The above results must include the role of deposit insurance DI, a financial institution used in many countries around the world to protect the rights and interests of depositors.. DIV i
Trang 1VIETNAM ACADEMY OF SOCIAL SCIENCES
GRADUATE ACADEMY OF SOCIAL SCIENCES
L
NGO QUANG HUY
THE LAW ON DEPOSIT INSURANCE IN VIETNAM
Trang 2The dissertation completed at Graduate Academy of Social Sciences, Vietnam Academy of Social Sciences
Supervisors: 1 Dr Tran Minh Duc
2 Dr Nguyen Van Tuyen
Reviewer 1: Associ.Prof.Dr Nguyen Thi Thuong Huyen
Reviewer 2: Associ.Prof.Dr Pham Thi Giang Thu
Reviewer 3: Associ.Prof.Dr Duong Dang Hue
The dissertation will be defended at Graduate Academy Level Council of dissertation assessment at Graduate Academy of Social Sciences, Vietnam Academy of Social Sciences, 477 Nguyen Trai, Thanh Xuan, Hanoi
Time: ………… date ……… month …… …year 2020
The dissertation may be found at:
- Vietnam National Library;
- Graduate Academy of Social SciencesLibrary
Trang 3INTRODUCTION
1 The necessity of the research topic
Currency trading activities in the market economy are always attached and contain potential risks such as interest risk, foreign exchange risk, credit risk, liquidity risk, and moral hazard In recent years, Vietnam's socio-economy has achieved significant achievements in stabilizing the macro-economy and sustainable development Inflation is controlled at a reasonable level and much lower than previous years, the economic growth is quite good, and social security is guaranteed Although the world’s economy has many adverse changes, Vietnam made some remarkable achievements in economic development in recent years These achievements are due to the Party, National Assembly (NA) and government have made timely decisions and active and flexible monetary policy, as well as better coordination between fiscal and monetary policies
The above results must include the role of deposit insurance (DI),
a financial institution used in many countries around the world to protect the rights and interests of depositors In Vietnam, DI is considered a public commitment of deposit insurers with insured organizations and depositors that the deposit insurers will pay the insured deposits to depositors when they cease to operate and become insolvent The operation of deposit insurance of Vietnam (DIV) has a solid legal foundation that is the law on DI and the system of guiding documents
DIV is defined as the State financial institution operates for profit purposes to protect the legitimate rights and interests of depositors, implementing the deposit insurance policy to contribute
non-to maintaining the stability of the system of credit institutions (CIs)
to ensure safe and healthy development of banking activities Regulations on protecting the legitimate rights and interests of
Trang 4depositors at CIs have been stipulated in documents including the
2010 Law on the State Bank of Vietnam; the 2010 Law on Credit Institutions and the Law on Amending and Supplementing a Number
of Articles of the Law on Credit Institutions 2017; the 2010 Law on Protection of Consumer Rights, the Bankruptcy Law of 2014, the
2012 Law on Deposit Insurance and guiding documents
In fact, however, the provisions of the existing law on DI have revealed limitations, shortcomings and overlaps leading to ineffective implementation results, even many provisions are no longer appropriate Especially, ever since the law on amending and supplementing CIs of 2017 took effect, as an important legal basis for the implementation of solutions of the project on restructuring CIs and solving bad debts in the period 2016-2020 were approved by the Government Accordingly, the DIV has been assigned more important functions in the process of restructuring CIs to enhance its role in ensuring legitimate rights and benefits of depositors and supporting the ability of recovering special control for CIs such as: (i) Providing special loans to support liquidity when the CIs are at risk of insolvency and threatening the system stability during special control time for CIs; (ii) Buying long-term bonds supported by CIs based on the decision of the State Bank (SBV); (iii) Participating in coordination with the special control board (SCB), cooperative Bank
to assess the resilience of people's credit funds, microfinance institutions, financial companies; formulating plans for bankruptcy of credit institutions under special control so as to submit it to the SBV This shows that the Law on amending and supplementing a number
of articles of the 2017 Law on CIs specifies regulations on authority and earlier interventions in the process of restructuring weak CIs; completing the legal basis to build a healthy credit institution system,
in line with international practices and market mechanisms, ensuring the interests of depositors and maintaining the stability and safety of
Trang 5the national financial and monetary system In order for the DIV to meet the requirements of new situation, it is necessary to review, supplement and complete the law on DI, of which, review and evaluate the implementation of the law on DI so as to propose recommendations on amending the DI law and relevant law so that the DI is really effective tool to help the Government to restructure weak CIs and dealing with bad debts and bankruptcy of CIs, thereby, protecting the legitimate rights and interests of depositors, contributing to ensuring the safe and healthy development of the financial and banking system
From reasons mentioned above, the author has chosen research titled “The law on deposit insurance in Vietnam” as his doctoral dissertation
2 Research purpose and tasks
2.1 Research purpose
The dissertation aims to clarify the theoretical issues on the deposit insurance and analyze the implementation of the law on organization and operation of DIV By studying the theoretical issues, the author seeks to assess the implementation of the law on DIV and operation of DIV in practice Thenceforth, the study proposes solutions to improve the law on DI, organization and operation of DIV
Trang 6Particularly, the dissertation seeks to analyze, evaluate and compare the provisions of the existing law on DI in Vietnam with international law and relevant law, as well as referring to experience
of legal adjustment of DI of some countries to find out suitable lessons for Vietnam The study also points out shortcomings and limitations of provisions of Vietnamese law on DI
Second, practically:
The dissertation analyzes and assesses the current situation of the law on DI by summarizing and assessing operation of DIV in practice
The implementation of the law on DI of DIV has achieved remarkable results As a non-profit state-run financial institution to protect the legitimate rights and interests of depositors, the implementation of DI policy contributes to maintaining the stability
of the system of CIs and ensuring the safe and healthy development
of DI relations in practice How has the operation of payment, financial support, liquidation and recovery of assets of the DIV affected the operation of CIs over the years; how have inspection, monitoring and settlement of complaints related to DI activities of DIV conducted over the years?
By examining the current situation of implementation of the law
on DI, the dissertation makes comments and assessments of the achieved results, and it also points out limitations and causes of these limitations that need to be overcome in the process of implementing the law on DI of the DIV
Trang 7Third, from the above assessments, the dissertation points out the
requirements of improving the law on DI in Vietnam and proposing directions and solutions to improve the law on DI and its operation and organization in Vietnam today
3 Research subject and scope
3.1 Research subject
The research subject of the dissertation includes:
Theoretical issues related to DI and DIV operation such as: Definition, characteristics, role of DI; operational model of deposit insurers in the world;
The provisions of Vietnamese law and international law as well as foreign law related to deposit insurance;
The current situation of implementing the law on DI of the DIV through mission, organization and operation of the DIV
Requirements, directions and solutions to improve the law on deposit insurance through the operation of deposit insurance in Vietnam
3.2 Research scope
Regarding the research content:
- The dissertation will inherit previous research results such as the concept, characteristics, roles, and distinguishing DI from other insurances
- The dissertation examines specific issues related to the DIV’s operation such as clarifying the legal status of the DIV, model and selection of the DI model suitable to Vietnam, the provisions of the law and implementing contents of DI subject, the insured deposit, DI fee and DI fee management, as well as inspection, supervision, payment of the DIV so as to assure the role of DIV in ensuring the safe and healthy development of banking operation
- Spatially and research time, the dissertation examines the law on
DI and the implementation of the law on DI of DIV in practice
Trang 8Thenceforth, the study seeks to compare the law on DI of some countries around the world from 2013 to the present
4 Methodology and research methods
From the research purpose and tasks, the study approached research subject by the following research methods:
4.1 Methodology
With the specific nature of the research theme for both economically and legally, the dissertation uses a multidisciplinary and interdisciplinary approach, in which, it focuses on legal aspects
to highlight the legal validity of the dissertation The dissertation also uses dialectical materialism and historical materialism of Marxist - Leninist doctrine to solve the research tasks of the dissertation
- Comparative juridical method is used throughout the dissertation
to compare the legal provisions over the times with the law of countries to find out reasonable points in the provisions of the law on
DI to learn their experience of building law to complete the law on
DI in Vietnam
- Methods of analysis, synthesis, statistics, etc are used in chapters1 and chapter 4 to forecast the socio-economic development trends, thenceforth, the study provides solutions to improve the law
on DI
5 New contributions of the dissertation
Trang 9First, the dissertation examines the theoretical issues and law
related to DI such as the role of DI, it points out DI model in the world and Vietnam The study also affirms DI position and role in the financial and banking system as well as its significance for protecting interests of depositors; assessing factors affecting DI both
at home and abroad so as to give appropriate lessons for improving the law on DI in Vietnam nowadays
The dissertation seeks to examine current situation of the provision
of the law on DI including the situation of participants, rights and obligations of the parties, the situation of fee payment and use of Vietnam deposit insurance organizations, as well as implementing the provisions of the deposit insurance law of the Vietnam deposit insurance organizations through their specific operation in practice The dissertation also provides data and cases to support the author’s arguments In addition, the dissertation also points out the limitations and shortcomings in the mechanisms, policies, provisions of the law and the law enforcement in practices so as to point out the causes of those limitations
By studying the theoretical and practical issues on DI law, the dissertation also points out the need of improving law on deposit insurance in accordance with the socio-economic development orientation in general and strategy for the development of the banking industry in particular The dissertation then seeks to propose solutions
to improve deposit insurance law, organizational structure and operation of deposit insurers and organizations participate in deposit insurance in accordance with the development trend in the new situation
6 Theoretical and practical significance of the dissertation
Theoretically: The dissertation examines systematically
theoretical issues on DI and evaluates the effectiveness of the law
Trang 10The dissertation confirms the role of DI to the development of banking and financial system; It also points out the factors affecting the DI operation, thereby making comments and assessments on the current situation of the law on DI and pointing out causes of limitation in practice
Practically: The dissertation points out necessary requirements
and basic orientations for building and perfecting the law on DI It then proposes the most important solutions to ensure the rights and interests of entities participating in DI relations
In addition, the dissertation is also an important reference in researching and teaching legal, economic and financial sciences, and policy making DI in Vietnam
7 Structure of the dissertation
Besides the introduction, conclusion, and references, the dissertation includes 4 chapters:
Chapter 1: Literature review
Chapter 2: Theoretical issues on DI and the law on DI
Chapter 3: Current situation of enforcing law on DI of the DIV Chapter 4: Solutions to improve the law on DI and enhance the efficiency of enforcing law on DI of the DIV
Chapter 1 LITERATURE REVIEW AND THEORETICAL BASIS 1.1 Literature review
1.1.1 Research works related to DI
1.1.1.1 Research works on position, role and function of DI
The International Association of Deposit Insurers (IADI) was established in 2002, this marks the interest of many countries around the world on DI and making a new motivation to promote this activity worldwide
Research works contribute to the process of building and
perfecting functions and tasks of DI including “Deposite Insurance
Trang 11around the world - A date base” by Asli Demirguc-Kunt, Baybars Karacaovali and Luc A Laeven, 2005; “Structuring a deposit insurance system from the Asian perspective” by Jang-Bong Choi,
2000
The above research works has an intensive analysis on the necessity of DI, its role for financial and banking system of countries,
as well as DI’s role and responsibility to depositors
In Vietnam, before the DI law, researchers have had many studies
on DI to choose the model of DI in accordance with Vietnam circumstances such as: Documents of the National Assembly Standing Committee, Legislative Research Institute, Center for Scientific Information, 2009, International experience on effective DI organization; “Moral hazard in DI activities” by Nguyen Thi Kim Oanh, Banking Magazine No 8/2002; “Selecting subjects participate
in DI”
In addition, there are many published research works related to
DI The research results of these studies will be a valuable reference
so that the author can inherit in his dissertation
1.1.1.2 Evaluating the research situation related to the position, role and function of deposit insurance
First, domestic and foreign research works have clarified relevant
contents of deposit insurance
Second, issues related to DI have mentioned but not been solved
in previous works, the dissertation tries to clarify
1.1.2 Research situation related to DI and the law on DI
1.1.2.1 Research works on DI and the law on DI
In recent years, countries around the world are quite interested in
DI issues in research works and there are some typical works such as Perbadanan Insurans Deposit Malaysia (PIDM), Summary of the Corporate Plan 2018 – 2020; Will crashed banks' assets be liquidated
Trang 12in new way in Russia? LPS Pays IDR36, 8 Billion in Bank Customer Claim in 2017
In Vietnam, research works on policies and law related to DI have been paid attention and as the basis for promulgating and completing the DI Law
The above studies have examined quite generally and relatively sufficient about issues related to DI and the law on DI of some countries in the world The research results of previous works are the basis for the dissertation to refer, inherit, evaluate and continue to improve the issues related to DI in Vietnam today
1.1.2.2 Assessing research works on DI and the law on DI
- Affirming the role of DI for economy
- The policy of DI limits is an important tool to protect depositors and maintain depositors' confidence in the banking system and to demonstrate the deposit institution’s commitment to its customers;
- The oversight function is an important one of the DI that must be performed regularly and continuously to detect and alert early on risks of the financial system
The deposit insurance law has created a solid legal basis to further protect the legitimate rights and interests of depositors, maintain stability, develop safe and healthy banking activities
Improving the quality of DI activities and DI organization has an important significance for the sustainable development of the banking system
The dissertation will inherit the research results of domestic and foreign research works, and it tries to focus on the following issues: (1) Clarifying the legal status of the in the banking and financial system and especially in the national financial safety net
(2) Clarifying the provisions of the law on DI in Vietnam and examining the current situation of money insurance from the practice
of Vietnam deposit insurer through specific professional activities
Trang 13such as the basis of DI relations, fee and deposit fee usage, as well as inspection and supervision
(3) Proposing some solutions to improve the Vietnamese law on
- Consumer protection and competition of schools
- Viewpoints on business, contracts and the state’s role in the market economy
- The theory of market economy institution theory and legal theory
1.2.2 Research question and hypothesis
- General research question: How is the current situation of Vietnamese law on DI and what are advantages and disadvantages of law enforcement on DI in DI organizations?
- General research hypothesis: The provisions of the law on DI have revealed certain limitations and shortcomings that need to be addressed
- Expected research results: (i) To build up a theoretical and practical basis for the development and completion of the law on DI
To determine the purpose and requirements of the development and completion of the law on DI; (ii) In the legislative field, it is necessary to quickly revise a number of provisions of the law in line with the provisions of DI: proposing solutions for the state banks and for the Government to amend relevant legal documents in order for DIV be able to further participate in the process of restructuring week CIs, raising insurance payment limits in line with actual requirements
to enhance public confidence for the CIs