The central bank has placed DongA, a mid-sized Vietnamese lender, under special supervision and announced the sacking of some of its executives for alleged management violations that affected the bank’s operations.
The State Bank of Vietnam said in a statement Friday that it would assign executives from BIDV, the country's largest partially private bank by assets, to take over the management to bring the bank back on track.
“Inspections have found many violations in financial and credit management at DongA in 2012 and before that, which have severely affected the operations of the bank.”
But it would make sure the management changes do not hurt the bank’s customers or partners, it said.
DongA also released a statement the same day guaranteeing normal operations.
The Ho Chi Minh-based lender, whose assets are valued at nearly VND90 trillion (US$4.07 billion), has been one of the best-performing banks in Vietnam during its 23 years in business, and one of the pioneers in automated banking services.
It was never part of the government’s plan to restructure the banking system until its 2014 financial report showed a 96 percent drop in profits from the previous year to a mere VND35 billion ($1.58 million).
The central bank’s announcement came shortly after the DongA’s CEO, Tran Phuong Binh, told the media that he is seeking government permission to sell 49 percent of his bank’s shares to foreign funds to raise money for restructuring. Vietnam currently caps foreign ownership of domestic banks at 30 percent.
Binh said the bank’s bad debts were at times as high as 6 percent of loans.
A lender comes under central bank supervision when its bad debts rise to 10 percent of loans, its losses are more than half of registered capital, or when it appears headed for insolvency.
Several banks have been placed under such supervision. While some like Eximbank have recovered and bounced back, others like Oceanbank were eventually taken over by the central bank.