Strengthening the proactive role of deposit insurance

The authority to approve the list of investment structures and limits shall be assigned to the Government for decision; deposit insurance shall only be implemented within the approved scope.

Need to control when deposit insurance makes special loans

Discussing in groups about the draft Law on Deposit Insurance (amended), National Assembly deputies said that the construction of the Law has closely followed and fully institutionalized the Party's guidelines and policies, the State's policies; 5 policies approved by the Government; inherited regulations that are still suitable for practice and overcome shortcomings and limitations through the implementation of the Law on Deposit Insurance in 2022.

Concerned about the deposit insurance organization participating in the process of early intervention, special control, and handling of weak credit institutions, National Assembly Deputy Nguyen Ngoc Son ( Hai Phong ) said that this is also a reality in which the current Law has not clearly defined the role and authority of the deposit insurance organization in participating in early intervention, special control, and handling of weak credit institutions.

National Assembly Delegate Nguyen Ngoc Son (Hai Phong) spoke at the discussion group. — National Assembly Deputy Nguyen Ngoc Son (Hai Phong) speaks. Photo: Khanh Duy

In this amendment, the draft Law has added the rights and obligations of deposit insurance organizations regarding participation in assessing the feasibility of recovery plans... in Article 14, however, some contents, according to delegate Nguyen Ngoc Son, are not really clear.

Therefore, the delegates suggested that it is necessary to clarify the mechanism for dividing authority among banks; between the State Bank, deposit insurance and the Cooperative Bank of Vietnam because this is one of the banks that can handle weak credit institutions to avoid overlapping and dispersion of responsibilities among banks. The deposit insurance should only take the lead in cases where credit institutions have insured deposits while other banks such as the Cooperative Bank of Vietnam are in charge of restructuring in terms of organization.

In addition, it is necessary to supplement regulations on limiting conditions and control mechanisms when deposit insurance makes special loans, buys bonds and supports payments to ensure that financial risks do not arise for the deposit insurance fund. Allow deposit insurance to establish funds that can intervene early, separate from the deposit insurance payment fund and invest in safe assets.

Delegates also noted that it is necessary to clearly define the principles, criteria, scope and responsibilities of personnel assigned to participate in the management and operation of specially controlled funds, ensuring compliance with the approved restructuring plan. Strengthen the proactive role of deposit insurance in recovering and handling weak credit institutions while still ensuring risk limits and strict monitoring mechanisms.

Regarding the investment activities of deposit insurance organizations, according to Article 21 of the current Law, the investment forms of deposit insurance organizations are limited within a very safe scope. However, the provisions in Article 29 of this draft Law have diversified the investment portfolio of deposit insurance organizations. "This is a very open structure, helping to promote the role of deposit insurance," said delegate Nguyen Ngoc Son.

However, the delegate suggested that it should be regulated in the direction of only allowing deposit insurance to invest in commercial banks with high credit ratings and ensuring minimum capital safety ratios, not subject to special control. The authority to approve the list of investment structures and limits should be assigned to the Government, deposit insurance should only be implemented within the approved scope. At the same time, add specific safety indicators; establish an independent audit mechanism or periodically report to the State Bank and the State Audit on this content.

Delegate Nguyen Ngoc Son also requested to clarify the scope of capital used for investment activities, which can only be used from the reserve fund and the development investment fund, not from the deposit insurance payment fund. The Governor of the State Bank also needs to issue a maximum investment limit for each group of credit institutions and stipulate the minimum liquidity ratio that the deposit insurance fund must maintain. There are regulations on the principle of allocating investment capital in the direction of absolute priority to system safety.

Deterrent but still ensures emergency support capability

Regarding special loans, Article 35 of the draft Law has expanded the duties of the deposit insurance organization, including regulations on special loans for credit institutions under special control. However, according to the assessment of National Assembly Deputy Tran Dinh Gia ( Ha Tinh ), current regulations have not clearly defined the limits, interest rates and loan recovery plans.

National Assembly Deputy Tran Dinh Gia (Ha Tinh) speaks. Photo: Khanh Duy

Therefore, delegates proposed to supplement specific regulations on the ceiling rate of using the Professional Reserve Fund for special lending activities; special lending interest rates in accordance with market principles, with deterrent effect but still ensuring the ability to provide emergency support; plans and deadlines for debt collection to ensure capital safety and maintain the capacity to pay deposit insurance.

Because, according to the current Law, the core function of the deposit insurance organization is to protect the interests of depositors and contribute to maintaining the stability of the banking system. Special lending should only be considered as a temporary support measure, not a regular task. If the task is expanded without specifying specific limits, it will "distort" the function of the deposit insurance organization, leading to overlap with the credit function of the State Bank or other credit institutions.

In practice, the Operational Reserve Fund is mainly formed from deposit insurance premiums contributed by participating organizations, and is a source of payment when a bank collapses. “Using this fund for special loans, without a clear control mechanism and limit, will reduce the ability to pay, affecting the confidence of depositors and the safety of the financial and banking system,” noted delegate Tran Dinh Gia.

Regarding insurance payment procedures, Clause 4, Article 24 of the draft Law stipulates that "within 45 days from the time the obligation to pay insurance arises, the deposit insurance organization is responsible for paying insurance to the insured depositor".

National Assembly Delegate Nguyen Van An (Hung Yen) spoke at the discussion group. — National Assembly Delegate Nguyen Van An (Hung Yen) speaks. Photo: Khanh Duy

Considering that the 45-day period is relatively long and can cause confusion for people about recovering their money, National Assembly Deputy Nguyen Van An (Hung Yen) suggested that it is necessary to apply information technology and electronic data management during the inspection and examination process to shorten the time and ensure the rights of insurance participants.

Source: https://daibieunhandan.vn/tang-cuong-vai-tro-chu-dong-cua-bao-hiem-tien-gui-10392811.html