Deposit Insurance Law: Positive impact but still needs amendment

After more than 12 years of implementation, the Deposit Insurance Law has created a clear legal framework, contributing to improving the effectiveness of the deposit insurance organization. However, in the current context, the Deposit Insurance Law has also revealed some difficulties and obstacles that need to be amended.

Legal basis for deposit insurance operations

After 12 years of implementation, the Deposit Insurance Law No. 06/2012/QH13 – passed by the 13th National Assembly on June 18, 2012, and effective from January 1, 2013 – has proven its crucial role in protecting depositors and strengthening the safety of the financial and banking system. The law fully institutionalizes the views and policies of the Party and State on strengthening the protection of depositors' rights; it also accurately reflects the specifics of Vietnam's financial market and is consistent with the country's socio -economic conditions. Along with the law, the system of subordinate legal documents issued in recent years has contributed to perfecting the legal framework for deposit insurance activities. The regulations are becoming increasingly clear and specific, creating a complete legal foundation for deposit insurance organizations to effectively perform their functions; and simultaneously supporting credit institutions in improving compliance awareness and risk management.

The Vietnam Deposit Insurance Corporation's branch in the South Central and Central Highlands regions is disseminating information about deposit insurance policies.

The Deposit Insurance Law also ensures the uniformity and effectiveness of the financial and banking legal system, strengthening coordination among components in the national financial safety net. As the highest legal document comprehensively regulating deposit insurance activities, the law clearly defines the position, functions, and tasks of the deposit insurance organization; fully defines the rights and obligations of participating deposit insurance organizations; and clarifies the scope of insured deposits, the timing, and the payment limits. As a result, the rights of depositors are better protected, contributing positively to the stability, safety, and soundness of the banking system over the past 12 years.

Difficulties and obstacles have arisen in the current context.

After more than 12 years of implementation, in the context of increasingly developing socio-economic conditions, the Deposit Insurance Law has encountered several difficulties and obstacles that need to be amended and supplemented to suit the new situation and changes in the current legal system. One of the major difficulties currently is the regulation on insured deposits; the law and guiding documents do not clearly define "other forms of deposits," leading to inconsistent interpretations when determining certain types of deposits. Another important obstacle is the timing of the obligation to pay insurance; current regulations do not ensure timeliness and do not provide a basis for Vietnam Deposit Insurance to pay deposits earlier, immediately when a credit institution experiences an incident that threatens the safety of the system. The fact that the Deposit Insurance Corporation (DIC) can only pay out deposits after a credit institution has been declared bankrupt does not guarantee the role of the DIC in stabilizing depositors' confidence, preventing the risk of collapse, and best protecting depositors' rights. Furthermore, on January 18, 2024, the National Assembly passed the Law on Credit Institutions, which amended and supplemented several regulations on the rights and obligations of the DIC in participating in early intervention and special supervision of credit institutions. However, some provisions of the Law on Credit Institutions are not detailed but refer to the Law on Deposit Insurance, thus requiring amendments and additions to the Law on Deposit Insurance to align with the provisions of the Law on Credit Institutions. The current deposit insurance payout limit of VND 125 million per depositor/participating institution, stipulated since 2017, has revealed many shortcomings.

Furthermore, many regulations related to the investment activities of the Vietnam Deposit Insurance Corporation (DIC) or its role in restructuring credit institutions are no longer appropriate, and there is no sufficient legal basis for the DIC to deeply participate in the process of handling weak credit institutions. The law also does not allow the DIC to sell government bonds when liquidity is needed; new provisions such as special loans or the purchase of long-term bonds at the decision of the State Bank of Vietnam have not yet been codified into law.

Therefore, the amendment of the Deposit Insurance Law aims to address the difficulties and obstacles in deposit insurance operations over the past period, ensuring consistency and uniformity with related laws, creating a complete and clear legal framework for deposit insurance organizations to improve their financial capacity and participate more deeply in the restructuring process of credit institutions. This will better protect the rights of depositors, ensure the stability of the credit institution system, and maintain social security and safety in accordance with the deposit insurance development strategy until 2025, with a vision to 2030, which has been approved by competent authorities.

HOANG DUNG

Source: https://baokhanhhoa.vn/kinh-te/tai-chinh-ngan-hang/202512/luat-bao-hiem-tien-gui-tac-dong-tich-cuc-nhung-van-can-sua-doi-b7d4c4a/