Several Vietnamese private banks such as Sacombank, Techcombank, VietABank, National Citizen Bank (NCB) and Bac A Bank violated credit supply regulations in the 2013-2017 period, according to the Government Inspectorate.
Under current regulations, a customer is only allowed to borrow up to 15% of a credit institution's equity. However, the Government Inspectorate said, several banks granted excessive loans to a customer or project via several “independent customers” to circumvent the regulations. They also lent money to clients to contribute capital to subsidiaries and purchase stakes of project owners.
At Sacombank, the total outstanding loans of 16 customers as of December 31, 2017 was VND15.37 trillion ($648.88 million), which decreased to VND15.22 trillion ($642.38 million) by August 31, 2018.
Sacombank lent up to VND9.26 trillion ($391 million) or 48.52% of the bank's equity to nine businesses: Him Lam Thu Do JSC; Hong Bang Investment JSC; Bao Loc Investment and Construction JSC; Nam Thang Investment, Trading and Service JSC; Cong Phuc Construction JSC; Bao Tin Infrastructure JSC; Viet Phu My Investment and Construction JSC; Viet Ha JSC; and Hiep An JSC.
These enterprises borrowed capital that was eventually invested in the same project - Saigon Binh An Urban Area.
The businesses did not directly implement the project, but borrowed money to transfer to a third party through signing a principle contract on the transfer of subdivisions under the project.
Sacombank only appraised the financial capacity of the borrowers instead of the project developers. This created potential risks for the bank. Meanwhile, the project faced land-related legal issues and increasing interest expenses, affecting the lender’s credit quality and business results.
As of August 31, 2018, Techcombank had lent VND34.2 trillion ($1.44 billion) to 19 customers, which accounted for 20% of their total outstanding loans.
This bank also gave loans to and bought corporate bonds of seven clients with a total balance of over VND20.1 trillion ($848.46 million).
The Government Inspectorate found that Techcombank had appraised and approved the loans on the basis of unsuitable information and data on the loan plans. Its appraisal was "incomplete, ungrounded and inaccurate".
The bank disbursed money even before transfer conditions were met and after in-principle agreements had expired.
Similar violations were made by in BacABank, NCB and VietABank, who lent to customers even when they failed to meet lending conditions, the inspectorate found.