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DIV proposes to raise deposit insurance payment limit to VND 200 million   2009-01-21 - TBKTVN

The Deposit Insurance of Vietnam (DIV) has proposed to raise the deposit insurance payment limit by four folds, from VND 50 million to VND 200 million. Bui Khac Son, DIV General Director, explained the proposal.


DIV General Director Bui Khac Son

About the proposal, a part of a financial measure package DIV has suggested to the Government, Son said:


We have made thorough studies on the current financial market and made the proposal based on four factors.


First, in accordance with international practice, the deposit insurance payment limit is raised or lowered depending on the economic situation and the finance-banking conditions.


In Vietnam, in order to stimulate the economy and ensure social security, we think that in the current period, when Vietnam bears the negative impact of the international financial market, we need to raise the deposit insurance payment limit to VND 200 million.


Second, the deposit insurance payment limit can be 3, 4 or 5 times of the GDP per capita, depending on the GDP per capita of every country.


The third factor to consider is the number of depositors.


And the fourth factor is the financial capability of the deposit insurance institution and the Government’s policy on this.


Do you mean that the currently applied deposit insurance payment limit of VND 50 million is proving to be no longer suitable?


The VND 50 million-level proved to be suitable until the period of 2008, before which it satisfied the requirement of protecting the interests of up to 90% of depositors.


However, the principle that the State is following in the market economy is to limit using the state budget to compensate for the collapse of bad management of banks. Meanwhile, the deposit insurance mechanism can help ensure the benefit of the people.


Regarding the global financial crisis, why do you think the US people have not suffered, though many US banks have collapsed?


As you may know, a series of US banks collapsed in 2008, but no massive money withdrawals occurred.


We have found that it is because of good finance policies and the timely action of the US deposit insurance to raise the deposit insurance limit from $100,000 to $250,000.


The decision by the US deposit insurance was a condition for the US Government and Congress to approve the bailout of USD $700 billion.


How have the findings affected your thoughts about Vietnam’s mechanism?


Though Vietnam has not had a law on deposit insurance, the regulations stipulated in Decrees 89 and 109 have provided the necessary legal framework to protect depositors.


DIV has been operating for a long time, nine years, from which it has drawn a lot of experience. In the last nine years, we have been protecting depositors well. DIV’s financial capability has also been improved. However, the difficulties still exist, including the lack of compatibility of legal documents.


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