Vietnam mounts ‘unprecedented’ $24 bn rescue for bank engulfed in fraud
Hanoi, 17 April
Vietnam has mounted an “unprecedented” rescue of Saigon Joint Stock Commercial Bank (SCB), a lender engulfed in the nation’s biggest financial fraud, according to three bank documents and new official information provided to Reuters.
“Without lending, SCB will collapse,” according to the new information provided to Reuters. “If the lending continues, the national treasury will gradually dry up.”
The new information also described the situation as unprecedented for the massive volume of the cash injections, the complexity of the operation and the scale of existing and potential damage to Vietnam’s financial system.
Vietnam’s public debt was stable last year at 37 per cent of gross domestic product (GDP), while the budget deficit widened slightly to 4.4 per cent of GDP. Foreign reserves were $100 billion at the end of the year, up from $90 billion at the end of October.
As of the start of April, Vietnam’s central bank had pumped $24 billion in “special loans” into SCB. Lending has slowed slightly but averaged over $900 million a month in the past five months.
The central bank did not reply to requests for comment. The finance ministry referred a question to the central bank. SCB initially told Reuters it would circulate the news agency’s request for comment, but did not respond to subsequent emails. An SCB official declined to comment.
The State Bank of Vietnam’s previously unreported cash injections into SCB amount to 5.6 per cent of the nation’s annual economic output, or about one-fourth of Vietnam’s foreignexchange reserves.
The central bank placed SCB under its supervision to stem a run on the bank sparked by the October 2022 arrest of real estate tycoon Truong My Lan. Since then, SCB has been using the injections to cover cash withdrawals.
After the central bank stepped in, SCB’S deposits plunged 80 per cent to about $6 billion by December 2023. SCB could run out of deposits by mid-year at the current pace, and bad loans had surged to 97.08 per cent of SCB’S credit balance as of October.
Lan, the tycoon whose October 2022 arrest sparked the bank run, was sentenced to death on April 11,2024 after being found guilty of masterminding the fraud. She had pleaded not guilty to embezzlement and bribery.