* Case highlights lax oversight in Vietnam's banks
* Fraud scandals dent image of domestic banks
* Central bank says bad loans halved, restructuring underway
By Nguyen Phuong Linh
HANOI, Jan 27 A former banker at a state-owned
Vietnamese lender was sentenced to life imprisonment on Monday
for masterminding a scam that swindled customers of $190 million
in the country's highest-value bank fraud case.
A court in Ho Chi Minh City found Huynh Thi Huyen Nhu, 36,
guilty of "swindling to appropriate assets" and of using
counterfeit documents and stamps to steal customers' deposits
while working at Vietinbank, Vietnam's biggest partly
private bank by assets, from 2007-2011.
A former Vietinbank branch manager, Vo Anh Tuan, received 20
years in jail and 20 other accomplices were given punishments
ranging from 12 months of house arrest to 14 years behind bars.
The case was the latest conviction of top bankers who stole
millions by exploiting loopholes and lax oversight during
Vietnam's 2003-2007 economic boom, when banks grew rapidly and
collected record deposits, but lent frivolously.
The economy overheated and banks' weaknesses were quickly
exposed, revealing a crippling ratio of non-performing loans and
a tightening of credit that slowed retail growth, plunged tens
of thousands of businesses into bankruptcy and froze the
Two former executives of state-owned Agribank were sentenced
to death last year for embezzling $25 million in one of dozens
of bank fraud cases being handled by the courts, with losses
totalling hundreds of millions of dollars.
Nhu only escaped death because the money she stole was from
customers and not the bank itself. The judge ordered her to
repay all of the depositors she duped.
Her case was made more prominent because it exposed illegal
lending at high rates by Asia Commercial Bank and implicated its
founder, tycoon Nguyen Duc Kien and its ex-chairman, former
government minister Tran Xuan Gia, with Nhu the recipient of
credit funnelled through shell companies. Gia and Kien are
The court heard how Nhu abused her position at Vietinbank to
borrow $9.5 million at high interest to fund failed property and
equities investments. She also conspired with accomplices to
forge documents and set up a Ponzi scheme, the judge said.
Toxic debt and widespread fraud has dented the image of
Vietnam's nascent banking sector, which the government has
sought to clean up by ordering the restructuring or dozens of
lenders and setting up an asset management firm to buy bad loans
and rescue banks.
The government recently announced a decree allowing foreign
institutions to buy bigger stakes in lenders from next month,
capping them at 20 percent for a single "strategic foreign
investor" - an entity with $20 billion of registered capital -
within a total 30 percent foreign shareholding.
It would also allow majority foreign stakes in domestic
banks considered weak, of which there were 11 last year,
according to the central bank, the State Bank of Vietnam (SBV).
The SBV said last week the ratio of non-performing loans
(NPLs) in Vietnam had been halved to 3.79 percent at the end of
2013, and $1.9 billion of bad debt had been bought by its asset
Fitch Ratings revised Vietnam's outlook to positive last
week but said the banking sector remained weak, "due largely to
a high but unknown level of NPLs".
Independent economists have long suspected official NPL
estimates have been understated and say better regulatory
oversight is needed to regain public trust.
"The image of the banking system was never as bad as now,"
said economist Le Xuan Nghia, a government adviser.
Nguyen Thi Bac, a lawyer for Vietinbank, or Vietnam Joint
Stock Commercial Bank for Industry and Trade, said his client
was not responsible for compensating customers.
Vietinbank is 64.5 percent owned by the state and 20 percent
by Japan's Bank of Tokyo-Mitsubishi UFJ. It reported
2013 gross profit of $368 million and is considered one of the
country's most reliable lenders.
The case and the way Nhu managed to defraud depositors of
$190 million under the nose of Vietinbank has alarmed some of
its customers, however.
"I withdrew my money from Vietinbank right after reading
about the bank's irresponsibility," said Mai Van Dung, 56, a
motorcycle taxi driver who took out his 20 million dong ($950)
savings from a Hanoi branch over the weekend.
"My trust has collapsed."
(Editing by Martin Petty and Robert Birsel)