DIV caught between a rock and a hard place

DIV general director Bui Khac Son

How many banks can DIV rescue with its current capital reserves if collapses happen?

Our current capital reserves are around VND8 trillion ($386.4 million), with half contributed by banks and credit organisations over the past decade. Part of it came from our financial investments and state’s initial investment of VND1 trillion ($43.8 million). With such capital, we are not in a position to rescue two medium-sized banks if they collapse. That was because current regulated levels of deposit amounts and insurance premiums are rather low. Current insurance amounts for all sorts of deposits for one person is VND50 million ($2,400) and it was applicable from 2005. Such level is now impropriate as aggregate inflation from 2005 to 2010 was 50 per cent. Low deposit levels are also risky since bank and credit institution deposits will flow overseas or into Vietnam-based foreign bank branches.

Could DIV entirely compensate depositors if a credit institution collapses?

We have multiple ways to fully compensate our customers such as supporting credit institutions to resume operations or assisting healthier credit organisations to buy out feeble ones. In the worse case if a credit organisation goes bankrupt, we can compensate each depositor with a maximum VND50 million each. Compensation will be higher if we acquire more money from relative asset liquidation.

However, as per international practices the depositors must be given compensation in a short time after risks appear. We cannot raise a huge amount in a short time as we have diverse investment ventures. Therefore, the DIV demands a capital advance scheme from the State Bank and the Ministry of Finance or we use foreign loans for compensations and later refund the debt within the financial year.

What are your proposals to raise DIV’s scale and more effectively protect depositor interests?

The deposit limit of VND50 million in 2005 should be raised to VND100 million ($4,800) now. Insurance premiums should also be hiked to fit actual conditions.

Besides, we should be given the right to revise the deposit limit in special cases such as long-lasting inflation, accelerating gross domestic product rates or an economic downturn. We have drafted and submitted to the government a deposit insurance operation scheme in which we set suitable premium levels to insure against risks. We also demand the right to access special capital sources in particular cases to be able to act swiftly in case of risks.