Safety first for deposits

>> NA law to protect all bank deposits

What do you think about Deposit Insurance of Vietnam (DIV) being put under central bank’s management as set in the proposed draft law on deposit insurance?

I am concerned if Vietnam’s deposit insurer DIV is put under State Bank control. It is like putting commercial banks under economic groups. This is quite risky. A deposit insurer is better to  be an independent organisation.

Insurance premiums pose risks to the whole banking system if incorrectly invested. Will the proposed draft regulations ensure safety?

In light of the proposed draft law, deposit insurance organisations are eligible to collect premiums and use idle capital to invest. However, its investment areas are restricted to buying government bonds, State Bank promissory notes or just putting on State Bank coffers to enjoy interest. Deposit insurers cannot buy commercial bank bonds or put money into banks.

That is right because if deposit insurers put money into or buying bank or firm bonds, then the latter went dissolved, this could endanger the whole system.

Regulations on premium investment should be reviewed to boost efficiency. Though under current law deposit insurers are not profit-making entities, whether current low premium level is sufficient for them to handle their insurance liabilities effectively if a banking entity collapses.

Is socialising deposit insurance a good option?

Deposit insurance is a fresh model in Vietnam so that at the inception it should be established as a state-owned financial institution only as regulated in the proposed draft law.

In fact we have little experience about it. Bad management could entail big consequences.

Besides, we should only accept individual deposits in this stage to ensure we could manage the situation if a banking or credit entity goes bankrupt.

Insuring foreign currencies and gold currently tops the National Assembly agenda. What is your stance on this?

Some people said we should insure dong currency only to fight against dollarisation and goldisation. That is, to some extent, right.

In my view, insuring dollars and gold also helps prevent goldisation and dollarisation. In fact, a huge volume of dollars and gold is kept by the community which is beyond state’s control. Therefore, the best way to control them is to lure them into banks, from there controlling the flow of gold and dollars, avoiding them to be illegally traded.

Of course, when gold and dollars are put into banks, central bank should have measures to control them effectively.

Some countries do not insure gold and dollars. Is that the case?

That is right. However, in these countries, such as China, gold and dollars are tightly controlled and the free market does not exist there.