Adjusting the insurance payment limit mechanism to better protect depositors' interests

Regarding the draft Law on Deposit Insurance (amended), the issue of insurance payment limit has received special attention from National Assembly deputies. This is a content that has a direct impact on tens of millions of depositors, and is also an important tool to help ensure the stability of the financial and banking system. Many opinions have proposed to improve the mechanism for determining the limit, adjustment criteria as well as the authority to decide the limit, in order to ensure flexibility but also strictness and transparency.

Need to regulate mechanism for adjusting insurance payment limit

According to current regulations, the maximum payment limit is 125 million VND for each individual at an organization participating in the Deposit Insurance (DI). Many delegates said that this payment level is still low, not suitable for the scale of deposits and current income. Therefore, raising the payment limit is necessary to better protect the interests of depositors, especially in the context of many fluctuations in the financial market.

Delegate Nguyen Hai Nam ( Hue City) commented: "Vietnam's current deposit insurance payment limit is still quite low compared to the region, for example, Singapore or Malaysia, they both pay more than 1 billion. It is recommended to increase the limit to create more trust in the system. The Government should stipulate a flexible adjustment mechanism, possibly increasing the limit once every 3 years."

Will review and adjust deposit insurance limits to suit practical conditions.

Sharing the same opinion, delegate Hoang Thi Doi ( Son La ) stated: "Currently, the insurance payment limit is 125 million VND, which is quite low compared to the actual operations of the bank, and is no longer suitable for the scale of deposits and income of the people."

Delegate Thach Phuoc Binh ( Vinh Long ) also proposed increasing the payment limit to 200-250 million VND to better protect depositors.

The draft Law also stipulates that the Governor of the State Bank has the authority to prescribe limits in each period. Delegate To Ai Vang (Can Tho) agrees with this policy for three basic reasons: It is consistent with the Party's policy on decentralization and delegation of power; when the Governor decides on the limit, the implementation process is concise; helping the State Bank respond quickly to changes. "However, I would like to make the following two recommendations: First, the Government should establish a mechanism to monitor, inspect, and handle violations in order to ensure transparency, publicity, and the spirit of power going hand in hand with responsibility; Second, the Government should periodically carry out the public process in the last 6 months of the year. The Governor of the State Bank must report to the people and the National Assembly on decisions within his authority" - Ms. To Ai Vang proposed.

Delegate Hoang Thi Doi also proposed to add clear principles and bases to the law for the Governor of the State Bank to decide on the limit. These bases include: average income per capita, the size and value of deposits of the majority of people, financial capacity and size of the deposit insurance fund, the safety level of the credit institution system along with the goal of protecting depositors and stabilizing the financial system.

Sharing the same opinion on the insurance payment limit, delegate Luong Van Hung (Quang Ngai) proposed adding the principle of adjusting the insurance payment limit according to a roadmap suitable to the economic growth rate, average income of the people and inflation developments in each period.

Overpayment: Criteria should be clearly defined

The draft law also stipulates that in special cases, the Governor of the State Bank shall decide on the limit of payment exceeding the limit, up to the total insured deposits of depositors at deposit insurance participating organizations when the obligation to pay insurance premiums arises. This content has received the attention of many delegates.

According to delegate Hoang Thi Doi (Son La), the regulation of "special cases" will lead to the understanding that when a large-scale credit institution, of importance in the system such as a commercial bank, fails, the deposit insurance organization will be fully paid. Meanwhile, depositors at small-scale people's credit funds operating in mountainous areas and particularly difficult areas also need to enjoy this mechanism. Therefore, Ms. Doi proposed to change the phrase "in special cases" to "in case of necessity" to best protect depositors.

Delegate To Ai Vang (Can Tho) agreed with the Governor's decision on the limit of payment exceeding the limit. However, she recommended that the Government stipulate the basis for determining special cases requiring payment exceeding the limit, especially payment with all insured deposits of depositors, and at the same time, it is necessary to study the transparent approval process with the participation of relevant agencies. In addition, the Government needs to stipulate the principle of adjusting the limit of insurance payment in accordance with average income, actual situation and socio-economic development conditions at each stage to protect the legitimate rights and interests of depositors.

Delegate Thai Thi An Chung (Nghe An) suggested that it is necessary to supplement and specify with quantitative and qualitative criteria, in which it is necessary to pay attention to criteria such as the impact of the banking system, while also paying attention to criteria of social impact, contagion risks as well as urgent needs if the financial institution fails.

In general, National Assembly delegates all affirmed that the amendment of the limit mechanism must ensure the following factors: Transparency, with a clear basis when adjusting the limit; Flexibility, to promptly respond to systemic risks; Fairness, including for depositors at people's credit funds...

Deposit insurance limits will be reviewed and adjusted to suit reality.

Explaining the delegates' opinions on the insurance payment limit, State Bank Governor Nguyen Thi Hong stated: The insurance payment limit depends on the economic situation, the average balance of insured deposits as well as the payment capacity of the Deposit Insurance Fund. These criteria may change from time to time, so the draft law assigns the State Bank to regulate the deposit insurance limit to increase initiative, flexibility and suitability to actual conditions.

In response to the opinions of the National Assembly deputies, the State Bank will direct the deposit insurance organization to review and propose a more appropriate deposit insurance limit. In addition, the draft law is proposing policies for the deposit insurance organization to improve its financial capacity, thereby creating a basis for raising the deposit insurance limit to better protect the interests of depositors.

Regarding the case of having to pay in excess of the general deposit insurance limit, the Governor emphasized that this is a measure applied in special situations to prevent chain reactions of mass withdrawals and protect depositors. The draft law stipulates that the Governor of the State Bank is the person who decides on the level of payment in excess of the limit in these cases.

Regarding the deposit insurance mechanism, according to Governor Nguyen Thi Hong, insuring the entire amount of depositors' money is a mechanism applied by some countries to best protect depositors and prevent the effect of mass withdrawals in banking operations, such as the case of the US in the first months of 2022. "Incorporating the opinions of National Assembly deputies, we will continue to coordinate with National Assembly agencies and research to clarify the criteria for determining special cases in the draft law" - said the Governor.

Source: https://thoibaonganhang.vn/dieu-chinh-co-che-han-muc-tra-tien-bao-hiem-de-bao-ve-tot-hon-quyen-loi-nguoi-gui-tien-174228.html