Vietnam is mulling over controversial regulations to only insure deposits in domestic currency as part of struggle to prevent the dollarisation of the economy.
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| Deposits in USD and gold may not be insured |
The State Bank of Vietnam (SBV) submitted the proposed Law on Deposits to the National Assembly’s Standing Committee for consideration for the first time on October 12.
According to SBV’s Governor Nguyen Van Binh, the hoped regulation would only provide insurance for individual deposits in VND, not households, private firms and joint ventures.
Binh explained that the regulation was part of the Government’s attempt to eliminate the use of the US dollar in everyday transactions.
However, some NA deputies recommended insuring deposits in foreign currency, gold and precious metals to ensure banking security as currently large deposits in foreign currency held by commercial banks have yet to be insured.
Phung Quoc Hien, Chairman of the National Financial Supervisory Commission (NFSC), said overseas workers often send money to their homes in dollars and other foreign currency. If their money is not insured, it would affect their interests, he noted.
“Fighting dollarisation is the responsibility of state agencies. In order to ensure equal rights for deposits, there should be a regulation that money withdrawn in Vietnam must be converted into VND for circulation,” Hien recommended.
SBV Governor Nguyen Van Binh disagreed with Hien’s viewpoint, saying that it’s not in line with international rules.
“Currently, Vietnamese people habitually deposit and borrow in foreign currency. In the time to come, measures should be taken to encourage the buying and selling of foreign currency instead. This means that individuals and enterprises having foreign currency must sell it to banks and buy it back when having demand,” Binh emphasised.
According to Binh, confidence among Vietnamese depositors was not based on fears of insurance but on Government policies and the domestic financial environment. The drafting of the proposed law was aimed to help local citizens gradually accept international norms.
NA’s Vice Chairman Nguyen Thi Kim Ngan concluded that insurance on deposits should comply with the practical reality of the country’s economy. Regulations on insured deposits should not only be made to prevent a possible domino collapse of the banking system. If such a disaster occurs, the SBV would help, in addition to the Deposit Insurance of Vietnam, she added.
