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

Hanoi’s Financial Crisis: A Tale of Bank Bailouts and Economic Struggles

In a dramatic turn of events, Vietnam’s financial landscape has been shaken to its core as the central bank steps in to rescue Saigon Joint Stock Commercial Bank (SCB), the epicenter of the nation’s largest financial fraud. The bailout, totaling nearly $26 billion, is equivalent to 5% of Vietnam’s projected 2024 economic output. This move highlights the severe challenges Vietnam faces in overseeing its banking sector and managing potential risks within the financial system. The crisis began unfolding in 2022 when a run on SCB was triggered by the arrest of a real estate tycoon who effectively controlled the bank. This event exposed deep vulnerabilities in Vietnam’s financial regulatory framework and raised concerns about the stability of its banking institutions.

The central bank’s intervention, while necessary, underscores the broader economic risks Vietnam is grappling with. As the country navigates its domestic financial turmoil, its export-driven economy is also facing external pressures. The ongoing global trade tensions, exacerbated by President Donald Trump’s tariffs on U.S. trading partners, have cast a shadow over Vietnam’s economic growth. The combination of internal financial instability and external trade risks has left policymakers scrambling to find solutions. While the bailout provides a temporary lifeline to SCB, it also raises questions about the long-term health of Vietnam’s banking sector and the government’s ability to manage such crises effectively.

At the heart of this rescue effort is Sun Group, a prominent local developer mandated by the State Bank of Vietnam in November 2023 to help restructure SCB. The company has presented a detailed roadmap for the bank’s recovery, which includes a staggering 657 trillion dong (approximately $25.8 billion) in special loans from the central bank. This amount is intended to cover deposit withdrawals and stabilize the bank’s operations during the first year of restructuring. Under the plan, SCB will remain heavily reliant on these loans for the foreseeable future, with repayment scheduled to begin in the 14th year of the rescue plan, contingent on favorable market conditions.

The rescue plan, which spans 222 pages and has not been previously reported, outlines an ambitious timeline for SCB’s recovery. Sun Group is hopeful that the restructuring will be approved as early as the start of next month. If the plan proceeds as envisioned, SCB is expected to fully repay the central bank within 15 years of the approval date. However, the viability of this timeline remains uncertain, as it is subject to market conditions and the broader economic environment. Despite the meticulous details of the plan, key questions remain unanswered, including whether Sun Group’s strategy has the backing of the Vietnamese government and the ruling Communist Party.

Reuters has been unable to determine whether Sun Group’s plan has garnered the necessary support from Vietnam’s leadership or whether it will be approved within the proposed timeline. The lack of clarity on these fronts adds another layer of uncertainty to the situation. Sun Group, SCB, the central bank, and the finance ministry have not responded to requests for comment, further complicating the picture. This silence has left stakeholders and observers in the dark, wondering whether the bailout and restructuring plan will ultimately succeed in stabilizing the bank and restoring confidence in Vietnam’s financial system.

As Vietnam navigates this complex and delicate situation, the outcome of the SCB bailout will have far-reaching implications for the country’s economy. The success of the rescue plan will not only determine the fate of SCB but also serve as a litmus test for Vietnam’s ability to manage financial crises and maintain stability in its banking sector. With global trade tensions looming large and domestic challenges mounting, Vietnam’s policymakers face a daunting task in ensuring the long-term health of its economy. The coming months and years will be critical in determining whether the country can overcome its current struggles and emerge stronger, or whether the financial storm will continue to cast a shadow over its future.