Draft Law on Deposit Insurance (amended): Regulations on the basis for determining special cases

Considering that the regulation on the Governor of the State Bank of Vietnam deciding on the limit of payment exceeding the limit in special cases as in the draft Law on Deposit Insurance (amended) is still general, the National Assembly deputies suggested that it is necessary to supplement more specific regulations with quantitative and qualitative criteria, in which, attention should be paid to criteria such as the impact of the banking system.

Best protection of depositors' interests

Clause 2, Article 22 of the draft Law on Deposit Insurance (amended) stipulates that "in special cases, the Governor of the State Bank of Vietnam shall decide on the payment limit exceeding the limit prescribed in Clause 1 of this Article, up to the total insured deposits of depositors at deposit insurance participating organizations when the obligation to pay insurance premiums arises".

Basically agreeing with this regulation, National Assembly Delegate To Ai Vang (Can Tho City) stated that the insurance payment limit according to Decision 32 of the Prime Minister is 125 million VND, which is not commensurate with the current economic conditions in our country. Therefore, the State Bank Governor's regulation of the insurance payment limit for each period is appropriate.

National Assembly Delegate To Ai Vang ( Can Tho City ) speaks. Photo: Quang Khanh

Expressing her agreement, National Assembly Deputy Thai Thi An Chung (Nghe An) emphasized that this is a flexible, backup mechanism to respond to crisis situations that risk causing serious instability to the banking system or social security.

However, according to delegate Thai Thi An Chung, the provision in Clause 2, Article 22 of the draft Law only allows the State Bank to decide on the payment level exceeding the limit in necessary cases and is still general. Therefore, the delegate suggested that it is necessary to supplement more specific regulations with quantitative and qualitative criteria, in which it is necessary to pay attention to criteria such as the impact of the banking system. In addition, it is necessary to pay attention to criteria of social impact, contagion risks as well as urgent needs if the financial institution fails.

National Assembly Delegate Thai Thi An Chung (Nghe An) speaks. Photo: Quang Khanh

Believing that deposit insurance is directly related to the interests of depositors and the stability of the national financial system, delegate To Ai Vang stated that decisions on limits that have macro-level impacts need to be controlled by the Government; otherwise, increasing the limit too quickly could increase the potential obligations of the State because the State is the ultimate guarantor.

Analyzing this, delegate To Ai Vang suggested that the Government should stipulate the basis for determining special cases requiring payment exceeding the limit, especially payment with all insured deposits of depositors; at the same time, it is necessary to study a transparent approval process with the participation of relevant agencies. In addition, the Government should stipulate the principle of adjusting the insurance payment limit in accordance with average income, actual situation and socio-economic development conditions of each period to protect the legitimate rights and interests of depositors.

Concerned about the regulation of "special cases", National Assembly member Hoang Thi Doi (Son La) said that it would lead to the understanding that when a large-scale credit institution, important in the system such as a commercial bank, goes bankrupt, the deposit insurance organization will be fully paid. Meanwhile, depositors at small-scale people's credit funds operating in mountainous areas and areas with special difficulties also need to enjoy this mechanism.

National Assembly Delegate Hoang Thi Doi (Son La) speaks. Photo: Quang Khanh

Therefore, in Clause 2, Article 22, delegate Hoang Thi Doi proposed to change the phrase "in special cases" to "in necessary cases" to best protect depositors; the Governor of the State Bank of Vietnam decides the maximum payment limit exceeding the limit equal to all insured deposits of depositors.

Along with that, specific regulations identify necessary cases to facilitate the State Bank to have a mechanism to allow deposit insurance organizations to best perform their tasks, while at the same time, ensuring fairness for depositors in small-scale people's credit funds, which are a weaker group in today's society.

Additional duties of deposit insurance organization

Regarding the rights and obligations of deposit insurance organizations, Clause 16, Article 14 of the draft Law stipulates "implementing propaganda work on policies, laws, images and activities on deposit insurance". Delegate To Ai Vang suggested that the draft Law should supplement the tasks of deposit insurance organizations in carrying out financial education activities and using safe banking services for relevant organizations and individuals to build depositors' trust in the deposit insurance policy and the safety of the banking and financial system.

In addition to utilizing traditional media such as television, radio, print and electronic newspapers, it is also necessary to promote digital communication channels from social networks, official websites and other online platforms to disseminate information quickly and interactively to young people and technology users. In addition, conducting surveys and research to assess people's understanding of deposit insurance, thereby making appropriate adjustments to the content and communication methods in the coming time.

Governor of the State Bank of Vietnam Nguyen Thi Hong explains at the meeting. Photo: Ho Long

Explaining at the meeting, Governor of the State Bank of Vietnam Nguyen Thi Hong said that 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 and the draft Law is currently assigning the State Bank to regulate the deposit insurance limit to increase initiative, flexibility and suitability to actual conditions.

In response to the National Assembly deputies’ comments, Governor Nguyen Thi Hong said that the State Bank will direct the deposit insurance organization to review and propose appropriate deposit insurance levels. In addition, the draft Law is proposing policies for the deposit insurance organization to improve its financial capacity and thereby create a basis for raising the deposit insurance limit to better protect the interests of depositors.

Governor of the State Bank of Vietnam Nguyen Thi Hong explains at the meeting. Photo: Quang Khanh

The decision on the payment limit exceeding the general deposit insurance limit applies in special cases to prevent chain reactions of mass withdrawals by depositors and to protect depositors. In this case, the draft Law assigns the Governor of the State Bank to decide on the payment level exceeding the general limit.

Regarding the deposit insurance mechanism, Governor Nguyen Thi Hong said that 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. The State Bank will continue to coordinate with the National Assembly's agencies to study and clarify the criteria for determining "special cases" in the draft Law.

Source: https://daibieunhandan.vn/du-thao-luat-bao-hiem-tien-gui-sua-doi-quy-dinh-can-cu-de-dac-dinh-truong-hop-dac-biet-10395849.html