Crackdown may slow Vietnam banking processes: S&P

Vietnamese bank’s failure reveals corruption, fraud and violations in sector.

The failure of Saigon Commercial Bank (SCB) is shedding light on corruption, fraud, and regulatory violations within Vietnam's banking sector, as highlighted by S&P Global Ratings.

"The event has revealed both significant lapses in corporate governance at the lender, and decisive action by the central bank to take extraordinary measures to maintain stability in the sector," said S&P Global Ratings credit analyst Ivan Tan.

In April 2024, real estate developer Truong My Lan was convicted of fraud spanning nearly a decade, involving systematic fund diversion from SCB through accomplices and loans to related entities.

Tan notes the central bank's swift response, which placed SCB under state control, curbing a potential run on the institution and preserving depositor confidence.

A flight-to-quality ensued, with deposits moving to larger, state-owned banks, but crucially, maintaining stability within the banking sector, S&P Global’s "Your Three Minutes In Vietnamese Banking: Effects Of SCB Failure Reach Far” revealed.

Whilst the crackdown on corruption aims to enhance economic efficiency and attractiveness to foreign investment, it may also pose challenges.

"However, these efforts may also generate pain points," said Tan. "The initiative may slow administration and approval procedures, as the bureaucratic process adjusts to the new norms of enhanced scrutiny and accountability."