Vietnam's central bank takes action!
According to Reuters, Vietnam's central bank is bailing out Saigon Commercial Bank on an "unprecedented scale", Vietnam's fifth-largest bank was involved in the country's biggest financial fraud, followed by a run, and briefly collapsed Vietnam's stock market.
According to the report, a bank document shows that as of early April, Vietnam's central bank has injected 23.72 billion US dollars (equivalent to about 170 billion yuan) of "special loans" into Saigon Commercial Bank, which is equivalent to 5.6% of Vietnam's annual GDP and a quarter of its foreign exchange reserves.
Last week, 67-year-old Vietnam's richest woman, Zhang Meilan, was sentenced to death for defrauding more than 90 billion yuan. According to the charges, Truong My Lan is suspected of defrauding a huge amount of US$12.5 billion (about 90.5 billion yuan), equivalent to 3% of Vietnam's GDP in 2022, through Ghost Company, bribing government officials and the Saigon Commercial Bank, which she illegally controls.
170 billion yuan to save banks
The largest financial fraud in Vietnam's history, the impact on the country's financial system is not over. On April 17, Beijing time, Reuters reported that if the loan was not provided, Saigon Commercial Bank would fail. But if lending continues, Vietnam's treasury will gradually dry up.
Vietnam's central bank is reportedly carrying out an "unprecedented" bailout of Saigon Commercial Bank (SCB), which was caught in the country's largest financial fraud. The reason for describing the operation as "unprecedented" is the sheer scale of the capital injection, the complexity of the operation, and the extent of the damage that the case has caused and is likely to cause to Vietnam's financial system.
As of April 2, Vietnam's central bank had injected $23.72 billion in "special loans" into the SCB, according to a bank document that has been updated daily since March 29 with data on the bank's overall capital injections. Vietnam's central bank initially injected an average of US$3.7 billion per month into the bank in October and November 2022, before slowing to about US$1.2 billion per month by October 2023, the documents show. Since November last year, the pace of capital injections has slowed further, with about $910 million injected per month.
Vietnam's public debt remained at around 37% of GDP last year, and the budget deficit widened slightly to 4.4% of GDP, according to the central bank. Foreign exchange reserves at the end of the year were about $100 billion. Vietnam's central bank has never publicly disclosed the size of its injection into the SCB before. It is now reported that the total amount of funds provided by the central bank to the SCB is equivalent to 5.6% of Vietnam's annual GDP and a quarter of its foreign exchange reserves.
Even with such a large-scale bailout, Saigon Commercial Bank's business situation has not improved. As of the end of December, the bank's deposits fell 80 percent to about $6 billion, according to the filing. At this rate, the bank's deposits will be completely depleted by the middle of this year. Meanwhile, as of October last year, non-performing loans had soared to 97.08 percent of the bank's credit balance.
Despite official support, Saigon Commercial Bank was facing liquidity problems as of December last year, with it sometimes struggling to settle payments on time and process payments through the country's main clearing system when its customers transferred money to other banks, according to the latest news. The bank said this affected the "psychology" of customers and created risks for the banking and financial system as a whole.
There was a run on the richest woman after her arrest
The financial fraud case is part of the Vietnamese government's multi-year anti-corruption campaign. In recent months, a number of high-ranking officials in the country have resigned or been arrested on suspicion of corruption.
In August 2022, Deputy Prime Minister Le Van Thanh made it clear that he would strengthen supervision of the sale of real estate companies' bonds to avoid speculation and price manipulation, and in September 2022, Deputy Governor of the Central Bank of Vietnam, Tao Minh Thu, warned that the central bank would strengthen its scrutiny of bank loans, especially in risky areas such as real estate projects.
In October 2022, real estate tycoon Truong My Lan, the richest Chinese woman in Vietnam, was suddenly arrested and interrogated by the police on suspicion of illegally issuing bonds between 2018 and 2019, raising trillions of VND.
Trao has a strong influence in Vietnam's real estate industry, and she founded VTP Group, the largest private real estate company in Vietnam. Since VTP Group is not listed, Zhang Meilan's specific net worth is unknown, but Vietnamese insiders generally call her "the richest Chinese woman in Vietnam", a fourth-generation Chinese in Vietnam, whose ancestral home is Shantou, Guangdong Province. It is reported that Zhang Meilan actually controls more than 90 percent of the shares of Saigon Commercial Bank through hundreds of shell companies and agents.
The news of Truong My Lan's arrest immediately caused an uproar in Vietnam's business circles, and the "special scrutiny" of the Saigon Commercial Bank, Vietnam's fifth-largest bank, was also subjected to a "special scrutiny", which led to a frenzied run on the Saigon Commercial Bank, as well as a crisis in Vietnam's real estate and corporate bond markets, and the country's stock market fell sharply.
Subsequently, Saigon Commercial Joint Stock Bank received an emergency bailout from the Central Bank of Vietnam, and the run was able to subside. Vietnam's stock market has also bottomed out since mid-November 2022.
However, a thorough restructuring of Saigon Commercial Bank is indispensable for a complete solution to the problems of Saigon Commercial Bank. The Vietnamese authorities have been seeking foreign investors to restructure the bank. However, one of the major difficulties faced by the bank before the restructuring was the valuation and legal ownership of the collateral used by Zhang Meilan to obtain the loan.
According to state media, the Vietnamese government has repeatedly sought help from the private sector for Saigon Commercial Bank, including foreign investors. Vietnamese law imposes a 30% cap on foreign ownership of bank shares. At the end of last year, it was also reported that Vietnam's central bank had appointed private property developer Sun Group to draw up a plan to restructure Saigon Commercial Bank, and it was unclear what progress would be made.
The key to the restructuring plan is to accurately assess the real estate assets used by Zhang Meilan and her company for mortgage loans. The problem is that the legal status of these assets is mostly in a grey area. Many of them are still in the application approval stage, while others face penalties for violating the rules on the use of public land or building permits. Among the mortgaged assets, there is no shortage of high-priced properties located in prime locations in Ho Chi Minh City, but the vast majority of them are unfinished properties.
Earlier this month, a representative of the Zhang Meilan family vowed in an interview with the media that the assets in their name were worth as much as $30 billion. However, the valuation agency hired by the central bank of Vietnam gives a valuation of only $12 billion, and there is a huge difference between the two.
She also needs to pay hundreds of billions of yuan in compensation
On April 11, a judge of the Ho Chi Minh City People's Court in Vietnam announced that he had sentenced Truong My Lan, a Vietnamese real estate developer and the richest woman, to death.
Zhang Meilan, 67, was accused of defrauding US$12.5 billion (about 90.5 billion yuan). In the verdict, the judge found Zhang Meilan guilty of embezzlement of public funds, accepting bribes, and violating bank regulations, causing particularly heavy economic losses. In addition, the judge also demanded that Truong Mei Lan pay 673.8 trillion VND (about 195 billion yuan) in compensation.
Vietnamese prosecutors accuse Truong My Lan of illegally controlling Saigon Commercial Bank between 2012 and 2022, during which time she and her accomplices fraudulently obtained more than 2,500 loans totaling more than 1,000 trillion VND (about 290.3 billion yuan), equivalent to 10% of Vietnam's GDP in 2023. The loans were disbursed to VTP Group and other companies set up by Truong My Lan, and as of 2022, the outstanding loans exceeded VND677 trillion (about 200 billion yuan).
From October 2018 to October 2022, Truong My Lan and her co-defendants falsified 916 loan information to meet their personal needs, defrauding Saigon Commercial Joint Stock Bank of VND304 trillion (about US$12 billion) in total. The bank has so far failed to make the payment and has incurred more than VND 129.4 trillion in interest.
In order to conceal the truth, Zhang Meilan and her accomplices were accused of bribing government officials through thousands of shadow companies. Among the 85 people prosecuted along with Truong My Lan are former officials of Vietnam's central bank, the General Inspection Office, the National Audit Office, and Truong My Lan's husband, Zhu Liji. As many as 40,000 people were killed in the case.
The financial fraud case is also the largest and most complex scandal since Vietnam's 2016 "Melting Pot" anti-corruption campaign, involving 86 defendants, 70 arrested, 11 released on bail and five at large. The documents involved in the case alone contained 104 boxes with a total weight of 6 tons.
Among the defendants are Chu Liji, a Hong Kong businessman and husband of Cheung Mei Lan, who was sentenced to nine years in prison in the first instance on charges of setting up a false loan application to extract funds from Saigon Commercial Bank, and their niece, the current CEO of VTP, was sentenced to 17 years in prison in the first instance. At present, most of the defendants have pleaded guilty, but according to the prosecutor, Zhang Meilan, as the mastermind of the case, not only did not admit guilt and show remorse, but also stubbornly continued to shirk responsibility. In her final statement in court, she claimed that she "thought about suicide" and that "the biggest mistake was to get involved in the financial industry that she didn't know anything about." A relative said Truong My Lan would file an appeal, which is within 15 days of the first-instance verdict in Vietnam.
Truong My Lan was born in 1956 in Saigon (now Ho Chi Minh City) to a Vietnamese father and a Vietnamese-Chinese mother. As a young man, Zhang Meilan helped her mother sell cosmetics at the oldest market in her hometown. In 1992, Zhang Meilan and her family founded VTP Company. The company started as a trader, and later extended to restaurants, hotels and other fields, and has been engaged in real estate business for more than 30 years. Ho Chi Minh City's iconic Saigon Times Square, many iconic buildings on both sides of Nguyen Hue Boulevard, and the Windsor Hotel, the venue of the 2006 APEC meeting, are all owned by Truong My Lan.
As VTP became one of the richest real estate companies in Vietnam, Truong My Lan also became a key figure in the country's financial sector. In 2011, coordinated by Vietnam's central bank, she orchestrated the merger of the troubled Saigon Commercial Bank with two other banks. In 2020, there was a steady stream of negative news about Saigon Commercial Bank, which finally triggered a run in 2022. In October 2022, Zhang Meilan was arrested.
Editor-in-charge: Tactical Heng
Proofreading: Liao Shengchao