Truong My Lan’s death sentence and Vietnam’s anti-corruption drive

What’s been the fallout?

SCB, Vietnam’s largest by assets, misled 83-year-old Ho Thi Le Hang into buying fraudulent bonds under Lan’s Van Thinh Phat Holdings Group. 

One of an estimated 42,000 victims, Hang hopes to get back the US$500,000 – all of her life savings, raised from selling two plots of her ancestors’ land – she parted with. While some bond issuers have defaulted their debt obligations, the rest of the bonds have been frozen.

After Lan’s arrest in October 2022, Vietnam’s central bank placed SCB under special supervision to stop a run – that is, customers were withdrawing their money in fear of the commercial lender’s potential failure.

This week, it was reported that the central bank had pumped US$24 billion in special loans as of the beginning of April, in a bid to prevent SCB from collapsing. That’s equivalent to one-fourth of the country’s foreign exchange reserves.

Meanwhile, insiders have expressed concerns over how underlying problems in Vietnam’s banking sector have gone unnoticed. 

From 2012 to 2020 SCB passed, without red flags, audit checks by local offices of top global firms including Ernst & Young, Deloitte and KPMG. Yet after Lan’s fraud was exposed, separate audits showed more than US$18 billion in accumulated losses.

Her case has also highlighted the issue with “cross-ownership” in Vietnam’s banking sector, where private businesspeople – including real estate developers like Lan – also hold key positions at commercial banks, effectively using them as personal ATMs.

“Financial institutions need to put an end to the practice of providing loans to specific companies, projects in its own ecosystem or backyard firms under the same group that would endanger the healthiness and safety of the bank,” Vietnamese Prime Minister Pham Minh Chinh said in December.

Vietnam has since amended laws to strengthen shareholder limits at banks. But experts say regulation alone is not enough in the absence of effective enforcement.

“There is no guarantee that it will be the last case … Violators have bypassed the laws easily,” Dr Nguyen Tri Hieu, a banking insider, told CNA. “I am not surprised at the fraud. But I am surprised at the magnitude of it.” 

SOURCE: CNA (Channelnewsasia.com) RSS Latest News   (go to source)
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