1. 1 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 ENHANCING THE EFFECTIVENESS OF THE FINANCIAL SUPERVISORY SYSTEM OF VIETNAM Pham Phan Dung General Director Banking and Financial Institutions Dept. Ministry of Finance, Vietnam Pham Phan Dung General Director Banking and Financial Institutions Dept. Ministry of Finance, Vietnam

2. 2 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 CONTENT Part I: The necessity to improve the financial supervision system capacity in Vietnam Part II: Orientation of determining the supervision model of the financial system in Vietnam Part III:Roles and functions of DIV in the national financial supervision system

3. 3 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 CONTENT Part I:The necessity to improve the financial supervision system capacity in Vietnam 1.1Introduction on the current supervision operation of the financial system in Vietnam 1.2The fast moving financial market 1.3Requirement of developing a market economy with Socialist orientation 1.4The necessity to renovate supervision operation in accordance with international standards

4. 4 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 1.1 Introduction on the current supervision operation of the financial system in Vietnam Supervision agency operates as policy maker and license issuer A financial institution is subject to more than one supervision agency Each supervision agency only functions in designated area Lack of cooperation between supervision agency Lack of transparency, less effectiveness on overall supervision and early warning, creating burden to financial institutions

5. 5 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 1.2 The fast moving financial market The Trend of mobilizing fund via financial market Increase of systemic risk and effect to the national economy

6. 6 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 1.3 Requirement of developing a market economy with Socialist orientation The commitment of the Government of Vietnam in the renovation process toward market economy Renovating principles: State Management based on the law and regulation system. The economy develop under market disciplines Continuing and unique policy: avoid overlapping, clear cut between responsibility of policy maker and supervisory function

7. 7 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 1.4 The necessity to renovate supervision operation in accordance with international standards The effectiveness of consolidate supervision system The trend of establishing consolidate supervision system in economic transformed countries and countries effected by the financial crisis

8. 8 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 Contents Part II:Orientation of determining the supervision model of the financial system in Vietnam 2.1Government Orientation 2.2Types of financial supervision agency 2.3Determine mandate and function of financial supervision agencies in Vietnam

9. 9 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 2.1 Government Orientation Enhancing the effectiveness of financial market supervision, focus on the interaction between the monetary market and capital market Set up an appropriate supervisory mechanism Establish a general financial market supervision agency

10. 10 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 2.2 Types of financial supervision agencies Centralized model: Japan Korea U.K Diversified model: China Australia

11. 11 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 Issuing license Mandate & Function Determine process & Standards Supervision and examination Enforcement of violations and claims settlement Maintain the stability of financial market 1- Maintain the stability and sustainable development of the financial market 2- Protect the interest of market players 1- Maintain the stability and sustainable development of the financial market 2- Protect the interest of market players Objectives 2.3 Determine mandate and function of financial supervision agencies in Vietnam

12. 12 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 CONTENTS Part III Roles and functions of DIV in the national financial supervision system 3.1Function and position of DIV in the financial supervision system 3.2Comments on the development of DIV

13. 13 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 3.1 Roles and functions of DIV in the national financial supervision system DIV is a component of the financial market and national financial supervision system Right to carry out examination of DIV Right to carry out supervision of DIV Mobilizing fund for claim payment

14. 14 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 3.2 Comment on strategic development of DIV DIV to clearly determine the role and function in the national supervision system Propose the Government to formulate the Law on Deposit Insurance Improve the organizational structure, human resource and financial capacity Diversify services and products, modernizing operation Best protect depositors, contribute to maintain the stability of the financial system in accordance with international standards

15. 15 International Conference on Enhancing the Effectiveness of Deposit Insurance Operation, Hanoi March, 2007 Thank You ! PhamPhanDung@mof.gov.vn