NATIONAL ECONOMICS UNIVERSITY
School of Advanced Education Programs
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GROUP ASSIGNMENT
COMMERCIAL BANKING 1
Research Topic: Deposit insurance in Vietnam: Rationale,
Regulations and Reforms
Students:
Phan Văn Trường – 11234054
Trần Hương Giang – 11236620
Trịnh Nam Khánh – 11232682
Đinh Khánh Linh – 11233086
Nguyễn Hà Thu – 11231746
Nguyễn Khánh Chi – 11235342
Trần Lê Minh Phương – 11234461
Phạm Duy Hoàng Nguyên – 11236678
Lê Ngọc Anh – 11234245
Phạm Thị Loan - 11234400
Phạm Thanh Hiền – 11236816
Class: Tài chính doanh nghiệp CLC 65E
Professor: TS. Khúc Thế Anh
Hanoi, 2025
TABLE OF CONTENT
I.
INTRODUCTION ................................................................................................................................ 4
II.
CONTENT ....................................................................................................................................... 5
I. Rationale ................................................................................................................................................ 5
1. The origin of deposit insurance ......................................................................................................... 5
1.1. Economic and financial conditions before Deposit Insurance ................................................... 5
1.2. Major banking crises leading to the establishment of Deposit Insurance .................................. 5
2. Macroeconomic Rationale ................................................................................................................ 6
2.1. SBV’s Limited Role Pre-DIV .................................................................................................... 6
2.2. Transition to a Market Economy ................................................................................................ 7
2.3. Aftermath of the Asian Financial Crisis (1997–1998) ............................................................... 7
3. Systemic Stability Rationale ............................................................................................................ 7
3.1. Prevent bank runs and preserve public credibility ..................................................................... 8
3.2. Support financial sector reform.................................................................................................. 8
4. Legal and Policy Rationale ............................................................................................................... 9
5. Socio Economic Rationale ................................................................................................................ 9
II. Regulations and Reforms ................................................................................................................... 10
1. Legal Foundation and Institutional Structure of Deposit Insurance in Vietnam ............................. 10
1.1. Legal Foundation ..................................................................................................................... 10
1.2. Organizational Structure and Governance of the DIV ............................................................. 11
1.2.1. Organizational Structure ................................................................................................... 11
1.2.2. The Regulatory Role of the State and the Central Bank (SBV) ........................................ 11
2. Phase 1: Initial Formation (1999–2012) ......................................................................................... 12
2.1. Regulations .............................................................................................................................. 12
2.1.1 Coverage Scope and Participation Requirements .............................................................. 12
2.1.2 Premium System and Financial Management: ................................................................... 14
2.1.3 Enforcement Mechanisms .................................................................................................. 16
2.1.4 Payout Process ................................................................................................................... 16
2.2. Challenges and Shortcomings .................................................................................................. 17
2.2.1. The Foreign Currency Exclusion ...................................................................................... 17
2.2.2. Inadequacies in determining the types of deposits subject to insurance ........................... 18
2.2.3. A Marginal Role of Deposit Insurance of Vietnam in the Financial Safety Net ............... 18
2.2.4. Process of handling bank failures is still insufficient ........................................................ 18
2.2.5. Provisions on deposit insurance rates ............................................................................... 19
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2.2.6. Limitations of the deposit insurance payment .................................................................. 19
2.2.5. Moral hazard of deposit insurance in Vietnam.................................................................. 19
2.3. Reforms .................................................................................................................................... 19
3. Phase 2: Legal Codification (2012–2016)....................................................................................... 20
3.1. Regulations .............................................................................................................................. 20
3.1.1 Coverage Scope and Participation Requirements .............................................................. 20
3.1.2 Premium System and Financial Management .................................................................... 22
3.1.3 Enforcement Mechanisms .................................................................................................. 23
3.1.4 Payout Process ................................................................................................................... 24
3.2. Challenges & Shortcomings..................................................................................................... 24
3.3. Reforms .................................................................................................................................... 25
4. Phase 3: System Enhancement (2017–2020) .................................................................................. 26
4.1. Regulations .............................................................................................................................. 26
4.1.1 Coverage Scope and Participation Requirements .............................................................. 26
4.1.2 Premium System and Financial Management .................................................................... 27
4.1.3 Enforcement Mechanisms .................................................................................................. 27
4.1.4 Payout Process ................................................................................................................... 28
4.2. Challenges & Shortcomings..................................................................................................... 28
4.3. Reforms .................................................................................................................................... 29
5. Phase 4: Modernization (2021–2025) ............................................................................................. 29
5.1. Regulation ................................................................................................................................ 29
5.1.1. Coverage Scope and Participation Requirements ............................................................. 29
5.1.2. Deposit Insurance Premium System and Financial Management ..................................... 30
5.1.3. Payout Process .................................................................................................................. 31
5.2. Challenges & Shortcomings..................................................................................................... 32
5.3. Reforms .................................................................................................................................... 32
C. CONCLUSION ...................................................................................................................................... 33
D. REFERENCE ......................................................................................................................................... 34
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A. INTRODUCTION
Deposit insurance (deposit protection) is a measure implemented in many countries to protect bank
depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit
insurance systems are one component of a financial system safety net that promotes financial stability.
Deposit insurance institutions are predominantly established or administered by governmental entities and
may or may not be a part of a country's central bank, while some are private entities with government
backing or completely private entities. There are a number of countries with more than one deposit
insurance system in operation, including Austria, Canada (Ontario and Quebec), Germany, Italy, and the
United States. The deposit insurance premium is the amount that a deposit insurance participating
institution is required to pay to the deposit insurance organization to insure the deposits of depositors at
the participating institution.
As of 31 January 2014, according to the International Association of Deposit Insurers (IADI), 113
countries have instituted some form of explicit deposit insurance, up from 12 in 1974. Another 41
countries are considering the implementation of an explicit deposit insurance system. Several countries
have established deposit insurance institutions, such as the Federal Deposit Insurance Corporation (FDIC)
in the United States, serving as a global model for deposit insurance, the Canada Deposit Insurance
Corporation (CDIC), and the Korea Deposit Insurance Corporation (KDIC).
In Vietnam, the Deposit Insurance of Vietnam (DIV) is the sole deposit insurance entity, functioning as a
one-member limited liability company with 100% of its charter capital owned by the State. The
organizational core values are Unity, Capacity, Dedication, Sense of responsibility, and Professionalism.
The Deposit Insurance of Vietnam (DIV) is committed to fulfilling its mission of protecting depositors,
maintaining the stability of credit institutions, and ensuring the safe and sustainable development of
banking activities. By safeguarding depositors’ interests, the DIV plays a crucial role in strengthening
public confidence in the financial system. With a vision to operate under an effective deposit insurance
model, DIV aims to become a key policy tool that contributes to the successful implementation of the
banking sector’s common objectives. By enhancing its operational efficiency, the organization seeks to
support the overall stability and development of Vietnam’s financial system. To achieve these goals, DIV
focuses on several strategic targets. It continuously improves its monitoring, analysis, and early warning
systems to detect and prevent risks within the credit institution system. Additionally, DIV actively
participates in restructuring the people’s credit fund system and the microfinance sector, contributing to
the broader reform of the credit institution system. Furthermore, the organization ensures accurate, full,
and timely compensation for depositors in case of risks affecting deposit insurance participants. To
support these efforts, DIV strengthens its financial capacity in alignment with the evolving development
of the credit institution system.
From the initial capital of 1,000 billion dong, by the end of September 2022, the total assets of the deposit
insurer reached more than 92 trillion dong, of which the professional reserve fund reached nearly 86
trillion dong. DIV has built a deposit insurance network with its head office in Hanoi and 8 branches in
key economic regions of the country to closely follow the development of credit institutions. Currently,
the DIV is protecting deposits of depositors at 1,283 participating institutions, including 97 banks and
foreign bank branches, 1,181 people's credit funds, 1 cooperative bank, and 4 microfinance institutions.
On November 9, 1999, the Prime Minister promulgated Decision No. 218/1999/QD-TTg, which
facilitated the establishment of the Deposit Insurance of Vietnam (DIV). Over the preceding 23 years of
development and expansion, DIV has progressively evolved, effectively fulfilling its mandate to
safeguard the interests of depositors, thereby affirming the validity of a significant economic and financial
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policy that aligns with the demands of an increasingly dynamic market economy and the intensifying
trend of international integration.
This analysis delves into the multifaceted aspects of deposit insurance in Vietnam, with a specific focus
on its underlying rationale, the regulations governing its operation, and the reforms shaping its future. It
will investigate the economic and systemic reasons for its establishment, the legal and institutional
structures that define its scope and enforcement, and the progressive changes implemented to address
emerging challenges and align with international standards. By examining these dimensions, this study
aims to provide a comprehensive understanding of deposit insurance’s development and impact in
Vietnam, offering a clear summary of its evolution and concluding with insights into its future direction
and recommendations for enhancement.
B. CONTENT
I. Rationale
1. The origin of deposit insurance
Deposit insurance was established as a financial instrument aimed at protecting depositors, maintaining
financial stability, and promoting economic advancement. Therefore, it is essential to examine the
economic and financial conditions that existed before the implementation of deposit insurance, the crises
that led to its creation, and the subsequent evolution of deposit insurance systems worldwide.
1.1. Economic and financial conditions before Deposit Insurance
Before the establishment of deposit insurance, global financial systems were exceptionally vulnerable to
banking crises. The absence of a safety net for depositors resulted in widespread instability and economic
disruptions. There are several key characteristics of the financial landscape prior to the introduction of
deposit insurance.
Firstly, the economic and financial conditions at that time lacked adequate depositor protection.
Depositors had no assurance of recovering their funds in the event of a bank failure, leading to
considerable financial losses. Secondly, frequent bank runs were a prominent feature of the financial
environment before deposit insurance was implemented. During times of financial uncertainty,
widespread public anxiety often triggered mass withdrawals from banks, resulting in severe liquidity
shortages and institutional collapses. These bank runs not only undermined the stability of individual
financial institutions but also intensified broader economic downturns by disrupting credit flows and
financial intermediation. Lastly, limited government intervention characterized this period. Governments
and central banks did not possess the necessary mechanisms to effectively rescue failing banks or protect
depositors, which exacerbated the severity of financial crises.
1.2. Major banking crises leading to the establishment of Deposit Insurance
Several historical financial crises underscored the need for deposit insurance, highlighting the
consequences of systemic banking failures.
One of the most significant events that led to the establishment of deposit insurance was the Great
Depression in the United States. Between 1929 and 1933, thousands of banks in the U.S. collapsed,
erasing the life savings of millions of depositors. The loss of confidence in the banking system resulted in
a severe economic contraction. In response, the U.S. government enacted the Banking Act of 1933, which
created the Federal Deposit Insurance Corporation (FDIC). The FDIC introduced a formal deposit
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insurance system, restoring public confidence in financial institutions and setting a precedent for other
countries.
In addition, during the late 20th century, Japan faced a major financial crisis following the burst of its
asset price bubble. Numerous banks became insolvent, and the government had to intervene to prevent a
total banking system collapse. This crisis reinforced the necessity of deposit insurance as a measure to
safeguard depositors and stabilize financial institutions
Moreover, the 1997 Asian Financial Crisis severely impacted banking systems across Thailand, South
Korea, and Indonesia. Many financial institutions collapsed due to high levels of non-performing loans
and speculative investments. Governments in the region implemented or strengthened deposit insurance
mechanisms to restore depositor confidence and prevent further economic deterioration.
The establishment of deposit insurance was driven by the need to protect depositors, prevent financial
instability, and maintain economic growth. Historical financial crises, particularly the Great Depression,
Japan’s financial turmoil, and the Asian Financial Crisis, played a crucial role in shaping modern deposit
insurance systems. Today, most countries recognize deposit insurance as a fundamental component of
financial stability, ensuring public confidence in banking institutions and mitigating the risks associated
with economic downturns.
2. Macroeconomic Rationale
Deposit insurance plays a vital role in ensuring financial stability, fostering economic confidence, and
supporting sustainable economic growth. The rationale behind its implementation can be analyzed
through several macroeconomic perspectives, particularly in the context of economies transitioning to
market-based systems and recovering from financial crises.
2.1. SBV’s Limited Role Pre-DIV
Before the Vietnam Deposit Insurance (DIV) was established in 1999, the State Bank of Vietnam (SBV)
was responsible for regulating and supervising the banking system but lacked a specific mechanism to
protect depositors in the event of bank insolvency. At that time, the financial system primarily operated
under an implicit government guarantee, meaning that if a bank encountered difficulties, the government
might have to intervene by using public funds for a bailout. However, this approach was unsustainable
and exposed several limitations.
Firstly, due to the absence of an official deposit guarantee, the public lacked confidence in the banking
system, especially in smaller financial institutions or newly established joint-stock commercial banks.
Although Vietnam was not directly affected by the global financial crisis, its weak economy and
inefficient state-owned enterprises led to instability in the domestic financial and banking sector. For
instance, during the 1980s and 1990s, a series of people's credit funds went bankrupt, and many banks
faced financial difficulties, seeking government support or even ceasing operations. As a result, public
trust in the financial and banking system was severely undermined.
Secondly, the absence of a clear crisis resolution mechanism meant that when a financial institution
collapsed, contagion risks could arise, threatening the stability of the entire financial system. Ultimately,
although the SBV had a supervisory role, there was no independent deposit insurance fund to effectively
support banks or protect depositors. These limitations underscored the urgent need for a formal deposit
insurance mechanism. The establishment of the DIV helped address these weaknesses by providing a
financial safety net, strengthening public confidence in the banking system, and mitigating systemic risk.
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2.2. Transition to a Market Economy
In the 1990s, Vietnam underwent a significant transition from a centrally planned economy to a socialistoriented market economy, in which the banking system played a crucial role in mobilizing capital,
supporting businesses, and driving economic growth. However, this transition also introduced various
risks, as the number of private banks and financial institutions grew rapidly while financial stability
remained uncertain. Before the Đổi Mới reforms, the financial system was primarily controlled by stateowned banks. However, as the economy opened up, a wave of joint-stock commercial banks and people's
credit funds emerged, often with limited financial management capacity, increasing the risk of liquidity
shortages or bankruptcy. Additionally, the public was still unfamiliar with the modern banking system and
tended to hold cash rather than deposit money in banks due to concerns over financial risks.
In this situation, the establishment of the Vietnam Deposit Insurance (DIV) played a crucial role in
strengthening public confidence, promoting financial inclusion, and supporting the development of a
more modern and secure banking system. Deposit insurance was not merely a mechanism to protect
depositors; it also had a broader macroeconomic significance in maintaining financial stability,
particularly given the limitations of the State Bank of Vietnam (SBV) in safeguarding depositors before
the creation of DIV. Following the 1997–1998 Asian financial crisis, the necessity of a deposit insurance
system became even more apparent, enabling Vietnam to build a more resilient financial framework,
facilitate the transition to a market economy, and ensure the sustainable development of the national
economy.
2.3. Aftermath of the Asian Financial Crisis (1997–1998)
The Asian financial crisis (1997–1998) had severe repercussions on many economies in the region,
including Thailand, Indonesia, and South Korea, as a wave of financial institutions collapsed due to high
levels of bad debt and massive capital outflows. After the severe aftermath of the Asian financial crisis
that heavily impacted the regional financial system in 1997–1998, nations across Asia recognized the
urgent need for financial reforms and the establishment of deposit insurance (DI) institutions.
Although Vietnam was not directly affected due to its relatively closed financial system at the time, the
crisis exposed several weaknesses in the country's banking sector. The poor economic conditions and
inefficient state-owned enterprises, particularly in the financial and banking sector, had already led to a
crisis in which a series of credit cooperatives failed during the 1980s and 1990s. Many banks faced severe
difficulties, sought financial assistance, or even ceased operations. Public confidence in the banking and
financial system had significantly deteriorated, as reflected in the tendency for mass withdrawals at the
first signs of instability, increasing the risk of systemic collapse.
Given this reality, the Vietnamese government recognized the necessity of an official protection
mechanism to prevent systemic risk contagion and maintain financial stability. Following the crisis, many
countries in the region implemented extensive financial reforms, including the establishment of deposit
insurance institutions to safeguard depositors' rights and mitigate systemic risks. Vietnam was no
exception to this trend, establishing the Vietnam Deposit Insurance (DIV) in 1999 as a crucial policy tool
to strengthen public confidence in the banking system and enhance the overall safety of the national
financial sector.
3. Systemic Stability Rationale
The Systemic Stability Rationale explains why protective measures, such as Deposit Insurance, are
essential for maintaining the stability of the financial system. A stable banking system not only safeguards
depositors' rights but also plays a crucial role in preserving public confidence and promoting the
sustainable development of the economy.
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3.1. Prevent bank runs and preserve public credibility
The banking system plays a vital role in the economy but is also exposed to significant risks, particularly
the threat of bank runs. When depositors lose confidence in a bank, they tend to withdraw all their funds
immediately, triggering a domino effect that can lead to liquidity shortages, bank insolvencies, and even a
full-scale financial crisis.
Therefore, Deposit Insurance (DI) is implemented to ensure that even if a bank faces financial difficulties,
depositors remain protected up to a certain limit. This mechanism reassures the public, mitigates panic,
and helps curb mass withdrawals. When confidence in the banking system is maintained, credit and
investment activities can develop more stably, serving as a catalyst for economic growth.
The primary objective of DI is to safeguard the interests of depositors, particularly small depositors who
often lack financial literacy and in-depth knowledge about banking risks. By providing security for
depositors, DI encourages people to entrust their savings to banks, thereby facilitating capital
mobilization and strengthening the banking system.
As a result, DI not only protects individual rights but also contributes to the overall stability of the
financial system by ensuring the sustainable operation of banks and minimizing the risk of crises. DI is
widely adopted worldwide as a tool to protect depositors and maintain the safety of the banking system.
Vietnam’s adoption of DI aligns with global trends and enhances the credibility of its banking sector.
3.2. Support financial sector reform
Deposit Insurance (DI) not only plays a crucial role in protecting depositors' rights but also supports
financial reforms and promotes the sustainable development of the financial system. During financial
restructuring, particularly in the process of banking system reform, weaker financial institutions may need
to merge, be dissolved, or exit the market.
Without a mechanism to protect depositors, widespread uncertainty could arise, eroding confidence in the
financial system and triggering large-scale liquidity crises. DI serves as a stabilizing force, ensuring that
depositors remain assured even when financial institutions undergo restructuring, thereby maintaining
trust and preventing disruptions in the banking sector.
Deposit insurance helps mitigate this risk by providing a safety net for depositors, ensuring that even if a
bank encounters difficulties, their rights are protected up to a certain limit. This mechanism helps
maintain public confidence in the banking system, facilitating the implementation of financial reforms
without causing major disruptions to the economy.
Moreover, deposit insurance also contributes to enhancing transparency and discipline within the financial
system. Knowing that banks must comply with strict safety standards to participate in the deposit
insurance program, financial institutions are incentivized to improve risk management, maintain adequate
liquidity levels, and limit high-risk speculative activities. This fosters a healthier competitive environment
where banks operate based on principles of safety and sustainability rather than pursuing short-term
profits at all costs.
Additionally, deposit insurance supports the integration of Vietnam's financial system with international
standards. In the context of global economic integration, international investors and financial institutions
often assess the safety of a country's banking system before making investment decisions. An effective
deposit insurance mechanism not only protects the rights of domestic customers but also builds
confidence among foreign partners, encouraging capital inflows into the economy.
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Thus, deposit insurance is not merely a tool for protecting depositors; it also plays a crucial role in
maintaining financial system stability, supporting banking reforms, and fostering a more transparent and
competitive financial environment. This, in turn, helps establish a solid foundation for the long-term
development of both the financial system and the overall economy.
4. Legal and Policy Rationale
The formalization of deposit insurance within Vietnam’s legal framework was the result of an ongoing
process to refine and enhance financial management in alignment with international practices. The key
legal foundation for deposit insurance in Vietnam was established through Decision 218/1999 and Decree
89/1999, which explicitly defined its primary objective as protecting the “lawful rights of depositors.”
The establishment of the Vietnam Deposit Insurance (DIV) not only ensured the safety of the banking
system but also played a crucial role in stabilizing public confidence in the financial system.
One of the key factors in developing a deposit insurance policy is ensuring a balance between the
independence of the Vietnam Deposit Insurance (DIV) and the supervisory role of the State Bank of
Vietnam (SBV). This mechanism allows DIV to operate with a certain level of autonomy to maintain
objectivity in policy implementation while remaining under SBV’s oversight to ensure transparency and
efficiency. This balance enables deposit insurance to function not only as a tool for protecting depositors
but also as a crucial instrument in maintaining the stability of the banking system.
Moreover, the formalization of deposit insurance aligns with international standards set by the IMF, the
World Bank, and ASEAN. These international financial institutions recommend that countries establish
dedicated deposit insurance organizations to enhance financial stability and mitigate systemic risks. The
establishment of the Vietnam Deposit Insurance (DIV) has brought Vietnam closer to global best
practices, including clearly defined coverage limits, a swift payout mechanism in the event of bank
failures, and a transparent legal framework for governing the deposit insurance system.
In addition, the SBV has simultaneously implemented measures to modernize financial regulations and
supervisory frameworks to enhance risk management capabilities and ensure that the financial system
operates in accordance with international standards. This process not only helps protect depositors but
also lays the foundation for a stable and reliable financial system, thereby attracting investment capital
and promoting sustainable economic development.
5. Socio Economic Rationale
Deposit insurance is not merely a financial instrument designed to protect depositors' rights; it also plays
a crucial role in promoting financial inclusion and strengthening public confidence in the banking system.
This is particularly important in the context of Vietnam, where financial literacy levels, especially in rural
areas, remain limited.
One of the major barriers to expanding Vietnam’s formal financial system is the reluctance to deposit
money in banks, particularly among people living in remote and rural areas. In the past, many individuals
preferred to hold cash or engage in informal financial channels due to a lack of trust in the security of the
banking system. The establishment of the Vietnam Deposit Insurance (DIV) has played a crucial role in
addressing this issue. By ensuring that deposits are protected even if a bank faces difficulties, DIV has
strengthened public confidence in the formal financial system, thereby encouraging people to deposit their
money in banks rather than hoarding cash or relying on less secure informal credit systems.
Deposit insurance is particularly significant for vulnerable populations, including low-income individuals,
those with limited financial options, and individuals reliant on informal credit systems. Before the
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implementation of deposit insurance, small-scale depositors faced the risk of losing their entire savings if
the financial institutions they entrusted collapsed. DIV has played a crucial role in protecting these groups
by compensating small deposits and helping to stabilize local economies in the event of regional financial
crises.
Moreover, deposit insurance supports the long-term objectives of the State Bank of Vietnam (SBV) in
expanding financial access to underserved areas. While SBV focuses on formulating macroeconomic
policies to stabilize the financial system, DIV serves as a direct implementation tool at the grassroots
level, enabling safer access to banking services. The coordination between SBV and DIV not only ensures
financial system stability but also helps bridge the gap between urban and rural areas in accessing formal
financial services.
In summary, deposit insurance serves as a safeguard for depositors and is an essential instrument for
fostering financial inclusion and ensuring economic stability for vulnerable populations. By strengthening
public confidence in the banking system, protecting small depositors, and supporting financial expansion
at the grassroots level, DIV has made significant contributions to Vietnam’s socioeconomic development.
This, in turn, has helped build a more stable and reliable financial system for the entire economy.
II. Regulations and Reforms
1. Legal Foundation and Institutional Structure of Deposit Insurance in Vietnam
1.1. Legal Foundation
From the first foundation of Decree No. 89/1999/ND-CP in 1999 and Decree No. 109/2005/ND-CP in
2005 on Deposit Insurance, the legal basis for the Deposit Insurance policy in Vietnam has been upgraded
to the Law on Deposit Insurance, effective from January 1, 2012. The Law on Deposit Insurance in 2012
has created a legal corridor for the Deposit Insurance of Vietnam (DIV) to perform Deposit Insurance
operations such as: Remote monitoring, on-site inspection, inspection to report to the State Bank of
Vietnam (SBV) to rectify and handle errors at organizations participating in Deposit Insurance;
communicating the Deposit Insurance policy to raise awareness and strengthen public confidence,
contributing to minimizing risks threatening the safety of the credit institution system; Paying Deposit
Insurance to depositors when the participating organization becomes insolvent or bankrupt.
However, during the implementation process, the Law on Deposit Insurance has also revealed a number
of shortcomings and limitations, due to many changes in practice. Moreover, the Law has not yet
regulated, has unclear regulations or has regulations but is inconsistent with other laws on: the time when
the obligation to pay insurance premiums arises, exemption from Deposit Insurance fees; uninsured
deposits; profiteering from Deposit Insurance...
The amendment and supplementation of the Law on Deposit Insurance is a consistent policy of the
National Assembly, the Government, and the State Bank; it is also an important task assigned to the
Vietnam Deposit Insurance. The period of institutional consolidation from 2017-2020 marks a change in
the Vietnam deposit insurance mechanism with many reforms and amendments. From there, the Vietnam
Deposit Insurance can participate more deeply in the restructuring process to better protect the legitimate
rights of depositors, contributing to ensuring the safety of the credit institution system.
On December 30, 2022, the Prime Minister issued Decision No. 1660/QD-TTg approving the Deposit
Insurance Development Strategy to 2025, with a vision to 2030. Accordingly, one of the main tasks and
solutions to perfect the legal basis is to amend and supplement the Law on Deposit Insurance and the
system of documents guiding the implementation of the Law on Deposit Insurance.
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1.2. Organizational Structure and Governance of the DIV
1.2.1. Organizational Structure
Deposit Insurance of Vietnam (DIV) has a complete three-level organizational structure, including: (1)
Highest Governing Authority with Controller and Board of Directors; (2) Executive Management
including General Director and Deputy General Director; (3) A system of 15 specialized departments at
the headquarters consists of multiple specialized departments undertaking core operations from
supervision, fee collection, compensation payment to financial management and training. In addition,
DIV also established 8 regional branches spanning the North, Central and South to implement local
policies with Committees and Supporting Units, creating a modern, multi-layered, complete and reliable
governance model, meeting the requirements of protecting depositors and stabilizing the banking system.
1.2.2. The Regulatory Role of the State and the Central Bank (SBV)
The Law No.06/2012/QH13 of the National Assembly: Law on Deposit Insurance marked Vietnam’s first
definition of the role and functions of the government.
Article 7. State policies on deposit insurance
1. The State has policies to protect the legitimate rights and interests of depositors
2. The State has policies to manage and use in order to preserve and grow the capital resources of the
deposit insurance organization. The revenues of the deposit insurance organization are exempted from
taxes.
Article 8. State management agency on deposit insurance
1. The Government has unified the management on deposit insurance
2. The State Bank of Vietnam is responsible to the Government to carry out the state management on
deposit insurance
3. The Ministries, ministerial-level agencies within the duties and powers shall coordinate with the State
Bank of Vietnam to carry out the state management on deposit insurance.
4. The People's Committees at all levels within the duties and powers shall coordinate with the State
management agencies to carry out the state management on deposit insurance.
The State Bank's functions were only fully legalized in Law No.06/2012/QH13 of the National Assembly:
Law on Deposit Insurance, the SBV's responsibilities include:
Article 9. State management responsibilities for the deposit insurance of the State Bank of Vietnam
1. Issuing or submitting to the competent agencies for the issuance of legal normative documents on
deposit insurance
2. Presenting the Prime Minister for the approval of the development strategy of deposit insurance.
3. Examining, inspecting and handling violations and settling complaints and denunciation about deposit
insurance.
4. Presenting the Prime Minister for making a decision on participating in international organizations on
deposit insurance of the deposit insurance organization.
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5. Signing international agreement or submitting to the competent agencies for signing and joining the
international agreement on deposit insurance.
2. Phase 1: Initial Formation (1999–2012)
2.1. Regulations
2.1.1 Coverage Scope and Participation Requirements
a. Insured deposits
Vietnam’s deposit insurance mechanism is designed to protect deposits in the Vietnamese currency, VND,
in various forms, including term deposits, demand deposits, savings accounts, deposit certificates,
promissory notes, treasury bills, and other deposit types regulated by the Law on Credit Institutions.
The Deposit Insurance Law has undergone multiple revisions regarding the insured currency between
1999 and 2012. According to Decree No. 89/1999/ND-CP of September 1st, 1999 on Deposit Insurance:
Article 3 - The deposit money to be insured shall be Vietnam dong deposited by individuals at the deposit
insured.
This policy only applies to personal deposits and completely excludes all types of deposit certificates,
which limits the types of deposit insurance that are not diverse, flexible and not yet widely available.
In 2000, according to No.03/2000/TT-NHNN Circular Guiding The Implementation Of The Government's
Decree No.89/1999/ND-CP OF September 1st, 1999 on Deposit Insurance, there was a law amendment:
II. TYPES OF DEPOSIT TO BE INSURED
The deposit money to be insured shall be Vietnam dong deposited by individuals (including residents and
non-residents) at the deposit insured, including:
- Demand and time savings;
- Demand and time deposits, including those on personal accounts;
- Money to purchase certificates of deposit and registered bonds, issued by the deposit insured with
permission of the competent State body. Vietnam Deposit Insurance shall not insure those certificates of
deposit and bearer bonds issued by the deposit insured.
Therefore, the revised deposit insurance currency in 2000 has made new improvements, such as clearly
distinguishing between residents and non residents, specifying the insured currency, not just personal
deposits, and adding additional clauses allowing the use of valuable documents for insurance. These
reforms have expanded the protection scope of more deposit products and provided transparency and
clarity in distinguishing deposit types
In 2005, according to No. 109/2005/ND-CP Decree On Deposit Insurance Amending And Adding To A
Number Of Articles Of Decree 89/199/Nd-Cp Of The Government Dated 1 September 1999
To amend and add to article 3 as follows:
"Deposits to be insured shall be Vietnamese dong deposited by depositors being individuals, family
households, co-operative groups, private enterprises and partnerships with institutions which participate
in deposit insurance, except for the following cases:
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(a) Deposits of depositors who are shareholders owning more than ten (10) percent of the charter capital
or holding more than ten (10) percent of the shares with voting rights of the institution which participates
in insurance of such deposits;
(b) Deposits of depositors who are members of the board of management, board of controllers, or who are
the general director (director) or deputy general director (deputy director) of the institution which
participates in insurance of such deposits;
(c) Deposits used as security for the discharge of obligations of depositors;
(d) Money used to purchase valuable papers, except a number of valuable papers pursuant to guidelines
of the State Bank of Vietnam."
In 2006, according to No. 03/2006/TT-NHNN Circular Guiding A Number Of Contents Of The
Government's Decree No. 89/1999/ ND-CP of September 1, 1999, on Deposit Insurance, and Decree No.
109/2005/ND-CP of August 24, 2005, Amending And Supplementing A Number Of Articles Of Decree
No. 89/1999/ND-CP:
Deposits to be insured shall be those in Vietnam dong deposited at insured organizations by individuals,
households, cooperative groups, private enterprises or partnerships, except the following cases:
a/ Deposits of shareholders owning more than 10% of the charter capital or holding more than 10% of
the voting share capital of such insured organizations;
b/ Deposits of members of Managing Boards or Control Boards, general directors (directors), or deputy
general directors (deputy directors) of such insured organizations;
c/ Deposits used as security for the performance of depositors' obligations;
d/ Deposits used for the purchase of non-bearer valuable papers issued by insured organizations.
In general, the period 2005-2006 has seen significant improvements in the addition of insured subjects
including individuals, family households, co-operative groups, private enterprises and partnerships. In
particular, the policy on deposit exclusion has also been tightened, helping to eliminate moral hazard and
increase transparency in banking management.
b. Coverage limit
The insurance payment limit refers to the maximum amount that a crypto insurance organization can pay
for all insurance deposits of individuals participating in the crypto insurance organization when an
insurance payment obligation occurs. With the improvement of the legal corridor, deposit insurance limits
are also set by the government and prime minister, and adjusted according to the actual situation in
Vietnam at each period. The deposit insurance limit and scope are periodically re-evaluated based on
many macroeconomic factors such as: inflation, personal income, financial capacity of the deposit
insurance organization, financial - banking system situation, systemic risk... to ensure that the public
policy objectives of the deposit insurance system can be met. Therefore, from 1999 to 2005, the deposit
insurance limit was VND 30 million. This limit was considered appropriate with international practices at
the time of application, which was equivalent to 5.5 times of the GDP per capita and about 80% of total
depositors could be fully insured if the bank went bankrupt, while the DI coverage limit in the world was
about 3-12 times of the GDP per capita. From 2005, the deposit insurance limit increased to VND 50
million, about 3 times of GDP per capita and therefore about 81% of total depositors could be fully
insured. Vietnamese law does not yet regulate the payment of deposits exceeding the deposit insurance
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limit as many countries in the world have regulated (when financial crisis, bank bankruptcy...) to maintain
public confidence, prevent mass withdrawals, causing system collapse.
c. Participation Requirements
According to Decree No. 89/1999/ND-CP of September 1st, 1999 on Deposit Insurance, Compulsory
organization participation in deposit insurance is defined as follows:
Article 2.
1. Credit institutions and organizations other than the credit institutions which are allowed to carry out a
number of banking operations prescribed by the Law on Credit Institutions and take deposit money from
individuals shall have to participate in the compulsory deposit insurance;
2. Organizations participating in the deposit insurance or the deposit insured shall have to post up their
participation therein at their offices and transaction locations.
As of the 8th year of implementing the deposit insurance policy, Vietnam has established deposit
insurance relations with 1,077 deposit-taking organizations, including 5 state-owned commercial banks,
34 joint-stock commercial banks, 32 branches of foreign banks; 5 joint-venture banks, 10 non-bank credit
organizations, the Central People's Credit Fund and 990 grassroots people's credit funds. (Source:
Vietnam Deposit Insurance, as of December 31, 2007). These organizations have all been granted deposit
insurance Certificates.
Additionally, payment mechanism when credit institutions or banks go bankrupt is also specified in
Decree No. 89/1999/ND-CP of September 1st, 1999 on Deposit Insurance
Article 16.
1. When the deposit insured is ordered in writing to terminate its operation and that organization loses its
payment capability, the deposit insurer shall have to pay the insured deposits of depositors at the deposit
insured according to the principles defined in Article 4 of this Decree.
2. The deposit amount (including principal and interest) in excess of the maximum amount to be paid by
the deposit insurer shall be paid to the depositor in the process of liquidating the assets of the deposit
insured in compliance with the provisions of the Law on Bankruptcy.
Article 19.
Where the operating capital of the deposit insurer is temporarily not enough to support the deposit
insured meeting with difficulty in their payment capability or to pay the insured money to the depositors
at the bankrupt deposit insured, the deposit insurer shall have to report it to the State Bank so that the
State Bank shall report it to the Prime Minister for consideration and permitting the deposit insurer to
borrow money from credit institution(s) or other organizations with the Government's guaranty.
Although no bank in Vietnam has yet filed for bankruptcy, it is important for every depositor to
understand the deposit insurance regulations. This not only helps them make informed financial decisions
but also contributes to increasing transparency and confidence in Vietnam’s banking system.
2.1.2 Premium System and Financial Management
a. Premium System
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Deposit insurance premiums are fees that insured institutions must pay to ensure deposit protection. These
premiums help maintain the deposit insurer’s financial capacity, ensuring depositor protection while
promoting stability and competition in the banking system.
Globally, two main premium structures exist. The Flat-Rate Premium applies a uniform rate to all insured
institutions, making it suitable for a pay-box model where the insurer's primary role is reimbursement.
However, this model does not encourage risk control. In contrast, the Risk-Based Premium varies
premiums based on institutional risk levels, incentivizing safer practices and reducing state intervention
costs. This approach aligns more closely with a risk-minimization framework.
In Vietnam, since its establishment, the DIV has performed an ex-ante and flat-rate collection of premium
and the rate is 0.15% of the total average deposit balance of insured deposits at insured institutions. This
has helped the DIV to be very active in financial resources management in order to have quick response
when there is a need for reimbursement, thus helping to protect depositors’ legitimate rights and interests
and minimizing threats of social insecurity at locations where obligation of reimbursement arises.
The application of Flat Rate makes it easy to implement, manage, and ensure transparency. At the same
time, the Vietnamese financial system is still in its early stages. Therefore, Flat Rate is suitable for this
phase and creates a level playing field for all credit institutions. However, Flat Rate does not accurately
reflect the operational risk levels of each bank, leading to a lack of good risk management for
organizations and potentially causing weaker banks to not incur higher costs despite their greater risks, a
phenomenon known as "moral hazard."
The deposit insurance premium collection mechanism in Vietnam is governed by the Law on Deposit
Insurance (1999), Decree 89, which specifies that:
- The Prime Minister has regulated the fee framework of deposit insurance at the request of the State
Bank of Vietnam.
- Based on the fee framework of the deposit insurance, the State Bank of Vietnam shall regulate the
specific fee rate of the deposit insurance for the deposit insurance participating organizations on the
basis of assessment and classification of these organizations
- The deposit insurance fees are calculated on the basis of the average deposit balance of the insured
deposit at the deposit insurance participating organizations.
- The deposit insurance fees are calculated and paid quarterly in the fiscal year. The deposit insurance
participating organizations have to pay the deposit insurance fees to the deposit insurance organizations
on the 20th date of the first month of the succeeding quarter at the latest.
- The deposit insurance fees are recorded into the operation expenses of the deposit insurance
participating organizations.
- The deposit insured which violate the regulation on the premium payment time limits shall, besides
having to fully pay the outstanding premium amount, be subject to a fine of 0.1% (one per thousand) of
the overdue amount for each day of late payment.
- If after 30 days from the deposit insurance premium payment deadline, the deposit insured fail to pay the
deposit insurance premium and the fine, the deposit insurer shall have the right to:
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(1). Request the State Bank to make a deduction from the deposit account of the credit institution at the
State Bank for payment of the deposit insurance premium and the fine if the deposit insured is a credit
institution.
(2). Request the credit institution and/or the State Treasury where the deposit insured opens account(s) to
make deduction therefrom for payment of the deposit insurance premium and the fine if it is an
organization other than a credit institution, which is allowed to conduct some banking operations.
b. Financial Management
For the last 20 years, the DIV has made its efforts to use its capital effectively with the direction of not
wasting idle capital. Annual capital growth stood at 25-27%. On average after every 5 years, the fund of
the DIV has increased by more than twice. Investment has been made as legally regulated, ensuring the
objective of capital preservation and growth on the basis of reasonable investment decisions in each
period toward harmonizing investment-liquidity-profit.
In the period of 1999-2012, over 95% of the capital was invested mainly in term deposits at commercial
banks due to high interest rates, bringing more than 99% of revenues. Investment activities have not
resulted in overdue debts; mature principals and interest rates were fully paid, contributing to stable profit
earning to timely supply idle capital for re-investment.
However, profitability of invested capital (a financial indicator used to measure the ability to generate
profit relative to investment), which is calculated by accrued interest divided by the total invested capital,
has been on a decreasing trend.
2.1.3 Enforcement Mechanisms
Insured depositors are individuals who have deposits in Vietnam Dong with DI members. Therefore, as
compared to the previous stipulations, the Law excludes deposits of institutions. This can be explained
that institutions’ deposits are mainly for payment, thus highly liquid. If these deposits were insured, much
pressure would be put on the deposit insurer’s reimbursement ability given its current modest financial
capability. This provision helps to meet the ultimate goal of deposit insurance, namely protection of the
vast majority of depositors.
The Law on DI does not specify the coverage limit but entitles the Government to set a proper value for
each period. This is expected to further strengthen public confidence in the banking system, thereby
contributing to the stability of the financial and banking sector. Instead of the current flat rate of 0.15%
per annum, DI premiums will be risk-based and within the frame set by the Government. This will ensure
fairness, enhance operational effectiveness of credit institutions, accelerate the accumulation of DI funds
and contribute to constraining systemic risks.
The deposit insurer is entitled to take part in special control, management and liquidation of assets of
failed DI members to make sure that the organization will well protect depositors and clearly determine
the boundary of its role in ensuring the safety of the national financial system.
2.1.4 Payout Process
Between 1999 and 2012, Vietnam's deposit insurance system, managed by the Deposit Insurance of
Vietnam (DIV), implemented structured processes to ensure timely reimbursement to depositors and
maintain public confidence in the financial system.
According to Law on Deposit Insurance 1999, the details of payout process was that:
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Triggering Payout
Payouts were initiated when a participating financial institution was declared insolvent or unable to meet
its obligations to depositors.
The obligation to pay insurance arises from the time:
- The State Bank of Vietnam has a document terminating special control or a document terminating the
application or a document not applying solvency restoration measures, but the credit institution is an
organization participating in deposit insurance and still falls into bankruptcy
- The State Bank of Vietnam has a document identifying foreign bank branches as deposit insurance
participating organizations that are unable to pay deposits to depositors.
Within 60 days from the date the obligation to pay insurance premiums arises, the deposit insurance
organization shall be responsible for paying insurance premiums to the insured depositor.
Payout Procedure:
The dossier to request the payment of premium includes the written request of the premium payment, the
list of insured persons of deposit, the deposit of each insured person and the premium to request the
deposit insurance to make payment.
Within 05 working days after receiving complete dossiers as prescribed in Clause 1 of this Article, the
deposit insurance organization shall verify the documents and books to determine the amount to be paid.
Within 10 working days after the end day of inspection specified in clause 2 of this Article, the deposit
insurance organization must have a plan to pay a premium to the insured persons of deposit; publicly
announce the location, time, mode of payment of premium on three consecutive issues of a central
newspaper, a local newspaper where located the head office and the branches of the deposit insurance
participating organization and on website of a Vietnamese newspaper; listing the list of insurance payees
at the announced locations.
Upon receipt of premium, the insured persons of deposit must produce the evidencing papers of the legal
ownership with respect to the insured deposits at the deposit insurance participating organization.The
deposit insurance organization shall directly make payment of premium to the insured persons of deposit
or authorize another deposit insurance participating organization to make payment.
After a period of 10 years from the date the deposit insurance organization has announced the first time
the payment of premium, the unclaimed premium shall be established the state ownership and added to
the operating capital of the deposit insurance organization. The person who has the ownership of the
insured deposit shall not have the right to request the deposit insurance organization to return that
premium.
2.2. Challenges and Shortcomings
2.2.1. The Foreign Currency Exclusion
According to the estimation of the International Monetary Fund (IMF), before 2006, Vietnam's foreign
exchange reserves increased by more than 10% every year, reaching 6. In 2006, it was USD 341 million,
almost double that of 2001. Foreign exchange deposits account for a large proportion of the total
financing. According to the national open policy, the investment flow of foreign individuals and export
workers has increased, making foreign exchange deposits more and more popular.
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As of 2010, individuals have deposited foreign currency in banks with foreign exchange business
licenses, but the current deposit insurance policy in Vietnam does not stipulate whether these deposits are
insured, which is unfair, because people's remittance demand is increasing, but the interests of deposit
insurance cannot be guaranteed. On the other hand, the lack of foreign exchange deposit insurance
mechanism leads Vietnam to deviate from international practice, and many developed countries adopt
multi-currency insurance policies within a reasonable range.
2.2.2. Inadequacies in determining the types of deposits subject to insurance
The definition of "insured deposits" in the Law on Credit Institutions and Circular 03/2000/TT-NHNN is
not consistent, leading to different handling methods among credit institutions (credit organizations).
Some typical cases are:

Deposits of private enterprises and partnerships: Some credit institutions classify them as individual
deposits (insured), others consider them as organizational deposits (not insured). Private enterprises
and partnerships operate as organizations, so their deposits are not subject to insurance.

Individual deposits: Currently not insured because they are considered civil relations. However, in
essence, these are still personal deposits and need to be insured.

Joint account deposits (with individuals participating): If there is an individual in the joint account,
that individual's portion of the money must be insured.

Deposits of organizations and households but in the name of individuals: If there is no evidence to
confirm that they are organizational deposits, this amount should be insured as individual deposits.
2.2.3. A Marginal Role of Deposit Insurance of Vietnam in the Financial Safety Net
The national financial safety net has not been clearly defined in legal documents especially regarding the
role, responsibilities of institutions in charge of exercising financial supervision. “The role of DIV in the
financial supervision has not been clearly defined”, said Dr. Duong Thu Huong – Secretary General of the
Vietnam Banks Association. In accordance with the current law in force, DIV supervises, inspects the
observance of deposit insurance regulations and safety regulations in the operation of the insured
institutions. The insured institutions are required to provide documents, information, reports and
statements on business activities regularly or irregularly; implement measures to amend violations of
safety regulations on banking activities and the risk of losing affordability. However, the current law does
not stipulate penalties for the violations of the insured institutions. Therefore, it will reduce the efficiency
and effectiveness of supervision.
2.2.4. Process of handling bank failures is still insufficient
It is widely defined that DIV plays important roles in the process of handling credit institution bankruptcy
and achieving goals through professional activities for example bridge banks, financial assistance,
reimbursement for depositors... However, in accordance with the current law of Vietnam, the process of
handling credit institution failures still reveals shortcomings, especially there has been no rules or
regulations on credit institutions’ failures. For instance, it has not clearly defined bank failures and
dissolution. The roles performed by DIV in handling bank failures through professional activities such as
financial assistance (the process, procedures, initiatives) and asset liquidation (council’s liquidation
activities) are still limited. Especially, some professional activities undertaken by DIV to handle failures
have not been enshrined in the law, for example regulations on debt purchasing, bridge bank, etc…
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2.2.5. Provisions on deposit insurance rates
International practice stipulates that deposit insurance premiums are based on banking operational risks:
the higher the risk, the higher the premium and vice versa. However, in Vietnam, all organizations
participating in deposit insurance pay a common premium, regardless of the level of risk. According to
Decree 89/1999/ND-CP and guiding documents, the deposit insurance premium in Vietnam is currently
0.15%/year, calculated on the total average deposit balance subject to insurance. This premium is decided
by the Prime Minister based on the proposal of the deposit insurance organization and the opinions of the
State Bank and the Ministry of Finance.
This leads to a number of limitations:
- Not encouraging banks to improve operational efficiency and risk management.
- Lack of fairness between safe banks and banks with high risk levels.
- Not creating incentives for depositors to consider choosing safer credit institutions.
2.2.6. Limitations of the deposit insurance payment
During most of the 1999–2011 period, the deposit insurance coverage in Vietnam was capped at VND 30
million per depositor. While this amount was above the GDP per capita at the time, it increasingly fell
short of protecting the actual savings of many depositors as incomes rose and the financial system
expanded. The cap did not keep pace with inflation or the growth in household and small business
deposits, leading to limited protection for a large share of depositors. This gap in coverage risked
undermining public trust in the safety net and may have discouraged greater use of the formal banking
system.
2.2.5. Moral hazard of deposit insurance in Vietnam
After the 2008 crisis, the period of 2010-2011 witnessed the phenomenon of banks competing to increase
deposit interest rates, even applying "hidden" interest rates. When the State Bank committed to not
allowing any bank to fail, depositors relying on deposit insurance flocked to banks that paid the highest
interest rates, regardless of the risks. This disrupted cash flow, breaking the market supply-demand
balance.
On the other hand, many banks were forced to make risky investments in high-risk areas to meet deposit
interest rates, leading to an increase in bad debt. Notably, some people's credit fund officials violated
safety regulations, causing these funds to go bankrupt and forcing deposit insurance to pay compensation.
2.3. Reforms
After five years of operation, in 2005, the Government issued Decree No. 109/2005/ND-CP, amending
Decree No. 89/1999/ND-CP, raising the deposit insurance coverage limit to VND 50,000,000 to align
with economic and social developments.
This adjustment aimed to enhance depositor protection in response to economic changes, ensuring better
financial security for depositors. Additionally, the payout process was improved by introducing a
maximum payout time frame of 60 days and requiring transparent public disclosure of payout
information.
DIV was also authorized to delegate the payment process to eligible credit institutions. Regarding the
scope of insurance, it was clarified that only personal deposits were covered, while corporate deposits,
organizational funds, and investment products were excluded. To enhance operational effectiveness, DIV
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focused on staff training, modernizing its technological infrastructure, and strengthening international
cooperation to align with global standards.
Notably, by the end of this period, Vietnam began exploring a shift from a flat-rate premium system to a
risk-based premium system—an important direction in its journey toward international financial
integration.
3. Phase 2: Legal Codification (2012–2016)
"The codification phase" marked a big turning point in perfecting the legal framework for deposit
insurance in Vietnam. With the promulgation of "The Law on Deposit Insurance 2012" and its guiding
documents, the deposit insurance system has been significantly strengthened in terms of coverage,
premium management system, and enforcement mechanisms. These reforms aim to enhance depositors’
confidence, protect depositors’ rights, and contribute to ensuring the stability of Vietnam’s banking and
financial system.
3.1. Regulations
“The Law on Deposit Insurance 2012”clearly defines the principles of deposit insurance in Clause 1,
Article 5, emphasizing two basic principles. Firstly, deposit insurance is a compulsory type of insurance
as prescribed by law, not voluntary. Second, deposit insurance activities must ensure publicity and
transparency, ensuring the rights and legitimate interests of relevant parties, including insured depositors,
participating deposit insurance organizations, and deposit insurance organizations. This principle ensures
the stability and effectiveness of the deposit insurance system, which means creating confidence for
depositors.
3.1.1 Coverage Scope and Participation Requirements
a. Insured Deposits
During the period from 2012 to 2016, the coverage limit for insured deposits was fixed at VND 50
million per depositor per institution. This limit was initially set prior to the implementation of the Law on
Deposit Insurance in 2013 and remained unchanged until 2017. The enactment of Law No.
06/2012/QH13 by the National Assembly marked the first time that the definition and framework for
insured institutions and insured deposits were clearly established under Vietnamese law. This law and its
guiding documents formally clarified the scope of deposit insurance, including detailed lists of eligible
deposits as well as specific exclusions. The structure of the law reflected a principle of selective
protection, aiming to safeguard the most vulnerable participants in the financial system—namely,
individual depositors.
Article 18 of the Law on Deposit Insurance 2012 specifies that insured deposits include Vietnamese Dong
deposits held by individuals at institutions participating in the deposit insurance system. These deposits
may take various forms, including term and non-term deposits, savings accounts, certificates of deposit,
promissory notes, treasury bills, and other similar instruments as defined by the Law on Credit
Institutions. However, deposits denominated in foreign currencies, as well as deposits made by
organizations and enterprises, are excluded from this coverage. While this provision plays a crucial role in
protecting individual depositors and maintaining systemic stability, its limited scope has increasingly
become a point of concern in light of financial market development.
Exclusions are also stipulated in Article 19 of “the Law on Deposit Insurance 2012”:
1. Deposits of individuals owning more than 5% of charter capital
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Article 19, Clause 1, stipulates the exclusion of deposits from individuals who own more than 5% of the
charter capital of the credit institution where they deposit money. The main reason for this provision
comes from the fact that large shareholders often have the ability to directly influence the operations and
management decisions of the credit institution. If insured, they can accept higher risks in business, leading
to the risk of system collapse. For example, a shareholder who owns 10% of the bank's capital can
promote risky loans, knowing that his deposits are insured. This reduces the incentive to monitor risks,
destabilizing the whole system.
2. Deposits of members of the Board of Directors and Executive Board
Article 19.2 excludes deposits of members of the Board of Directors, Board of Supervisors, General
Directors, and Deputy General Directors of the credit institution or foreign bank branch where they work.
These groups of people hold inside information and are responsible for establishing risk management
policies. Insuring their deposits may create conflicts of interest, making them less responsible in
preventing decisions that pose risks to the institution. For example, a bank director may prioritize highyield but high-risk investments, despite the risk of bankruptcy, if he knows that personal deposits are still
insured.
3. Money to buy unknown valuable papers
Article 19.3 excludes money for purchasing anonymous securities issued by deposit insurance
participating organizations. Anonymous securities (such as bearer bonds) are often used in anonymous
transactions, posing risks of fraud and money laundering. Not insuring these instruments helps limit the
exploitation of the insurance system to conceal illegal activities. At the same time, this provision
encourages investors to be more cautious when choosing financial products, instead of relying on state
protection. These exclusions are also consistent with international practice, demonstrating the principle of
"not insuring risk creators" (moral hazard prevention).
The Scope of coverage based on “The Law on Deposit Insurance 2012” stipulated that deposit insurance
aims to ensure the repayment of deposits (including principal and interest) to depositors when a credit
institution becomes insolvent or bankrupt. Within the legal framework of this period, there are two main
subjects related to deposit insurance.
b. Participation Requirements
Firstly, according to Article 4, “the insured depositor” is an individual who has insured deposits at a
deposit insurance participating institution. This shows that the scope of deposit insurance is limited to
individual deposits, not including deposits of organizations. According to Law No.06/2012/QH13 of the
National Assembly: Law on Deposit Insurance, Rights and obligations of the insured:
Article 11. Rights and obligations of the insured persons of deposit
1. Being insured their deposits at deposit insurance participating organizations under the provisions of
this Law.
2. Receiving the premium fully and on time as prescribed by this Law.
3. Requiring the deposit insurance participating organizations and deposit insurance organizations to
provide complete and accurate information and regulations on deposit insurance.
4. Making complaints and denunciations and initiating a suit against the agencies, organizations, and
individuals related to deposit insurance as prescribed by the law.
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5. Having the obligations to provide complete and honest information on the deposit on the requirement
of deposit insurance participating organizations and deposit insurance organizations upon performing
the procedures for the premium payment.
Second, "insurance participating organizations" are credit institutions and foreign bank branches
established and operating under the Law on Credit Institutions that can receive individual deposits
(Article 4). Limiting the scope of deposit insurance to individuals reflects the main objective of the
deposit insurance system, which is to protect small depositors.
A participating insured institution refers to a credit institution or a foreign bank branch established and
operating under the Law on Credit Institutions, which is authorized to accept deposits from individuals.
These include commercial banks, cooperative banks, people’s credit funds, foreign bank branches
established and operating under the Law on Credit Institutions. Furthermore, Non-Bank Financial
Intermediaries are not included.
According to Article 4 of “the Law on Deposit Insurance 2012”, "insured deposits" are defined as
deposits in Vietnamese Dong of individuals at deposit insurance participating organizations, including
term deposits, non-term deposits, savings deposits, and other forms of mobilization as prescribed by law.
This provision affirms that only deposits in domestic currency (VND) are covered by insurance, reflecting
the policy of prioritizing the stability of the national monetary system and reducing exchange rate risks
for the insurance fund. At the same time, the exclusion of deposits in foreign currencies (USD, EUR, etc.)
comes from the goal of managing exchange risks and encouraging the use of domestic currencies in the
economy.
In addition, deposits of organizations and enterprises are completely excluded from the scope of insurance
as stipulated in Clause 2, Article 4 of “the Law on Deposit Insurance 2012”. This distinction is based on
the assumption that organizations have the financial capacity and expertise to assess risks better than
individuals while helping to reduce the financial burden on the deposit insurance fund. However, the
regulation also creates challenges when many small and micro enterprises – which are equivalent in size
to households – are not covered by this insurance regime.
Decree 68/2013/ND-CP (effective August 19, 2013) has detailed regulations on the issuance of
certificates of participation in deposit insurance in Article 6. This regulation demonstrates the mandatory
and official nature of the involvement in deposit insurance for credit institutions. It aims to ensure that all
credit institutions participate in the deposit insurance system, creating a synchronous safety net for
depositors.
3.1.2 Premium System and Financial Management
a. Premium System
“The Law on Deposit Insurance 2012” has established a mandatory insurance premium system for all
deposit insurance participating organizations. Article 10 of the Law clearly identifies "Deposit insurance
participating organizations not paying deposit insurance premiums" as one of the prohibited acts. This
provision emphasizes the mandatory payment of insurance premiums, ensuring the financial sustainability
of the deposit insurance system.
Paying insurance premiums is not only an obligation but also the basis for creating financial resources for
the Deposit Insurance Fund, from which it can perform the function of protecting depositors when
necessary. This is one of the core factors ensuring stability and confidence in the banking and financial
system. “The Law on Deposit Insurance 2012” clearly stipulates that failure to pay deposit insurance
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premiums is one of the prohibited acts for deposit insurance participating organizations. This emphasizes
the mandatory payment of premiums, establishing a solid legal basis to ensure financial resources for the
deposit insurance fund. Paying premiums in full and on time is not only a legal obligation but also
demonstrates the commitment of credit institutions to protect depositors and maintain the stability of the
financial system.
b. Financial Management
Safe Investment Principles
In the period from 2012 to 2016, as stipulated in Article 5, Clause 4 of Circular No. 312/2016/TT-BTC,
the Deposit Insurance of Vietnam (DIV) was permitted to invest its temporarily idle funds exclusively in
secure instruments. These included government bonds, which accounted for the majority of investments
due to their high reliability; deposits at the State Bank of Vietnam, which ensured quick access to capital
when necessary; and State Bank bills, which served as short-term instruments well-suited to meeting
liquidity requirements. This conservative investment approach was intended to minimize exposure to
high-risk assets such as stocks or real estate, thereby helping the fund maintain stability even under
volatile market conditions.
Reporting and Monitoring Mechanism
According to Article 25 of the same Circular, the DIV is required to prepare annual financial reports,
which are subject to independent audits conducted by the State Audit of Vietnam. Additionally, deposit
insurance participating institutions must submit quarterly reports detailing the balance of insured deposits,
along with their balance sheets and performance evaluations. These reports serve as a crucial basis for
adjusting annual insurance premiums, ensuring that the fund remains capable of meeting its payment
obligations in the event of adverse developments.
3.1.3 Enforcement Mechanisms
a. Legal Framework for Enforcement Mechanism
The Law on Deposit Insurance 2012 has clearly stipulated the principles of operation and enforcement
mechanisms to ensure the effectiveness of this policy. According to Clause 1, Article 4 of “the Law on
Deposit Insurance 2012”, "Deposit insurance" is defined as the guarantee of repayment of deposits to
insured depositors within the prescribed limit when the participating organization becomes insolvent or
bankrupt. This definition clarifies the main objective of deposit insurance - protecting the interests of
depositors- and at the same time establishes the basis for the enforcement mechanisms to be built.
The core principle stipulated in Article 5 of “the Law on Deposit Insurance 2012” emphasizes the
compulsory nature of this type of insurance. This means that all credit institutions and foreign bank
branches that accept deposits from individuals must participate in deposit insurance without exception.
This mandatory requirement plays an important role in ensuring credit institutions' compliance,
facilitating the synchronous implementation of deposit insurance regulations across the system.
The law also clearly stipulates that deposit insurance activities must be carried out in a public and
transparent manner in order to ensure the legitimate rights and interests of all relevant parties, including
depositors, participating deposit insurance organizations and deposit insurance organizations. This
principle of transparency is the foundation for building trust in the financial system and creating the basis
for effective monitoring and inspection mechanisms.
b. Prohibited Acts and Sanctions for Violations:
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Article 10 of “the Law on Deposit Insurance 2012” clearly lists prohibited acts in deposit insurance
activities, including:
1. The deposit insurance participating organizations fail to pay the fee of deposit insurance.
2. The deposit insurance organizations fail to pay or insufficiently pay the premium
3. Defrauding and falsifying records, materials, and papers on deposit insurance.
4. Obstructing, making it difficult and damaging the legitimate rights and interests of the deposit
insurance organizations and the deposit insurance participating organizations, the insured persons of
deposit and the agencies and organizations related to deposit insurance.
The Government has clearly stated the violations in the “the Law on Deposit Insurance 2012”. However,
the sanctions for violations during this period are still limited and lacking. Although “the Law on Deposit
Insurance 2012” was issued in 2012, it was not until 2019, when Decree 88/2019/ND-CP was issued, that
the sanctions for violations were completed and took effect from December 31, 2019.
3.1.4 Payout Process
The payout process under Vietnam's deposit insurance system is a structured mechanism designed to
ensure efficient compensation for depositors when a participating institution fails. As outlined in the
Deposit Insurance Law of 2012, the process begins when the deposit insurance organization determines
that a participating institution—such as a credit institution or foreign bank branch operating under the
Law on Credit Institutions—can no longer meet its deposit obligations or has become bankrupt. Once this
determination is made, the organization assesses the insured amount for each individual depositor, which
includes all eligible deposits, covering both principal and accrued interest, held at the failed institution.
For depositors with outstanding loans from the same institution, the insured amount is adjusted by
subtracting the loan balance, adhering to the legal principle of set-off. The final step involves disbursing
the calculated amount to depositors, up to a specified maximum limit. This process is supported by
Decree 68/2013/NĐ-CP, effective since August 19, 2013, which provides detailed guidelines—such as
those in Article 12 for authorizing payouts and Article 13 for receiving compensation—ensuring
transparency and operational consistency in protecting depositors’ rights during a bank failure.
3.2. Challenges & Shortcomings
Despite significant progress in the 2012-2016 law drafting period, the deposit insurance system in
Vietnam still faces many challenges, typically in terms of structure and operation, limiting the
effectiveness of the law and requiring further reforms. These shortcomings are reflecting certain
limitations and difficulties in implementation, requiring management agencies to address.
First challenge is about coverage limitations. A significant challenge lay in the limited scope of coverage,
which only extended to individual depositors rather than including legal entities or business accounts.
This restriction created protection gaps in the financial system and potentially limited the stabilizing
effect of deposit insurance during financial stress. Research has shown that more comprehensive coverage
can better prevent bank runs and maintain financial stability during crises, suggesting this limitation may
have undermined one of the system's primary objectives.
Second, enforcement mechanisms is also another difficulty. Although the legal framework prohibited
participating institutions from failing to pay deposit insurance premiums and forbade the deposit
insurance organization from refusing or incompletely paying insurance claims, questions remained about
the effectiveness of enforcement mechanisms. The penalties for violations were further clarified in Decree
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88/2019/NĐ-CP concerning administrative violations in currency and banking activities, but during the
2012-2016 period, enforcement remained a challenging aspect of implementation.
Another significant challenge was the deposit insurance system's operational readiness for managing
large-scale bank failures. While the legal framework established the compensation procedures, the
capacity to process numerous claims simultaneously during a systemic crisis remained untested. This
uncertainty created potential vulnerabilities in the system's ability to fulfill its mandated function during
extreme financial stress.
Despite the legal framework's emphasis on transparency and openness, public awareness of deposit
insurance protections remained limited. Many depositors did not understand coverage limits, eligible
deposits, and claim procedures. This knowledge gap potentially undermined one of the system's primary
purposes—maintaining depositor confidence and preventing panic-driven withdrawals during financial
uncertainty.
The interface between deposit insurance payouts and the broader bank resolution framework presented
coordination challenges. The 2012-2016 regulatory framework did not fully clarify how deposit insurance
would interact with other resolution tools, such as bank mergers, acquisitions, or asset transfers. This
ambiguity created potential efficiency losses in managing failing institutions and protecting depositors'
interests.
3.3. Reforms
Significant reforms to Vietnam’s deposit insurance system took place between 2012 and 2016,
establishing a more robust legal framework and laying the foundation for future improvements. These
reforms addressed previous legal loopholes and brought the system more in line with international
standards and best practices.
The most essential reform during this era was the thorough codification of principles and operations
related to deposit insurance as encapsulated in the 2012 Deposit Insurance Law (Deposit Insurance Law
No. 06/2012/QH13 was passed by the 13th National Assembly on June 18, 2012, and took effect on
January 1, 2013). This legislative enactment supplanted the antecedent mosaic of regulations with a
cohesive legal framework that governs all dimensions of deposit insurance operations. The statute
elucidated the characterization of deposit insurance as a compulsory protective mechanism, thereby
ensuring systematic coverage throughout the banking sector instead of permitting optional participation.
A significant reform advancement was achieved through Decree 68/2013/NĐ-CP, which delineated
comprehensive implementation directives for the foundational legislation. This decree elucidated practical
dimensions of deposit insurance operations, encompassing the certification protocol for participating
entities, the procedures for authorizing insurance disbursements, and the frameworks for obtaining
compensation. These regulatory implementations transmuted expansive legislative principles into
actionable procedures for all stakeholders engaged in the deposit insurance framework.
The legislative reform instituted more rigorous accountability frameworks for deposit insurance entities
and the affiliated financial institutions. The statute categorically forbade institutions from neglecting their
obligations to remit deposit insurance premiums and prohibited the deposit insurance agency from
rejecting or inadequately fulfilling legitimate insurance claims. These restrictions were bolstered by
enforcement mechanisms that established significant repercussions for non-adherence, although these
would be further augmented in subsequent regulatory revisions.
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The reforms instituted enhanced procedural safeguards for the management of joint deposit accounts as
well as for exceptional circumstances. In the context of jointly owned deposits, the legislation delineated
explicit provisions for the allocation of compensation in accordance with ownership agreements or
established legal principles. Likewise, the regulatory framework tackled intricate scenarios, such as
depositors with outstanding loans at the failing institution, elucidating the methodology by which
compensation would be computed in these situations.
While Decree 88/2019/NĐ-CP, which lies beyond the analytical scope of the 2012-2016 timeframe, is
poised to more comprehensively advance the complete enforcement regime, the foundational elements of
this enforcement architecture were instituted during the phase of legal codification. The legislation
enacted in 2012 delineated prohibited actions and established the principle that infractions would incur
administrative or criminal repercussions contingent upon their gravity, thereby laying the groundwork for
more nuanced enforcement stipulations in subsequent regulatory frameworks.
During the phase of legal codification, a robust foundation for a comprehensive framework governing
regulatory enforcement and transparency was established, thereby facilitating the introduction of more
detailed provisions in subsequent regulations, notably Decree 88/2019/NĐ-CP. The legislation enacted in
2012 delineated prohibited actions and specified that infractions would incur administrative or criminal
repercussions contingent upon their severity, thereby ensuring adherence to regulatory standards, financial
stability, and market integrity. Concurrently, a significant reform mandated stringent transparency
requirements for deposit insurance operations, obligating that all activities be conducted with openness to
safeguard the legitimate rights of stakeholders and uphold accountability. These transparency stipulations
bolstered public confidence, permitted more effective regulatory oversight, and mitigated the risks
associated with mismanagement and corruption. The measures concerning enforcement and transparency
were instrumental in enhancing compliance, governance, and trust within the financial system, thereby
establishing a solid groundwork for forthcoming regulatory advancements.
4. Phase 3: System Enhancement (2017–2020)
During the period from 2017 to 2020, Vietnam undertook significant measures to enhance its deposit
insurance system, aiming to bolster financial stability and protect depositors. This phase focused on
refining regulations, addressing existing challenges, and implementing reforms to strengthen the overall
framework.
4.1. Regulations
Several key regulatory developments occurred during this period, focusing on various aspects of the
deposit insurance system.
4.1.1 Coverage Scope and Participation Requirements
During the period from 2017 to 2020, the coverage scope of deposit insurance in Vietnam included
various types of deposits in Vietnamese Dong (VND), such as term deposits, demand deposits, savings
accounts, deposit certificates, promissory notes, treasury bills, and other deposit types regulated by the
Law on Credit Institutions. The coverage limit was set at VND 75 million per depositor per insured
institution from August 5, 2017, until it was increased to VND 125 million in December 2021.
Participation in the deposit insurance system is mandatory for all credit institutions licensed by the State
Bank of Vietnam (SBV), including commercial banks, people's credit funds, cooperative banks, and
microfinance institutions. These institutions must pay premiums to the Deposit Insurance of Vietnam
(DIV) based on their insured deposits. The DIV assesses and collects these premiums, which are used to
fund potential payouts in case of bank failures.
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4.1.2 Premium System and Financial Management
a. Premium System
The deposit insurance premium system remained based on a flat-rate model, where insured institutions
paid a fixed percentage of their total insured deposits. According to Circular No. 24/2017/TT-NHNN,
issued by the State Bank of Vietnam (SBV), the premium rate was set at 0.15% per year of insured
deposits. While this system provided stability, it lacked differentiation between high-risk and low-risk
financial institutions. Many international markets, including the United States, Canada, and European
countries, had already adopted risk-based premium models, where institutions with higher financial risk
pay higher premiums. The drawbacks of the flat-rate model became evident when examining the financial
performance of Vietnam’s banking sector. Between 2017 and 2020, some smaller credit institutions and
weak banks experienced financial distress, leading to concerns about systemic risk. Despite this, they paid
the same premium rate as large, well-capitalized banks. The absence of a risk-based system failed to
discourage risky behavior among financial institutions.
Recognizing the need for a more equitable approach, Vietnamese regulators began studying the feasibility
of a risk-based premium system. In 2019, the Deposit Insurance of Vietnam (DIV) initiated research in
collaboration with international organizations such as the World Bank and IADI to explore possible
models suitable for the Vietnamese market. However, full implementation remained a future goal beyond
2020.
b. Financial Management
During the period from 2017 to 2020, the financial management of the Deposit Insurance of Vietnam
(DIV) involved several key components to ensure the stability and effectiveness of the deposit insurance
system. The DIV collected premiums from insured institutions, which were used to fund potential payouts
to depositors. Notably, in 2020, the total collected premiums reached VND 8,322 billion, exceeding the
assigned plan by 108.7%. This achievement reflects the DIV's efficiency in managing its premium
collection process. The DIV also invested its temporarily idle capital primarily in government bonds and
other low-risk securities, with a total of VND 67,688.3 billion invested as of December 2020, marking a
19.3% increase from the previous year. However, due to decreasing interest rates, the returns on these
investments were relatively low. The DIV's charter capital, provided by the state budget, was crucial for
enhancing its financial capacity. Additionally, the DIV conducted regular on-site examinations and off-site
supervision to ensure compliance with deposit insurance regulations, monitoring for inaccuracies in
premium payments and applying penalties for non-compliance. Overall, the DIV's financial management
during this phase focused on optimizing premium collection, prudent investment strategies, and robust
risk management practices to support the stability of Vietnam's banking sector.
4.1.3 Enforcement Mechanisms
To strengthen the effectiveness of deposit insurance, enforcement mechanisms were enhanced in several
key ways: First, stronger supervision and compliance monitoring: The Deposit Insurance of Vietnam
(DIV) intensified its oversight of insured institutions to ensure compliance with regulatory requirements.
Secondly, collaboration with the SBV: A more integrated approach was adopted, allowing real-time data
sharing between the DIV and SBV to detect financial risks early and intervene when necessary. Besides,
stricter penalties for non-compliance: Institutions that violated deposit insurance regulations faced
consequences such as financial penalties, operational restrictions, or even license revocation in severe
cases. Notably, in 2019, several weak financial institutions were placed under special supervision,
allowing the DIV and SBV to intervene and prevent potential failures. However, enforcement
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effectiveness was still limited by resource constraints and the lack of advanced data analytics for risk
assessment.
Enforcement mechanisms are also another difficulty. Although the legal framework prohibited
participating institutions from failing to pay deposit insurance premiums and forbade the deposit
insurance organization from refusing or incompletely paying insurance claims, questions remained about
the effectiveness of enforcement mechanisms. The penalties for violations were further clarified in Decree
88/2019/NĐ-CP concerning administrative violations in currency and banking activities, but during the
2012-2016 period, enforcement remained a challenging aspect of implementation.
4.1.4 Payout Process
During this phase, one of the main objectives was to improve the deposit insurance payout process to
ensure depositors received timely compensation in case of institutional failures. The implementation of an
automated payout system reduced processing time from 60 days to 30 days, significantly enhancing
efficiency. Additionally, investments in technology upgrades improved the accuracy of depositor records,
ensuring faster and more transparent reimbursements. The State Bank of Vietnam (SBV) and the Deposit
Insurance of Vietnam (DIV) conducted crisis simulation exercises to test regulators' preparedness for
financial institution failures and refine response strategies. However, payout efficiency remained lower
than in many developed markets, where depositors could receive compensation within 7 to 14 days. This
slow process in Vietnam was primarily due to the lack of real-time deposit records and coordination
challenges between banks and regulators .between banks and regulators.
4.2. Challenges & Shortcomings
During the period from 2017 to 2020, Vietnam's deposit insurance system faced several challenges and
shortcomings that needed to be addressed to enhance its effectiveness and better protect depositors.
One of the primary challenges was the economic growth and inflation in Vietnam, which led to an
increase in consumer prices and average deposit amounts. This made the existing deposit insurance
coverage limit of VND 75 million less effective, as it no longer fully protected a significant portion of
depositors. In comparison to international practices, Vietnam's deposit insurance coverage limit was
relatively low. Many countries adjust their coverage limits based on GDP per capita and the ratio of
insured depositors to total depositors.
Furthermore, the Deposit Insurance of Vietnam (DIV) faced challenges in maintaining an adequate
financial capacity to support insured institutions and pay out deposit insurance reimbursements. The
profitability of the DIV's idle capital decreased due to low interest rates on government bonds, which
were the primary investment vehicle.
Regarding shortcomings, the coverage limit of VND 75 million was insufficient for many depositors,
especially as economic conditions changed. This limited coverage could erode depositor confidence in the
banking system. Additionally, the DIV's investment options were limited, primarily to government bonds
and State Bank of Vietnam bills, which offered low returns due to decreasing interest rates. This affected
the DIV's ability to grow its funds effectively.
There was also a need for clearer guidelines regarding the DIV's role in restructuring weak credit
institutions and managing uninsured deposits. Finally, the system required more robust risk management
practices to ensure the stability of the banking sector and protect depositors' interests effectively.
Addressing these challenges and shortcomings was crucial for enhancing the deposit insurance system in
Vietnam and ensuring it remained effective in protecting depositors and maintaining banking stability.
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4.3. Reforms
To address these challenges, several key reforms were implemented or planned for future execution. The
government raised the deposit insurance coverage limit to VND 125 million in 2021, providing stronger
protection for depositors. Research and feasibility studies on transitioning to a risk-based premium system
continued, paving the way for a future shift from a flat-rate to a risk-adjusted premium model to
encourage better risk management among financial institutions. Additionally, public education campaigns
were launched to enhance depositors' understanding of the benefits and limitations of deposit insurance,
strengthening confidence in the financial system. Lastly, the DIV explored further improvements to the
payout process by leveraging digitalization and automation to reduce processing times and better meet
depositor needs.
5. Phase 4: Modernization (2021–2025)
5.1. Regulation
5.1.1. Coverage Scope and Participation Requirements
a. Coverage Scope
The Prime Minister's Decision No. 32/2021/QĐ-TTg marked a watershed moment, elevating coverage to
125 million VND ($5,500 USD) while retaining the scope of insured instruments.
Although Vietnam's deposit insurance coverage limit increased significantly in nominal terms, from 30
million VND in 1999 to 125 million VND in 2021; the coverage-to-GDP per capita ratio declined from
5.5x to just 1.47x. This shift isn't necessarily a sign of policy lag or failure. Rather, it reflects a deliberate
strategy: Vietnamese policymakers have prioritized broad protection (coverage breadth) over high percapita payout limits (coverage depth). In a financial system where commercial banks are effectively
shielded from failure—often being merged or restructured instead of going bankrupt—the real risk lies
with smaller institutions like people's credit funds (PCFs) and cooperative banks, which operate closer to
rural and low-income communities. These institutions play a crucial role in financial inclusion but are
more vulnerable, and protecting their depositors ensures systemic stability at the grassroots level. As such,
maintaining a moderate coverage limit while maximizing the percentage of protected depositors (91% in
2021) is a rational trade-off within Vietnam’s state-backed financial safety net model.
Year
Coverage (VND)
GDP/Capita
Coverage/GDP
Protected Depositors
1999
30 million
$400
5.5x
80%
2005
50 million
$700
3x
81%
2017
75 million
$2,500
1.5x
87.32%
2021
125 million
$3,743
1.47x
91%
Table 1: Deposit Insurance Coverage and Economic Indicators Over Time
The International Association of Deposit Insurers (IADI) sets global standards to ensure effective deposit
protection systems. As of 2024, Vietnam is only partially compliant with IADI core principles, mainly due
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to its use of a flat-rate premium system, where all insured institutions pay the same rate regardless of
risk—unlike countries with risk-based pricing models. Additionally, coverage limit adjustments in
Vietnam are made through political discretion, not automatic indexation to inflation or GDP as
recommended by IADI. This, combined with a policy focus on protecting a high percentage of small
depositors rather than matching income levels, results in a relatively low coverage-to-GDP ratio (1.47x)
compared to peers like Indonesia or Mexico, which exceed IADI’s 2.5–5x guideline.
Country
Coverage Limit
GDP per Capita
Coverage/GDP Ratio
Vietnam
$5,500
$4,700
1.17x
Indonesia
$127,129
$4,800
26.49x
Mexico
$143,000
$10,000
14.30x
Philippines
$17,000
$12,000
1.42x
China
$70,000
$13,000
5.38x
IADI Guidance
-
-
2.5-5x
Table 2: Deposit Insurance Coverage Limits vs. GDP per Capita (Selected Countries) in the year 2024
b. Participation Requirements
According to Article 15 of the Deposit Insurance Law, institutions participating in deposit insurance must
publicly post a copy of the Deposit Insurance Certificate at all transaction points accepting deposits. This
certificate is issued by the Deposit Insurance of Vietnam (DIV). Furthermore, under Article 10 of the
Credit Institutions Law (2024), credit institutions and foreign bank branches are required to participate in
deposit insurance as mandated by law and must publicly disclose their participation at their headquarters
and branches. The institutions contributing to deposit insurance premiums include commercial banks,
cooperative banks, people's credit funds, microfinance institutions, and foreign bank branches.
As of 2023, Vietnam’s deposit insurance system covers 1,280 institutions, the majority of which are
People’s Credit Funds (1,179). Despite their small individual deposit volumes, they make up over 90% of
insured institutions, reflecting the unique structure of Vietnam’s financial system. While commercial
banks and foreign bank branches remained stable at 96, other segments like cooperative and microfinance
institutions had marginal shares. This structure reflects Vietnam’s financial landscape, heavily weighted
toward small, community-based institutions. The system has seen little change in participant numbers
over the past decade, indicating a mature but concentrated base. The prevalence of small-scale, lowerrisk-profile institutions also explains Vietnam’s continued use of a flat-rate premium, another factor
contributing to partial IADI compliance, which favors risk-based schemes for greater alignment with
institutional risk.
5.1.2. Premium System and Financial Management
a. Premium Structure
30
The current deposit insurance premium mechanism is the flat rate mechanism (the premium is 0.15% per
year calculated on the entire average deposit balance of individuals in Vietnamese dongs at the insured
institutions), applied since the establishment of the DIV until now. This rate is applied uniformly across
all participating institutions. In addition, DIV exempts deposit insurance premium as prescribed for
insured institutions under specially controlled; promptly answer and handle arising problems in order to
minimize late, excess and underpayment of deposit insurance premium. This is also a source of revenue to
help the DIV's professional reserve fund to grow steadily. By the end of June 30, 2023, the technical
reserve fund was more than VND 96 trillion, which increased by about 16% compared to the same period
in 2022. With the financial resources accumulated year by year, the DIV may be ready to reimburse
depositors when necessary for small and medium-sized insured institutions, effectively participating in
the process of restructuring the credit institutions system.
According to the 2024 Law on Credit Institutions, DIV may need to propose increasing insurance
premiums to compensate for special loans from SBV if its reserve funds are insufficient to cover
depositor claims in insolvency cases. This new measure requires further research and regulatory
adjustments to define the authority and procedures for premium increases.
b. Financial management
According to Article 13 of the Law on Deposit Insurance (2012), the Deposit Insurance of Vietnam (DIV)
is responsible for managing and preserving the deposit insurance fund, with permission to use idle funds
for (i) purchasing government bonds, (ii) buying treasury bills from the State Bank of Vietnam (SBV),
(iii) depositing at the SBV, and (iv) purchasing long-term bonds issued by supporting credit institutions
under SBV guidance. While these provisions have existed since 2012, DIV had primarily focused on lowrisk instruments like government bonds and SBV deposits until recent years.
Following the issuance of Decision No. 689/QĐ-TTg in June 2022, which laid out the roadmap for
restructuring credit institutions and handling bad debts through 2025, DIV was formally assigned the task
of studying and preparing for a more active financial support role, including the potential use of long-term
bond purchases. Although this decision did not immediately change DIV’s legal authority, it set the stage
for operational changes.
In 2023, DIV began implementing this direction in practice by participating in the SBV-led effort to
support weak credit institutions through long-term bond investments — a significant shift in investment
strategy. This practical move not only aligned with the national restructuring roadmap but also anticipated
the broader institutional role to be solidified in the 2024 Law on Credit Institutions.
By the end of 2023, DIV had cumulatively invested 106.487 trillion VND of idle funds, up 15.05% from
2022. In that year alone, 16.136 trillion VND was newly invested, exceeding the planned target by 8.8%.
Investment returns reached 4.068 trillion VND, slightly above the annual plan. This flexible and
diversified investment approach has enhanced DIV’s financial strength while maintaining safety and
liquidity.
5.1.3. Payout Process
The insurance payout includes both principal and interest for all insured deposits up to the insurance limit
defined in Article 24 of the Law. For joint accounts, the payout is divided according to the agreement of
the co-owners. If no agreement exists, the payout will be governed by legal provisions. Claims will be
adjusted if the depositor has any outstanding debts with the insured institution.
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According to Article 26 of the Deposit Insurance Law, the payout process must begin within 10 working
days from the moment the obligation to pay insurance arises. The institution participating in deposit
insurance must submit a request for payment, including a list of insured depositors, their deposit balances,
and the proposed amount of insurance to be paid, within this period. After receiving the request, the
deposit insurance organization has five working days to review the documents and verify the amounts.
After verification, the deposit insurance organization must have a plan to pay the insurance within 10
working days. They must also publicly announce the location, time, and method of payment in three
consecutive editions of one central and one local newspaper, as well as one Vietnamese e-newspaper. The
list of depositors receiving the payout must be posted at the announced locations.
Upon receiving the insurance payment, the depositor must present documents proving legal ownership of
the insured deposits at the participating institution. The deposit insurance organization may directly pay
the insurance to the depositor or authorize another participating institution to do so. After a period of 10
years from the date the deposit insurance organization has announced the first time the payment of
premium, the unclaimed premium shall be established the state ownership and added to the operating
capital of the deposit insurance organization. The person who has the ownership of the insured deposit
shall not have the right to request the deposit insurance organization to return that premium.
5.2. Challenges & Shortcomings
After 26 years of operation, the Deposit Insurance of Vietnam (DIV) faces pressing challenges in adapting
to a rapidly evolving financial landscape. A major concern is the absence of an officially promulgated
Deposit Insurance Development Strategy, which is increasingly urgent both legally and practically. The
global context—including post-COVID economic volatility, heightened indirect investment flows, rising
foreign debt, and the liberalization of financial services—places additional pressure on domestic financial
institutions to enhance service quality, operational efficiency, and competitiveness.
Vietnam's deepening international integration and increasing competition for foreign direct investment
(FDI) highlight the need for DIV to strengthen its institutional capacity. This includes expanding its legal
mandate, upgrading its financial strength, and professionalizing its operations to effectively respond to
potential systemic risks in the banking sector. Moreover, challenges persist in improving the efficiency of
deposit insurance payouts, particularly in reducing claims processing time to better protect depositors
during crises.
5.3. Reforms
To address these challenges, the State Bank of Vietnam (SBV) and the government have introduced a
series of reforms. Article 13 of the Law on Deposit Insurance (2012) mandates that deposit insurers
develop a development strategy, subject to SBV approval. In line with this, Decision No. 986/QĐ-TTg
(2018) outlines the Strategy for the Development of the Banking Sector until 2025 with a vision to 2030.
This strategy emphasizes transparency, technological advancement, risk control, and sustainable banking
practices, with DIV positioned as a state-owned institution responsible for depositor protection and
financial stability.
DIV’s mandate has gradually expanded. Although the Law on Deposit Insurance (2012) already allowed
DIV to use idle funds for purchasing long-term bonds of supporting credit institutions under SBV
guidance, this tool was only utilized in practice in 2023—marking a strategic shift toward more active
involvement in bank restructuring.
Further support came from Decision No. 689/QĐ-TTg (2022), which approved the “Project on
Restructuring the System of Credit Institutions associated with Non-performing Loan Settlement for the
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2021–2025 Period.” While the decision does not directly assign new legal powers to DIV, it sets a
roadmap that requires agencies like DIV to review, amend, and supplement the Law on Deposit
Insurance, enabling it to participate more effectively in the restructuring of weak institutions.
To improve payout efficiency, DIV has also undertaken internal reforms, including the development of a
deposit insurance reimbursement handbook, and simulation exercises for large-scale reimbursement
operations. The goal is to reduce claims processing time to 30 days by 2025 and 15 days by 2030,
aligning with international best practices in protecting depositor interests.
C. CONCLUSION
Deposit insurance has significantly shaped Vietnam’s commercial banking landscape by enhancing
stability, fostering public trust, and supporting systemic reforms. Established in 1999 through the Deposit
Insurance of Vietnam (DIV), this mechanism has evolved to protect depositors, with coverage limits
rising from VND 30 million to VND 125 million by 2021. Its influence on commercial banking is evident
in several major changes. Firstly, it has bolstered depositor confidence, reducing the risk of bank runs and
encouraging greater use of banking services, which strengthens the financial system’s stability. Secondly,
it has facilitated banking sector reforms by aiding the restructuring of weaker institutions, creating a
healthier competitive environment for commercial banks. Thirdly, mandatory participation ensures all
banks contribute to a safety net, though the flat-rate premium of 0.15% has raised concerns about moral
hazard, where banks might take excessive risks knowing depositors are protected. Lastly, deposit
insurance mitigates systemic risks during crises, such as the 1997-1998 Asian Financial Crisis, ensuring
smoother operations for commercial banks.
The document primarily details the history, rationale, regulations, and reforms of deposit insurance, with
its effects on commercial banking being indirect but substantial. DIV’s role in protecting 91% of
depositors by 2021, supporting financial inclusion, and aligning with national banking strategies
underscores its importance. However, challenges like the exclusion of foreign currency deposits, limited
enforcement mechanisms, and a uniform premium system highlight areas needing improvement.
Looking forward, the future outlook is promising, with planned reforms poised to enhance commercial
banking further. Transitioning to a risk-based premium system, researched since 2019 with international
collaboration, could incentivize safer banking practices. Improving payout efficiency to 15 days by 2030
through digitalization would boost depositor trust, benefiting banks’ deposit bases. Expanding DIV’s
mandate to handle systemic risks and amending the Law on Deposit Insurance to address regulatory gaps
would provide a more stable and predictable environment for commercial banks. Additionally, increasing
public awareness and aligning with global standards, such as those from the International Association of
Deposit Insurers (IADI), could elevate the sector’s credibility and attract investment.
Recommendations include supporting these reforms to ensure long-term stability and growth.
Policymakers should prioritize legal updates and risk-based premiums, while bank leaders should
advocate for faster payouts and public education. Together, these efforts will strengthen Vietnam’s
commercial banking sector, making it more resilient and competitive in an evolving financial landscape.
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thuvienphapluat.vn. https://thuvienphapluat.vn/van-ban/Tien-te-Ngan-hang/Nghi-dinh-89-1999-NDCP-bao-hiem-tien-gui-45666.aspx
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Nam & Thế Giới. https://vneconomy.vn/gui-ngoai-te-co-the-khong-duoc-bao-hiem.htm
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Ngân Hàng. https://tapchinganhang.gov.vn/nhan-dien-vai-tro-cua-to-chuc-bao-hiem-tien-gui-trongnen-kinh-te-1943.html
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Gửi Việt Nam. https://www.div.gov.vn/raising-deposit-insurance-coverage-limit-enhancing-depositorprotection-en
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24. Sửa đổi, bổ sung Luật Bảo hiểm tiền gửi – Yếu tố quan trọng hoàn thiện cơ sở pháp lý triển khai
chính sách bảo hiểm tiền gửi tại Việt Nam. (2025). Bảo Hiểm Tiền Gửi Việt Nam.
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hiểm tiền gửi. Thời Báo Tài Chính Việt Nam. https://thoibaotaichinhvietnam.vn/hoan-thien-co-sophap-ly-de-phat-huy-hieu-qua-chinh-sach-bao-hiem-tien-gui-139582-139582.html
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31. Wikipedia Contributors. (2019, October 19). Deposit insurance. Wikipedia; Wikimedia Foundation.
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32. DIV Annual Report 2021. (2021, December 31). https://div.gov.vn/an-pham-cat-126
33. DIV Annual Report 2022. (2023, December 29). https://div.gov.vn/an-pham-cat-126
34. DIV Annual Report 2023. (2024, November 7). https://div.gov.vn/an-pham-cat-126
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