Bui Khac Son General Director Deposit Insurance of Vietnam

1. ENHANCING THE LEGAL FOUNDATION FOR DEPOSIT INSURANCE OPERATION IN THE NATIONAL FINANCIAL SAFETY NET Bui Khac Son General Director Deposit Insurance of Vietnam International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

2. CONTENT PART I: FINANCIAL MARKET AND ITS SUSTAINABLE DEVELOPMENT PART II: NATIONAL FINANCIAL SAFETY NET PART III: LEGAL POSITION OF DEPOSIT INSURER IN THE NATIONAL FINANCIAL SAFETY NET PART IV:ENHANCING THE LEGAL FOUNDATION FOR DEPOSIT INSURANCE OPERATION PART V: CONCLUSION International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

3. PART I: FINANCIAL MARKET AND ITS SUSTAINABLE DEVELOPMENT International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

4. FINANCIAL MARKET AND ITS SUSTAINABLE DEVELOPMENT 1.1. Development trend of financial market 1.2. Ensure the sound and sustainable development of financial market International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

5. Development trend of financial market • Economic and financial interaction and dependency among countries in the region • Financial crisis in 1997-1998: causes and effects • Competition trend among world economies • The combination between banking and insurance industry • IT and communication revolution International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

6. Ensure the sound and sustainable development of financial market • Legal foundation: legalize the relation among regulators; relation between regulators and financial institutions • International standards on accounting and auditing system, risk management • Protection of consumers, investors and depositors International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

7. PART II: NATIONAL FINANCIAL SAFETY NET International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

8. NATIONAL FINANCIAL SAFETY NET 2.1. Concept and operational model 2.2. Role, function and responsibilities 2.3. Coordination between the participants of the Financial Safety Net 2.4. Set up the technical infrastructure International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

9. Concept and operational model Financial Safety Net Deposit Insurer Central Bank Ministry of Finance Other supervisory Agencies Firm legal foundation, clear division of roles and responsibilities and effective coordination mechanism International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

10. Role, function and responsibilities • Mission • Objective • Instruments • Strategies International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

11. Financial Regulators and Integrated supervision system Central Bank Deposit Insurer Ministry of Finance Country risks Consumer protection Depositor protection Systemic Supervision/Monitoring Capacity i. Administrative and Technical Structure ii. Offsite supervision and rating system iii.Onsite examination & institutional building iv. Enforcement Capacity Coordination between the participants of the Financial Safety Net International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

12. Set up the technical infrastructure Financial services provider Central Bank TCP/IP Data sharing Ministry of Finance Deposit Insurer Data sharing Data sharing International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

13. PART III: LEGAL POSITION OF DEPOSIT INSURER IN THE NATIONAL FINANCIAL SAFETY NET International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

14. LEGAL POSITION OF DEPOSIT INSURER IN THE NATIONAL FINANCIAL SAFETY NET 3.1 Model and mandates of deposit insurer 3.2 Scope of operation International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

15. Models of deposit insurers • Pay-box • Pay-box with extended functions • Risk minimizer Risk minimizer Pay-box with extended functions Pay-box International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

16. Scope of operation • Types of insured deposit • Identify the insured organizations • Commercial banks, • Cooperative banks, • Wholesale banks, • Financial companies, • Insurance companies, • Securities companies. • The function of risk-minimizer International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

17. PART IV: ENHANCING THE LEGAL FOUNDATION OF DEPOSIT INSURANCE OPERATION International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

18. ENHANCING THE LEGAL FOUNDATION OF DEPOSIT INSURANCE OPERATION 4.1 Objectives of National financial safety net 4.2 Enhancing the legal foundation of deposit insurance operation International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

19. Function of National financial safety net • Ensure the sound and sustainable development of the financial system; • Best protecting the consumers, investors and depositors; • Minimize the use of state budget to resolve the failed institutions • Restructure the financial system; Managing effectively the supervisory operation. • Enhance the cooperation between Central Bank, Ministry of Finance, Deposit Insurer and State securities commission International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

20. Enhancing the legal foundation of deposit insurance operation • The Law on deposit insurance • Identify and determine the functions and mandates • The independence status of deposit insurer • Synchronization of legal documents related to deposit insurance operation • Enhancing the legal capability of deposit insurer in conjunction with the capacity building and financial capability International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

21. PART V: CONCLUSION International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

22. CONCLUSION 5.1 Enhancing the legal foundation of deposit insurance operation 5.2 Proposal on enhancing the legal foundation of DIV International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

23. Enhancing the legal foundation of deposit insurance operation • The coordination of National Assembly, Government, Ministry of Finance, Central Bank and Deposit Insurer. • Deposit Insurer is an independent organization, with the mandates to protect the depositors and stabilize the financial system • Adopt the international standards in financial sector and recommendations of IADI International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

24. Proposal of Enhancing the legal foundation of DIV • Formulating the Law on deposit insurance in conjunction with the Law of State Bank, Law on credit institutions, Law on insurance, Law on Security and Consumer protection Law • Improving the financial capability, human resources, IT infrastructure of DIV. • Coordination between DIV with other supervisory agency pursuant to the Law on deposit insurance International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007

25. Thank You ! sonbui@div.gov.vn International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007