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Saturday, June 22, 2024

Doubtful cures for ailing banks

By Luu Minh Sang

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Scandals related to Vietnam Construction Bank (VNCB) and Saigon Joint-stock Commercial Bank (SCB) could be seen as the most devastating ones in Vietnam’s banking history in terms of the loss of money. There are similarities in both cases that point to loopholes in the country’s mechanism to deal with ailing banks. Measures to restructure ailing banks stem from the Law on Credit Organizations, the schemes to periodically restructure the banking industry approved by the Prime Minister, and policies to restructure banks in each specific case. Restructuring can be performed under the following measures: 1/ The State Bank of Vietnam (SBV) directs self-restructuring plans via capital injection, bad debt settlement, with the collaboration of another healthy credit organization alongside other support measures; 2/ Seeking external resources via mergers and acquisitions, transfers of all shares and stakes; and 3/ Compulsory transfer of the ailing bank to another bank or another legal entity. Both VNCB and SCB have been restructured in accordance with the second measure. VNCB was associated with the restructuring of TrustBank via the transfer of stakes from Phu My Group of investors (represented by late banking executive Hua Thi Phan) to another group of investors headed by Pham Cong Danh […]
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