Vietnam can order strong banks to buy stakes in weak bank

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Vietnam's central bank will order lenders it qualifies as healthy to purchase stakes in weaker banks as the country accelerates efforts to clean up bad debt in its financial system.

The governor can appoint banks to invest in lenders that are under special surveillance by the State Bank of Vietnam, according to regulations posted on the authority's website today. The rules take effect Sept. 20.

Prime Minister Nguyen Tan Dung is stepping up efforts to rejuvenate an economy that last year grew at the slowest pace since at least 2005, as one of the highest bad-debt levels in Southeast Asia crimped credit to businesses. Vietnam last week began operating an asset management company to clean up bad debt at lenders.

If no strong banks meet the requirements stipulated by the central bank, the authority itself can purchase stakes in weak lenders. Divestments will occur when the banks' operations return to normal or when they are acquired or merged, according to the new regulation.

The central bank may assist the appointed banks through refinancing loans, special loans or by allowing them to operate under more lax requirements for a certain period of time.

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