Why does deposit insurance only pay a maximum of 75 million VND?

DNUM_AEZBCZCABH 08:10

With this limit, Vietnam Deposit Insurance is capable of paying and protecting the rights of more than 87% of depositors.

According to the explanation of the Governor of the State Bank Le Minh Hung on the basis for giving the limit of 75 million VND that deposit insurance can pay to depositors.

Specifically, according to the head of the banking industry, the four bases for coming up with this figure are: Financial capacity of the deposit insurance organization; current macroeconomic situation in Vietnam; deposit scale; international practices and standards.

He also added that, according to international practice and recommendations of the International Association of Deposit Insurers, deposit insurance coverage should be limited, reliable and cover the majority of depositors (protecting 90-95% of depositors).

However, it is important to ensure that a significant proportion of the deposit value is subject to market discipline (i.e. exposed to market volatility).

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"Therefore, the amount of deposit insurance is not calculated based on the deposit value ratio of the depositor, but based on a specific amount. With a limit of 75 million VND, the Vietnam Deposit Insurance Corporation is able to protect 87.32% of the depositors (according to data calculated in June 2016). This limit is quite close to the recommendation of the International Association of Deposit Insurers," the Governor said.

To increase the insurance payment limit to over VND75 million, it is necessary to improve the financial capacity of the Deposit Insurance of Vietnam by increasing the deposit insurance premium. However, according to Mr. Le Minh Hung, the adjustment to increase the premium still has many difficulties, increasing the burden on credit institutions, negatively affecting the operational efficiency of the entire system and the production and business activities of enterprises.

"The State Bank will consider submitting to the Prime Minister an adjustment to increase the deposit insurance payment limit when conditions permit," the Governor affirmed.

In addition to receiving deposit insurance payment according to the prescribed limit, when bankrupt, depositors can also receive their deposits back according to the order of asset division prescribed in Clause 1, Article 101 of the Bankruptcy Law, the Governor's reply further explains.

Once again, the Governor emphasized that the consistent viewpoint and goal in the direction of the Party and the State is to ensure the rights and interests of depositors. "Therefore, in any case, the plan to handle credit institutions must prioritize ensuring system safety, strengthening people's trust in the banking system, ensuring the legitimate rights and interests of depositors, and not causing uncontrolled collapse. This viewpoint has also been clearly expressed in the Law amending and supplementing a number of articles of the Law on Credit Institutions recently passed by the National Assembly," said Mr. Hung.

According to VNE

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Why does deposit insurance only pay a maximum of 75 million VND?
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