Vietnam developer proposes 15-year rescue for bank at heart of giant fraud, documents show

HANOI – The bank at the centre of Vietnam’s biggest financial fraud has received a central bank bailout amounting to 5 per cent of the nation’s 2024 economic output, which a local white knight hopes to repay in 15 years, documents seen by Reuters show.

The nearly US$26 billion (S$34.61 billion) pumped into Saigon Joint Stock Commercial Bank (SCB) since a 2022 run on the bank, triggered by the arrest of the real estate tycoon who effectively controlled SCB, highlights Vietnam’s struggles to oversee its banks and contain potential sectoral risk.

Vietnam is scrambling domestically while its export-driven economy faces the risks of a global trade war as President Donald Trump imposes tariffs on US trading partners.

SCB remains “completely dependent on special loans” from the State Bank of Vietnam to cover deposit withdrawals, and the central bank’s lending would reach 657 trillion dong (S$34.25 billion) in the first year of restructuring, according to the rescue road map prepared by Sun Group, the developer mandated by the central bank in November 2023 to help SCB.

The lender, under Sun Group ownership, would start repaying the central bank in the 14th year of the rescue plan, subject to market conditions, under the base scenario of the 222-page plan, which has not been reported previously.

Under this scenario, SCB would fully repay the central bank within 15 years of the approval of the restructuring, which Sun Group hopes to obtain as early as the start of April.

Fraud scandal

The scandal broke in October 2022 with the arrest of businesswoman Truong My Lan, who built a real estate empire that prosecutors say was funded for a decade by US$44 billion in SCB loans.

The arrest of Lan – who used proxies to control what was one of Vietnam’s largest commercial banks by deposits – triggered a panic among depositors, prompting the central bank to inject US$4 billion in the three weeks after the arrest and billions more later to keep the bank from collapsing, according to a document seen by Reuters.

A court upheld Lan’s death sentence in December, rejecting her appeal against a conviction for embezzlement and bribery, state media reported.

SCB’s already dire state at the time of the bank run has only deteriorated, necessitating the proposed multi-year restructuring, the Sun Group report says.

Deposits had plummeted to 19.2 trillion dong at the end of 2024 from 669 trillion dong at the start of October 2022, according to the document.

Sun Group’s plan aims to make SCB profitable again, citing the developer’s banking experience as a key shareholder since 2021 in a smaller Vietnamese lender, National Citizen Commercial Joint Stock Bank.

It proposes investing at least 3 trillion dong in SCB’s charter capital – funds injected by owners towards core capital buffers.

The document forecasts SCB generating income from sources including investments in government bonds and infrastructure projects funded with resources recovered from loans.

It would repay about half the central bank’s loans by selling recoverable assets, land rights and properties used as collateral for SCB loans, with the remainder coming from profits from new investments, the road map showed.

Recoverable assets, however, are only a small portion of those on the banks’ books, Sun Group’s plan says, as the bulk of the credit SCB extended was to shell companies owned by Lan against collateral with inflated values. REUTERS