Changes planned for deposit insurance law
The State Bank of Vietnam (SBV) has just drawn up draft amendments to the Deposit Insurance Law as instructed by the Government.
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One of the proposed changes is increasing the maximum deposit amount that can be insured per customer from the current VND50 million to VND75 million.
Like in most other countries in the world, Vietnam’s deposit insurance policies have two main aims: to protect depositors and secure the banking industry.
Public trust in the banking system is an important commodity and can be significantly improved through deposit insurance policies.
However, the current limit per customer of VND50 million is not satisfactory for most depositors and also many experts who say it is too low.
Accepting this criticism, the SBV intends to hike the limit by half.
But this is not enough of an increase for the public and experts.
Analysts said when the insurance premium limit of VND50 million was fixed, it was equivalent to five times the country’s per capita income just like in many other countries. It covered 80 percent of deposits.
But now the country’s current per capital income is over US$2,000.
This means that the deposit insurance limit this time needs to be much higher at VND200 million upwards.
Experts point out that the new limit is much lower than the 50,000 euro in Europe, US$200,000 in the Republic of Korea and US$250,000 in the US.
They have called for raising the limit to VND150-200 million to achieve the purpose of deposit insurance: protecting depositors’ money.
The experts also disagree with having a uniform limit for all banks, saying there is need of higher limits for weaker banks to really protect depositors.
They also want the amended law to require lenders to declare their “health” to depositors to enable them to make informed decisions.
The experts are also critical that only VND deposits are insured and not deposits in foreign currencies or valuable papers.
They say that deposits in foreign currencies are trending upward because of the large amounts of foreign remittances from overseas Vietnamese and Vietnamese nationals working abroad.
Thus, if banks refuse to insure foreign currency deposits, they would simply move to foreign banks.
