The State Bank of Vietnam on Friday allowed a merger between troubled lender Habubank and the Saigon-Hanoi Commercial Joint Stock Bank.
The deal represents the central bank's first step in a plan to manage weak lenders this year.
The merger was proposed by the banks themselves and official documents are still pending final approval, the central bank said in a statement.
Habubank shareholders voted for the merger at the end of April. One week later, shareholders at Saigon-Hanoi Bank, or SHB, agreed to the plan. Habubank officials said the asset quality of the lender has deteriorated since 2011. Bad debts reached a peack of 16.06 percent of total loans at the end of February, according to local media.
The new bank, which is expected to take the name of SHB, will have a combined registered capital of nearly VND9 trillion (US$432.5 million) and total assets worth more than VND100 trillion.
Both of the lenders are still listed as individual banks on the Hanoi Stock Exchange.
The State Bank of Vietnam has said it plans to restructure nine weak lenders by the end of June and has urged banks to come up with restructuring plans before it intervenes.
Last year the central bank approved the mergers of three lenders Ficombank, Vietnam Tin Nghia and Saigon Commercial Bank, which faced liquidity problems.
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