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Raising deposit insurance threshold, when?
Deposit Insurance of Vietnam (DIV) once proposed raising the deposit insurance level by four fold to 200 million dong. However, it has remained at 50 million dong.
Experts say that the currently applied deposit insurance payment level of 50 million dong is unfit in the current circumstances, especially as the financial crisis in 2008 eroded depositors’ confidence.
In principle, they say, the payment level should be high enough to prevent massive money withdrawals when banks meet troubles and low enough to encourage depositors to keep cautious with their depositing activities.
Different deposit insurance payment levels are set at different moments, based on several criteria, including income per capita.
The experts say that deposit insurance should focus on protecting the interests of small depositors who have low incomes, do not have much information and are not capable of making investments in other fields.
In 2008, after the global financial crisis broke out, deposit insurance companies in the world immediately applied necessary measures to improve the confidence of depositors, raising deposit insurance levels. In the US, the Federal Deposit Insurance Corporation (FDIC) has raised the insurance level from $100,000 to $250,000 until the end of 2009.
In EU countries, every depositor is insured to EUR50,000. Meanwhile, some countries offer higher insurance levels, including the UK, where the level has been raised from GBP35,000 to GBP50,000. Germany has announced it guarantees all deposits of all local people at banks.
Vietnam is now bearing impacts of the global financial crisis. The Government of Vietnam has asked the State Bank of Vietnam and relevant ministries to strengthen control over domestic banks and check the safety of foreign banks that Vietnam has relations with in order to ensure the safety of deposits.
Thuy Duong
vietnamnet
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