Cross-ownership in Vietnam banks a headache seen from Van Thinh Phat-SCB scandal
The scandal surrounding real estate developer Van Thinh Phat Group and Saigon Commercial Bank (SCB) shows that violations in cross-ownership and cronyism have become complicated and increasingly sophisticated, posing a huge challenge for regulators when it comes to preventing businesses from controlling banking activities.
The investigative agency under the Ministry of Public Security has issued a conclusion on its investigation into the case of embezzlement; violating regulations on banking and other related activities; giving and receiving bribes; abusing positions and power while performing official duties; showing a lack of responsibilities causing serious consequences; and abusing trust for property appropriation at Van Thinh Phat, SCB and relevant units and organizations.
Truong My Lan, chairwoman of Ho Chi Minh City-based Van Thinh Phat, has been accused of controlling operations at SCB to appropriate over VND304 trillion ($12.53 billion).
The Ministry of Public Security's investigative agency also proposed prosecuting Lan for giving bribes, violating regulations on banking activities, and embezzlement.
According to the conclusion, from December 2011 to January 1, 2012, Lan held a 81.43% stake at SCB under the names of 32 shareholders; 98.74% of the shares in TinNghiaBank under the names of 36 shareholders, and a 80.46% stake at First Commercial Joint Stock Bank under the names of 24 shareholders.
The three banks were merged on January 10, 2012 under the name of Saigon Commercial Bank (SCB), and Lan asked 73 shareholders to hold 85.606% of SCB's shares on her behalf. She then bought more shares to increase her ownership ratio in the bank to 91.545% on January 1, 2018.
As of October 2022, SCB had a charter capital of VND15.23 trillion ($630 million) with a total of 4,129 shareholders recognized by the State Bank of Vietnam. In particular, Lan owned nearly 91.536% of the bank’s charter capital in the names of 27 legal entities and individuals. She directly owned 4.982%.
Lan did not hold a position at SCB but owned a controlling stake of 85% to 91.5% at the bank. With this stake, she arranged for people she trusted to be given key leadership positions on SCB’s board of directors and executive board, giving her control of all the activities at the bank.
Lan was accused of using SCB to raise capital, then directed her subordinates at the bank and Van Thinh Phat to prepare loan documents to take money from depositors, said investigators.
Cross-ownership problem difficult to solve
The SCB-Truong My Lan case will go down in the history of the banking industry as causing unprecedented losses.
Previous major bank manipulation cases such as OceanBank-Ha Van Tham, Vietnam Construction Bank (VNCB)-Pham Cong Danh, TrustBank-Hua Thi Phan, Southern Bank-Tram Be posted losses of only several to tens of trillions of Vietnam dong (VND1 trillion = $41.34 million), while the figure in this case reached hundreds of trillions, equivalent to 6% of Vietnam's GDP, larger than the combined assets of Vietnam's five dollar billionaires.
Speaking at a September 18 meeting of the National Assembly Standing Committee on cross-ownership and large shareholders’ control of banking operations, SBV Governor Nguyen Thi Hong said cross-ownership and cronyism are limitations facing the banking system.
Being aware of this problem, the Party Central Committee, National Assemby and Government have repeatedly asked for a legal framework on this issue, she said.
“There will never be a regulation that can thoroughly solve this problem. Instead, such regulation must be included in not only the Law on Credit Institutions, but also other legal documents to ensure transparency in the operations of banks, businesses and people,” she said.
Regarding a proposal to reduce the ownership ratio in a credit institution, Hong said that it is difficult to control the ownership ratio of individuals and businesses if they intentionally let others take the name. This needs the involvement of investigative agencies, she noted.
Major cases that have been brought to light show that an individual controlling a bank can have an "underground" ownership rate of up to 60-70%, and even over 90%. They sometimes do not directly hold any positions at the bank but make decisions about credit granting, lending activities, and improper use of capital. These violations often take place over a long period of time and are becoming increasingly complex and large in scale.
- Read More
2025 a turning point for Vietnam stock market: broker
Vietnam's stock market has struggled to capture the attention of both domestic and foreign investors in recent months, reflected by persistent foreign capital outflows and a steady decline in market liquidity, but next year will be a turning point for the market, says Chen Chia Ken, CEO of Phu Hung Securities JSC.
Finance - Wed, November 20, 2024 | 7:07 am GMT+7
Construction trio keen on building $1.5 bln expanded expressway in southern Vietnam
Three construction majors in Vietnam are interested in building an expanded expressway connecting Ho Chi Minh City with the Mekong Delta provinces of Long An and Tien Giang for an estimated VND38.6 trillion ($1.52 billion).
Infrastructure - Tue, November 19, 2024 | 8:18 pm GMT+7
Singapore, Germany upgrade relations to strategic partnership
Singapore and Germany have decided to elevate their ties to a Strategic Partnership to promote closer cooperation in areas of mutual interest such as security, artificial intelligence (AI) and clean energy.
Southeast Asia - Tue, November 19, 2024 | 8:01 pm GMT+7
Thailand’s rice shipment up 20% in 10 months
Thailand exported 8.37 million tons of rice in January-October, a year-on-year increase of 20%, according to the Ministry of Commerce.
Southeast Asia - Tue, November 19, 2024 | 8:00 pm GMT+7
Vietnam’s inconsistent legal framework poses problems for FDI sector: Deep C exec
Vietnam’s legal framework lacks consistency and the foreign direct investment (FDI) sector will soon face challenges related to the Law on Environmental Protection, says Bruno Jaspaert, CEO of Deep C Industrial Zones.
Economy - Tue, November 19, 2024 | 6:30 pm GMT+7
Vietnam shares sink on extended foreign selloffs
Vietnamese equities fell for a fourth consecutive day on Tuesday as foreign traders extended their selling spree.
Finance - Tue, November 19, 2024 | 5:10 pm GMT+7
Germany’s household product firm QuickPack to invest $32 mln in Vietnam
Germany’s QuickPack, a specialist for household goods and hygiene products, will invest €30 million ($31.8 million) in Vietnam’s Mekong Delta province of Long An.
Industries - Tue, November 19, 2024 | 4:24 pm GMT+7
Malaysian millionaire willing to invest in convicted Vietnamese tycoon’s property project: lawyers
Malaysian millionaire Vincent Tan has evinced investment interest in a residential project owned by convicted tycoon Truong My Lan, chairwoman of Van Thinh Phat Group, lawyers for the latter have disclosed.
Real Estate - Tue, November 19, 2024 | 4:17 pm GMT+7
‘Bottleneck of bottlenecks’ continues to dog Vietnam's property, infrastructure projects
Limited consultations between state agencies and the parliament’s primary focus on wording are issues with Vietnam’s legal framework adversely affecting property and infrastructure projects, say experts and corporate leaders.
Economy - Tue, November 19, 2024 | 3:40 pm GMT+7
President Xi Jinping hastens construction of 3 Vietnam-China rail routes
Chinese President Xi Jinping has called for more substantial cooperation between China and Vietnam, including the pacier implementation of three railway routes linking the two nations.
Infrastructure - Tue, November 19, 2024 | 3:08 pm GMT+7
Vietnam developers offer deferred principal payments, interest support to boost year-end sales
Vietnamese housing developers are offering several incentives including deferred principal payments and interest support to stimulate demand and boost liquidity as the year nears its end.
Real Estate - Tue, November 19, 2024 | 2:29 pm GMT+7
Australia's EQ Resources acquires TMG Group with Vietnam-based ferrotungsten factory
Australia-based EQ Resources Limited has acquired its fellow firm Tungsten Metals Group (TMG), which owns and operates the largest ferrotungsten (FeW) factory outside China.
Companies - Tue, November 19, 2024 | 11:00 am GMT+7
Techcom Securities becomes largest broker in Vietnam by capital base
Techcom Securities JSC (TCBS) has become the largest securities company in Vietnam by charter capital after finishing a rights offering last week.
Finance - Tue, November 19, 2024 | 9:11 am GMT+7
Vietnam airport operator ACV looks to better exploit non-aviation service potential: exec
Vietnam's airports operator ACV expects to earn $145 million from non-aviation services this year, accounting for around 18.83% of its total revenue, which is modest compared to other countries, said deputy general director Nguyen Duc Hung.
Companies - Tue, November 19, 2024 | 7:45 am GMT+7
The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment
A seminar themed “Removing legal bottlenecks for infrastructure and property investment” will be organized by The Investor in Hanoi on Tuesday.
Companies - Tue, November 19, 2024 | 7:00 am GMT+7
Indonesia promises Asia-Pacific investors more incentives
Indonesian President Prabowo Subianto recently told the press that he will create more incentives and expand special economic zones (SEZs) so as to lure investors from Asia-Pacific.
Southeast Asia - Mon, November 18, 2024 | 11:01 pm GMT+7
- Consulting
-
Remove roadblocks to lure foreign investment into Vietnam: HSBC exec
-
Rethinking resilience: How typhoon Yagi redefines supply chain strategies in northern Vietnam
-
In trade and investment, ASEAN and China are better together
-
AI can be a game changer for Vietnam tourism
-
Investment opportunities in LNG-to-power projects in Vietnam
-
Pepper prices 2024: will the dream of 'black gold' repeat?