In a move to improve depositor protection, the State Bank of Vietnam (SBV) has amended the Law on Deposit Insurance to grant Deposit Insurance of Vietnam (DIV) more power.

Regulators identified several limitations in the existing framework that need addressing to improve the efficacy of deposit insurance policies and support the stability of Vietnam's credit institution system.

A key element of the amendment focuses on expanding investment opportunities for the DIV.

Currently restricted to government bonds, SBV bills, or deposits at the central bank, the DIV would likewise take the helm in the purchase of long-term bonds issued by credit institutions undergoing compulsory transfers.

This change intends to address the agency’s financial setback regarding its declining yields despite allocating 99% of its temporarily idle capital to government bonds, which severely impacted the investment returns.

The DIV's profitability plummeted from 9.41% in 2013 to just 3.82% in 2023, limiting its ability to build financial reserves needed for protecting depositors.

The SBV's proposal also recommends giving the DIV greater input in establishing deposit insurance payment limits for people's credit funds and other financial institutions.

In addition, the amendments would introduce new regulations for managing investment risks, with the government tasked with defining specific criteria for investment portfolios, structures, and methodologies.

These amendments aim at strengthening the agency’s financial safety net as the local banking sector continues to develop and integrate with global financial markets.

Will these changes strengthen the agency’s financial performance? Share your thoughts below.