Police arrested the former head of one ofVietnam's largest banks as part of a widening probe into economic crimes thathas spooked investors and depositors in a country struggling to reform itsdebt-ridden bank sector, state-run media reported Friday.
Former Asia Commercial Bank chief Ly Xuan Hai was arrested Thursday night for"deliberately acting against the state regulations on economicmanagement," hours after he had resigned from the job and a replacementnamed, the Vietnam News Agency reported. The crime carries a maximum punishmentof 20 years in prison, the agency said. It was unclear whether Hai had anylawyers, and no more details were available.
ACB said it had halted lending as a result of the troubles, but that it wasoperating normally. On Thursday, as rumors swirled about the bank, it saidjumpy customers were withdrawing money from the institution, raising fears of apossible bank run. ACB branches in the capital, Hanoi, were quiet Friday.
On Monday, the bank's co-founder Nguyen Duc Kien was arrested on allegations of"illegal trading," triggering the largest ever drop on the country'smain stock exchange. Seeking to reassure the public, the central bank then saidthat Kien's alleged crimes were not related to his past activities at ACB andpledged extra liquidity to the bank. Prior to his arrest, Kien had nomanagement role at ACB.
Information is tightly controlled in Vietnam, but there has been speculationthat the arrests of Kien and Hai were related to efforts by the communist governmentto reform the banking system, which has the highest level of bad debt in Asiaand is hurting growth in what was once one of Asia's most promising economies.Much of the debt is owed by conglomerates with links to the government,complicating efforts to clean up the system and causing tensions within itstightly intertwined political and economic elite.
ACB, which Standard and Chartered has a 15 percent stake in, was considered oneof the better run of the more than 40 banks in Vietnam.
"It's quite an ominous sign for ACB," said Stephen Norris, a Vietnamanalyst at Control Risks, a political and security consultancy group. "Thefact they have arrested this guy suggests they have some quite serious dirt athim. Behind the scenes is a big power struggle about how they are going to dealwith the bad debt. That is the driver of political tensions."