Amendment of the Law on Deposit Insurance will contribute to maintaining the stability and sustainable development of the credit institution system. Photo vneconomy.vn

HÀ NỘI — The State Bank of Vietnam (SBV) has recently submitted to the Government a proposal to amend the Law on Deposit Insurance.

According to the SBV, after 12 years of implementing the Law on Deposit Insurance, there have been a number of difficulties and problems that need to be resolved to further enhance the role of the Deposit Insurance of Vietnam (DIV), ensure the deposit insurance policy to be implemented effectively, and better protect the legitimate rights and interests of depositors.

The SBV expects the changes will contribute to maintaining the stability and sustainable development of the credit institution system.

Under the proposal, the SBV proposes to expand investment forms of deposit insurance organisations in the direction of expanding investment forms. Specifically, the SBV proposes to allow the DIV to buy long-term bonds of credit institutions that receive compulsory transfers.

According to the current regulations, the DIV is allowed to use temporarily idle capital to buy government bonds and SBV’s bills, as well as deposit money at the SBV, to ensure capital safety.

The SBV’s data shows 99 per cent of the total temporarily idle capital of the DIV is currently invested in government bonds as yield of the government bonds is higher than interest rates of SBV’s bills and SBV’s deposits.

However, investment in government bonds has been difficult in recent years and revenue from government bonds has decreased due to low interest rates. This has greatly affected the revenue of the DIV. According to data provided by the DIV, its profitability of idle capital has decreased gradually, from 9.41 per cent in 2013 to only 3.82 per cent in 2023.

Under the SBV’s proposals, the DIV can also participate in developing plans and proposing deposit insurance payment limits for people's credit funds and other credit institutions.

The SBV also proposes regulations to limit risks in investment activities of the DIV. Accordingly, there must be regulations on the responsibilities of the DIV in carrying out investment activities and making provisions for risk for investments according to the Government's instructions. Besides, the Government must stipulate criteria for investment portfolio, investment structure and investment methods of the DIV.

According to the Law on Credit Institutions 2024, the Vietnam Deposit Insurance is assigned a number of new tasks, including the role of participating in restructuring weak credit institutions.

Specifically, the DIV can provide special loans to specially controlled commercial banks according to the SBV’s decision. — VNS