Learn about the recent changes in deposit insurance premiums and why they will no longer be in the same class. Get answers to frequently asked questions about this topic.
Deposit insurance is a crucial aspect of the financial system, offering protection to depositors in case of a bank failure. However, the recent changes in deposit insurance premiums have caused a shift in the way they are classified, leading to confusion among depositors. In this article, we will discuss why deposit insurance premiums will no longer be in the same class and answer some frequently asked questions about this topic.
Deposit Insurance Premiums: A New Class
Deposit Insurance of Vietnam (DIV) has officially announced the scheme to calculate premiums on the basis of risks of credit institutions. On this occasion, we had an exchange with Mr. Bui Khac Son, General Director of DIV.
Such an important project, but why has it been researched and applied only now, sir?
When the economy turned strongly to a market economy, integration made the banking and financial system grow strongly. That process also creates a larger risk gap between credit institutions. Therefore, the research and implementation of the fee system on the basis of risk measurement according to international practices and standards is very necessary for the banking and financial system and the realization of policies. that policy.
After 7 years of operation, DIV has made serious assessments of its performance compared with public policy goals in accordance with international practices as well as functions and tasks assigned by the Government. In addition to performing well in its role, we find that there are still many public policy objectives that have not been implemented well for various reasons, of which a number of deposit insurance policies have not been designed and implemented according to market principles and international practices.
Through studying and studying the experiences of other countries, we see that it is time to submit to the Prime Minister a risk-based charging scheme. Compared to the current equal-tier fee mechanism, how effective will the risk-based method of calculation be, sir?
According to our assessment, the effect of the new way of charging on the economy will be to reduce risks, improve transparency, and enhance financial stability and safety. For the national financial system, it will be more secure, objective and transparent. For insurance participating institutions, it will create a driving force to encourage credit institutions to operate more safely, contribute to preventing credit institutions from falling into financial difficulties, and raise the awareness of the real world.
Comply with international regulations and practices. For depositors, increasing confidence in credit institutions and the national financial system and thereby better protecting their interests.
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Is this the right time to deploy?
Although the timing is late, we still consider it appropriate. Regarding the legal basis, the Prime Minister’s Decrees 89 and 109 on deposit insurance also created an initial legal basis to allow Vietnam Deposit Insurance to implement public policy objectives in accordance with the model. Risk reduction.
It is necessary but not without difficulties, sir?
In fact, DIV has received technical assistance from ADB and the implementation is in the direction of classifying deposit insurance participating institutions. In order to develop a risk-based fee system, DIV needs to develop a quality rating and risk assessment system based on the results of remote monitoring.
On-site testing and international best practices, and use the results of assessment and inspection of other relevant agencies and organizations such as: the State Bank, the Ministry of Finance, the State Audit, the independent audit. In addition, this system, when approved DIV deployed with technical and technological support from the World Bank also ensures that there is no additional cost or burden on deposit insurance participating organizations when providing input information to Vietnam Deposit Insurance.
How is the fee system expected to be built, sir?
The construction will be based on the risk of the deposit insurance participating organization more or less without knowing whether the organization is large or small, who owns it, and which corporation is behind it. All are equal. This risk-based fee system will replace the flat fee system applied since 1999.
It is expected that the new fee system will have 4 levels and the difference from the lowest to the highest is 8 times based on the different fees. Safety criteria that distinguish between organizations are rated from low to high risk.