust in the country's financial system.
People have paid a lot of attention to the insurance premium limit of VND50million (around US$2,380) and think it is inappropriate. What is your opinion?
The announcement of the deposit insurance law was an important step in building a legal framework on deposit insurance in Viet Nam.
The law did not impose a concrete limit on insurance premiums but assigned the responsibility of regulating the limit to the Government, following recommendations from the State Bank.
The State Bank of Viet Nam is currently researching a premium adjustment plan for the Prime Minister.
Can you explain the deposit insurance fee?
The deposit insurance fee is currently applied at a rate of 0.15 per cent of the total deposit. The downside of the uniform rate is that high risk credit organisations don't pay a higher fee.
To deal with this, the law stipulated that the Prime Minister would regulate fee levels in line with the proposal from the Sate Bank of Viet Nam. SBV's proposal will ensure the rate for deposit insurers will vary according to the insurer's classification and assessment.
However, this requires serious research to perfect the ideal rating system. Our system will be based on the CAMELS model: an American supervisory rating system that assess a bank's overall health by combining analysis of financial statements with onsite inspections.
It will be an important basis for collecting fees in a consistent manner with the level of risk.
However, one very important consideration with this model is privacy of the information used to compile the ratings. We need to avoid information links that would create an unfair playing field and cause damage to the banking system.This is an important goal in developing banking policy reform in Viet Nam.
The new fee system will be announced in due course.
What should the Deposit Insurance of Viet Nam do to implement deposit insurance policies?
We need a plan for implementing deposit insurance policies to develop our financial markets and help us integrate with the global financial system.
Institutionally, we need comprehensive and cohesive deposit insurance policies.
The Government announced Decree 68/2013/ND-CP which will guide the law's implementation. Relevant authorities are also researching and compiling instructive documents for implementation.
This will form the legal basis for the Deposit Insurance of Viet Nam activities in implementing deposit insurance policies in Viet Nam.
In the meantime, Deposit Insurance of Viet Nam needs to strengthen financial and staffing capabilities. A communications plan is also needed to enhance public knowledge of deposit insurance and trust in the banking system. — VNS