The State Bank of Vietnam (SBV) has amended the law on deposit insurance to grant Deposit Insurance of Vietnam (DIV) more power.
According to SBV the law on deposit insurance was originally implemented in 2012 and over the years it has been found that there are a number of problems that need to be resolved to further enhance the role of the DIV.
The current amendment will contribute to maintaining the stability and ensure sustainable development of the credit institution system. SBV feels that the amended law will further enhance the role of the DIV and ensure the deposit insurance policy to be implemented effectively and better protect the legitimate rights and interests of depositors.
Under the present amendment the variety of investment channels available to DIV will expand. Specifically, the SBV will be able to allow the DIV to buy long-term bonds of credit institutions that receive compulsory transfers.
According to the pre-amended regulations, the DIV was allowed to use its temporarily idle capital to buy government bonds and SBV’s bills, as well as deposit money at the SBV, to ensure capital safety.
The SBV’s data shows 99% of the total temporarily idle capital of the DIV is currently invested in government bonds as yield of the government bonds is higher than interest rates of SBV’s bills and SBV’s deposits.
However, investment in government bonds has been difficult in recent years and revenue from government bonds has also decreased due to low interest rates. This has greatly affected the revenue of the DIV. According to data provided by DIV, its profitability of idle capital has decreased gradually, from 9.41% in 2013 to only 3.82% in 2023.
Under the SBV’s proposals, DIV can also participate in developing plans and proposing deposit insurance payment limits for people's credit funds and other credit institutions.
The Vietnam Deposit Insurance is assigned a number of new tasks, including the role of participating in restructuring weak credit institutions. Specifically, the DIV can provide special loans to specially controlled commercial banks according to the SBV’s decision.