On November 9, 2023, in Phu Quoc, the Deposit Insurance of Vietnam (DIV), together with the Asia Pacific Regional Committee (APRC) and the International Association of Deposit Insurers (IADA), organized the IADI APRC Workshop 2023 on “Enhancing the Role of Deposit Insurers in Early Detection and Timely Intervention”. First Deputy Governor Dao Minh Tu of the State Bank of Vietnam (SBV) attended and delivered the opening speech at the Workshop.
In his opening speech at the Workshop, First Deputy Governor Dao Minh Tu shared that, over the past time, the DIV has performed successfully its assigned tasks. As of October 2023, the total assets of the DIV reached over VND 109 trillion, equivalent to USD 4.43 billion. Therefore, the DIV has abundant resources to be ready for any deposit insurance payment should it arises, and participate effectively in the restructuring of the credit institution system through its financial support.
The SBV Deputy Governor also shared that, currently, Vietnam is in the process of revising the Law on Credit Institutions in order to improve the legal frameworks on the credit institutions’ operations, address the shortcomings and limitations of the current Law on Credit Institutions. The DIV would be assigned more functions and tasks related to the early interventions and the handling of poorly-performing banks in the draft revised Law on Credit Institutions. This is an important premise for the process of revising of the Law on Deposit Insurance in 2024.
An overview of the Workshop
Moreover, the SBV Deputy Governor said that, according to international experience, early detection of and timely intervention into poorly-performing credit institutions play a critical role in improving the efficiency and the stability of the deposit insurance system, contributing to maintaining the stability of the banking sector and the public confidence, while protecting the values of the banks in difficulties and their depositors, well as minimizing the losses for deposit insurers.
The Deputy Governor highly complimented the theme of the Workshop, especially in the context that it is necessary to enhance the role of deposit insurance organizations in particular, and ensure the stability of the banking system in general, not only in Vietnam but also in many countries in the region and around the world, particularly in light of world economic uncertainties affecting many aspects of the economic activities and the financial systems, including in countries with strong financial potentials.
The SBV Deputy Governor expressed his hope that the participants in the Workshop would focus on sharing about the role of the deposit insurers, as well as the coordination between the supervisory agencies and the deposit insurers in early detection and timely intervention; the practical best practices from other countries, etc., thereby enabling Vietnam to improve the legal frameworks for deposit insurance in particular and for banking operations in general.
At the Workshop, the participants’ discussions focused on three groups of topics, namely: Overview of early detection and timely intervention; the role of the deposit insurers in early detection and timely intervention; the coordination between the supervisory agencies and the deposit insurers in early detection and timely intervention.
According to Mr. Hidenori Mitsui, Chairperson of the APRC and Governor of the Deposit Insurance Corporation of Japan (DICJ), through a number of recent bank failures around the world, the role of the deposit insurers in early detection and timely intervention has been recognized more clearly. Through deposit insurance, in case of a bank failure, it will be possible to minimize the risks to the lowest level. That is how to better handle a crisis. In fact, there are many methods for early detection and timely intervention regarding the risks in the banking operations, which all require close coordination among the relevant agencies, and this is the key solution to ensure stable operations of the financial systems.
Through the discussions and experience sharing, the Workshop opened up a lot of new aspects in this area, along with notable orientations and possible solutions to contribute to improving the operational efficiency of the deposit insurance in general, and strengthening the role of the deposit insurers in early detection of and timely intervention into poorly-performing credit institutions in particular.
Le Hang