On April 11, 2024, Vietnamese real estate tycoon Truong Mei Lan (center) looked on at the court in Ho Chi Minh City.
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Vietnam has launched an “unprecedented” rescue of Saigon Joint Stock Commercial Bank, which has been embroiled in the country’s biggest financial fraud, according to three bank documents and new official information provided to Reuters by a person familiar with the matter.
According to new information provided by Reuters, “Without the loans, Standard Chartered Bank will collapse.” “If we continue to lend, the treasury will gradually become depleted.”
Reuters was not identifying the source more specifically due to the sensitivity of the matter.
The new information also said that this situation is “unprecedented” due to the large amount of cash injection, the complexity of the operation and the scale of existing and potential damage to Vietnam’s financial system.
Reuters was unable to determine whether other officials currently involved in overseeing Standard Chartered broadly share the conclusions about the impact on the treasury.
Vietnam’s public debt remained stable at 37% of gross domestic product last year, while the budget deficit widened slightly to 4.4% of gross domestic product. According to the central bank, foreign exchange reserves stood at about $100 billion at the end of the year. That’s up from about $90 billion at the end of October, according to data from the ASEAN+3 Macroeconomic and Research Office, an independent regional regulator.
Southeast Asian central banks have injected $24 billion in “special loans” to Standard Chartered Bank as of early April, according to a banking document seen by Reuters that provides a daily update on overall central bank capital injections since March 29. Condition.
Lending has slowed slightly over the past five months but has averaged more than $900 million per month, according to the documents, which were updated in the second document from March 15 to March 20 and in the third in November. Monthly updates are from October 2022 to October 2023.
The central bank did not respond to a request for comment on the rescue operation. The Treasury posed a question to the central bank. SCB initially told Reuters it would distribute the news agency’s request for comment but did not respond to a subsequent email. A Standard Chartered official declined to comment when contacted by phone.
Bank run after tycoon arrested
The State Bank of Vietnam’s previously unreported cash injection into Standard Chartered was equivalent to 5.6% of the country’s annual economic output and accounted for about a quarter of Vietnam’s foreign exchange reserves.
The central bank placed Standard Chartered Bank under supervision to prevent a run triggered by the arrest of real estate tycoon Zhang Meilan in October 2022. Since then, Standard Chartered has been using capital injections to cover cash withdrawals to account for the use of its loans, according to a bank document it sent to the central bank in November.
New official information from sources revealed that Standard Chartered Bank’s deposits plunged 80% to about $6 billion by December 2023 after the central bank intervened. At the current pace, Standard Chartered’s deposits could be exhausted by mid-year, with its nonperforming loans soaring to 97.08% of credit balances as of October.
Lan, whose arrest in October 2022 triggered a bank run, was sentenced to death on Thursday for orchestrating a fraud. She has pleaded not guilty to corruption and bribery charges for allegedly misappropriating $12.5 billion in loans from SCB to shell companies while effectively controlling SCB through agents.
A lawyer for Lan Chan, a well-known figure in Vietnam’s financial community, said she would appeal the decision by the Ho Chi Minh City People’s Court.
New information shows that despite official support, Standard Chartered continued to face liquidity problems as of December, sometimes struggling to settle payments on time when customers transfer money to other banks and to process payments through the country’s main clearing system. This affects the “psychology” of customers and creates risks for the entire banking and financial system, the report said.
As of April 2, Standard Chartered Bank has provided “special loans” of Rp 592.7 trillion ($23.72 billion) to Standard Chartered Bank, according to the latest information on the matter recently released by Standard Chartered Bank.
The figure was up from Rp 478 trillion at the end of October, according to a Standard Chartered document sent to the central bank. This represents a monthly injection of VND23 trillion ($910 million) since November.
The central bank initially injected an average of $3.7 billion per month in October and November 2022, and the pace has slowed to nearly $1.2 billion per month between then and October 2023, bank documents show.
Seek bank restructuring
Vietnam’s banking sector already faces greater risks from prolonged turbulence in the real estate sector. The fraud prosecution is part of the authorities’ “crucible” anti-corruption campaign, which triggered a housing crisis that weighed on the economy and clouded the outlook for banks.
Official media said that although the upper limit of foreign ownership in Vietnamese banks is 30%, the central bank and the government have repeatedly sought assistance from the private sector, especially foreign investors.
Late last year, the central bank tasked private real estate firm Sungroup to develop a plan to restructure Standard Chartered, according to new information from sources and three people familiar with the plan. Sungroup did not respond to a request for comment.
Reuters could not determine whether Sungroup’s plans had been approved.
Any restructuring plan depends on the appraisal of the real estate assets that Lang and his company used as collateral for the loans, but the legal status of those assets is often unclear because many are still seeking permits and some violate public lands or permits. regulations, based on new information.
Some of these assets include valuable properties in high-end areas of Ho Chi Minh City, but most are unfinished projects.
Representatives of the Lan family told Reuters this month that the Lan family has estimated assets of $30 billion, while Hoang Quan, a market valuation firm hired by the central bank, valued its assets at about $12 billion, according to public police documents in November. Lan’s alleged misconduct was described in detail.
Some of Lan’s Hong Kong business partners have expressed interest in the assets, Reuters reported earlier this month. They did not respond to requests for further comment on their interests in the assets following the verdict in Lang’s trial.
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