Gov’t raises depositor compensation

Under Decision 21/2017/QĐ-TTg, issued last week by Prime Minister Nguyen Xuan Phuc, the insured deposit amount, which is paid by the Deposit Insurance of Vietnam (DIV), will include both principal and interest.

As per current regulations, to get deposit compensation, credit institutions and banks mobilising deposits are required to purchase the insurance.

Insured banks have to declare the list of deposit insurance schemes they have purchased to all transaction offices.

To be eligible for insurance, deposits must be in Vietnamese dong. Depositors will be paid back 60 days after the bankrupt institution ceases all transactions.

In case the bankrupt credit institution or bank gets mired in dissolution, which affects the security of the banking and finance system, the DIV will support these banks by lending, guaranteeing, or covering their debts.

Like in most other countries, Vietnam’s deposit insurance policies have two main aims: to protect depositors and to secure the banking industry.

Public trust in the banking system is important, and can be significantly improved through deposit insurance policies.

The insurance limit is being raised after experts and depositors have repeatedly pointed out that the current limit of VND50 million per customer is very low. The limit is much lower than the EUR50,000 in Europe, US$200,000 in the Republic of Korea and US$250,000 in the United States.

According to the State Bank of Vietnam, institutions and individuals deposit roughly VND6 quadrillion in the country’s commercial banks.

Currently, annual interest rates for dong deposits average at 0.8-1% for below one month terms, 4.5-5.4% for one to six months, 5.4-6.5% for six to 12 months, and 6.4-7.2% for above 12 months.