The People’s Court in Hanoi City suddenly called off the hearing of the OceanBank corruption case on Tuesday, nearly two weeks after its opening, and the judges ordered investigative agencies to gather more evidence to clarify violations in the case. Initial findings at the hearing, however, reveal how irregularities have taken place in the banking industry given the loose supervision by the monetary regulator, and how certain leaders of State enterprises have managed to fish in troubled waters.
The hearing began on February 27 to look into accusations of “violating regulations in credit organizations’ lending activity; abuse of power on public duty; and intentional violations of State regulations” that occurred at OceanBank that caused huge losses of State assets, especially the loss of VND800 billion in paid-in capital as a stake held by Vietnam Oil and Gas Group (PVN) in the bank. Numerous illegal tricks have been uncovered during the court hearing.
As reported in local media, irregularities took place at the bank during a long period since 2009. Court documents point out that as the bank wanted to boost capital mobilization, Ha Van Tham, the then chairman, colluded with then CEO Nguyen Xuan Son of the bank to offer extra interest under the counter on top of the highest permissible interest rate set at 14% a year by the central bank for all major depositors. The extra interest was not stated in the deposit certificates and between 2010 and November 2014, the total sum used to pay extra interest under the counter amounted to as much as VND1.6 trillion, or roughly US$80 million based on the then exchange rate, Tuoi Tre reports.
Since the State Bank of Vietnam’s ceiling interest rate regulation at the time was legally binding, and any breach of the rule would lead to harsh penalties, OceanBank leaders managed to find legal loopholes to pay extra money for its privileged customers. Ha Van Tham established a company named BSC Vietnam, which provided services for those people wanting to take out loans from OceanBank. The fees charged on such customers contributed to a fund used to pay extra interest.
Nguyen Xuan Son, a representative of PVN who was sitting on the board of the bank and serving as OceanBank CEO, took VND69 billion from BSC, which was a sign of abusing power to appropriate assets, says Vietnamnet.
Between 2011 and 2014, hundreds of organizations and thousands of individuals had received huge extra interest from OceanBank. Therefore, the court decided to halt the hearing to find out who benefited from the illegal interest rate policy of the bank, Vnexpress reports, referring to the court’s decision. The court’s judges suggested that “there are signs such organizations conspired with OceanBank to receive those sums as illegal gains,” according to Tuoi Tre.
Despite the court’s documents lay special emphasis on the illegal interest rate policy at OceanBank, Nguyen Xuan Son denied such policy, explaining that extra interest payments were part of the bank’s customer care program.
A big question that the court wants to look into is the list of individuals and organizations benefiting from this interest rate policy, and this is also the key reason behind the decision to call off the hearing.
As the case unfolded at the hearing, all the extra interest sums were not stated in the deposit contracts, nor manifested in any book-keeping documents of organizations that deposited money at the bank. That means such huge interest sums may have been taken by certain individuals at such organizations.
The news magazine Thoi bao Kinh te Sai Gon remarks that the illegal practice of paying extra interest under the counter was commonplace a few years back. To find a legal reason to pay it, banks could sign other bogus contracts with special customers, such as money dealing or gold trading contracts, whereby such banks always incurred losses and customers earned profits. Such profit was in fact the extra interest for customers.
At the court, several defendants blamed the central State Bank of Vietnam’s inspectors for their failure to prevent such practices, according to Tuoi Tre. The central bank’s inspectors should have warned OceanBank of the illegal practice when paying extra interest. Defendant Nguyen Thi Nga, former chief accountant at OceanBank, even “accused” the State Bank of Vietnam for confusion in their policy, according to Tuoi Tre.
According to Thoi bao Kinh te Sai Gon, the illegal practice was known to many bankers at the time, and was nothing strange or abnormal. What is abnormal in the case of OceanBank is so many subsidiaries of PVN deposited money at this only bank.
“Not only one, two or three companies (under PVN), but scores of its subsidiaries have maintained tens of trillions of Vietnam dong in their OceanBank accounts,” says Thoi bao Kinh te Sai Gon. According to the paper, the big question is why such companies chose OceanBank to deposit money while the ceiling interest rate was the same at 14% at all other banks, many of which were far bigger and much more prestigious than OceanBank.
The public is awaiting an answer from the court, ponders Thoi bao Kinh te Sai Gon.
The court hearing will resume when evidence of irregularities is further gathered, and culprits are convicted. But the case is also a wake-up call. In the case of OceanBank, many have fished in troubled waters, so the central bank as the supervisor of credit organizations must ensure that such troubled waters cannot exist.