VietBu want to use Ownself check Ownself to Huat Big Big…Dimji Jitao pookkai Liao

[k1976]

 

[k1976]

Bank Corruption Case Highlights Vietnam’s Supervisory Gaps, Underlines State Support​

Mon 06 May, 2024 - 11:33 PM ET


Fitch Ratings-Singapore/Hong Kong-06 May 2024: A landmark corruption case involving Saigon Joint Stock Commercial Bank (SCB) confirms the presence of financial supervisory shortcomings in Vietnam but does not present new contagion risks to the banking system, says Fitch Ratings. The banking sector’s ‘bb’ operating environment score has reflected Vietnam’s evolving standards of corporate governance and financial supervision.

The State Bank of Vietnam (SBV) continues to provide substantial liquidity support to SCB totalling over VND600 trillion (USD24 billion, equivalent to around 5.9% of GDP) since October 2022, according to Reuters reports, although it appears incremental support has shrunk in recent months. The need for large-scale support for SCB was already apparent in 2023, when SBV’s statistics on system non-performing loans implied most of SCB’s assets were impaired and the bank was insolvent.

Fitch believes SBV’s actions demonstrate its high propensity to provide support to systemically significant institutions, even when a bank’s stress results from its own governance failures. They reinforce our decision to upgrade the Government Support Ratings of all banks in Vietnam in November 2022, shortly after the run on SCB.

SCB is receiving support from SBV via special loans. At least part of these loans could be repaid eventually, particularly if SCB recovers assets from Truong My Lan, the businesswoman convicted for embezzling from SCB. They do not appear to constitute an explicit sovereign liability at this time, as central banks are not part of the consolidated government balance sheet. However, moves by the government to strengthen SBV’s capital position would have an impact on public finances.

We believe the release of further details regarding SCB in recent weeks has not created new contagion risks. We see no evidence of distress – such as sudden share price movements, deposit flight or regulatory response – in other systemically important Vietnamese banks.