A recent multi-billion dollar embezzlement scandal in Vietnam is just the \u201ctip of the iceberg\u201d in the country\u2019s corrupt banking system \u2013 and the government is ill-equipped to address it, experts told Radio Free Asia.<\/p>\n
Last week, the Vietnamese Ministry of Public Security released the conclusion of its investigation that found that Truong My Lan, the chairwoman of Van Thinh Phat Group, or VTP, had embezzled 304 trillion dong (US$12.5 billion) by using “ghost companies” and the Saigon Joint Stock Commercial Bank, or SCB, the group\u2019s affiliate bank.\u00a0<\/p>\n
The case is considered to be one of the biggest corruption cases in Vietnam ever and the value of the known embezzled funds amounts to about 6% of Vietnam\u2019s GDP.<\/p>\n
In its report released on Nov. 17, 2023, the ministry\u2019s Police Investigation Agency recommended prosecuting 86 people involved in the case, including Lan, who should face charges of bribery, embezzlement and violating banking regulations.<\/p>\n
Police also recommended prosecuting dozens of staff from SCB Bank and companies under the VTP Group for embezzlement and violating banking regulations, and two SCB staff and a former acting chief of the Inspectorate and Supervision Department under the State Bank of Vietnam for dereliction of responsibility.<\/p>\n
Additionally it was found that in handling this case, inspectors were bribed to falsify their findings.<\/p>\n
Structural problems<\/strong><\/p>\n There are formidable structural problems in Vietnam\u2019s banking system, Vietnam-based economic expert Bui Kien Thanh told RFA Vietnamese.<\/p>\n \u201cApart from the SCB scandal, real estate is another bubble that can pop [at any time] in Vietnam,\u201d he said. \u201cBanks give many loans [to real estate companies]. Big groups often borrow loans worth seven or eight times more than their asset value. No country\u2019s [banking system] operates in that way.\u201d<\/p>\n He said the apparent bubble indicates that the government is mismanaging the banks.<\/p>\n \u201cAnd when the bubble bursts, the SCB story of US$12 billion would be just the tip of the iceberg only,\u201d he said.<\/p>\n <\/span><\/p>\n A man rides a motorbike carrying corrugated iron past the State Bank of Vietnam in Hanoi on July 27, 2023. Credit: Nhac Nguen\/AFP<\/p>\n <\/span><\/p>\n According to the investigation conclusion, Van Thinh Phat Group established more than 1,000 companies, including subsidiaries and member companies both inside and outside Vietnam, many of which specialize in banking, stock investment, and real estate.\u00a0<\/span><\/p>\n A large number of these \u201cghost companies\u201d were established just to take money from SCB bank for Lan\u2019s use, according to the investigation conclusion.<\/span><\/p>\n SCB Bank and Van Thinh Phat Group\u2019s subsidiaries were connected to each other through forms of cross-ownership, <\/span>economics expert Nguyen Huy Vu told RFA.<\/span>\u00a0<\/span><\/p>\n \u201cVia SCB’s banking system, SCB’s capital and bonds of Van Thinh Phat Group\u2019s subsidiaries are mobilized to be used for the Group\u2019s projects. This created extremely high risks for depositors and [bond] investors.\u201d<\/span><\/p>\n After the prosecutions and arrests of Truong My Lan and a series of other VTP leaders, many SCB depositors and those who bought VTP Group\u2019s bonds and other products and services via SCB, took to the streets and gathered at SCB offices to demand their money back.\u00a0<\/span><\/p>\n VTP victims continue to hold demonstrations. They have even created their own groups on the social media platforms of Facebook and Zalo.<\/span><\/p>\n \u2018Like a pawn shop\u2019<\/p>\n Thanh explained that the case shows weaknesses in the Vietnamese banking system.\u00a0<\/span><\/p>\n \u201cVietnam has over 30 banks, but [these banks] do not provide proper professional training to their employees,\u201d he said.\u00a0<\/span><\/p>\n \u201cThe operation mostly focuses on mortgage lending, but actually functions like a pawn shop,\u201d he said. \u201cBank employees do not really study whether the project is feasible and can repay the loan, they only look at the mortgages in the borrowing applications.\u201d<\/span><\/p>\n