Minister of Public Security Tran Dai Quang made the announcement at the National Assembly’s meeting yesterday morning, January 23.

Tan was arrested for “lacking of responsibility, causing serious consequences”, Quang noted.

Tan acted as Agribank CEO for over two years. He left his post in July 2011 to take a position at the State Bank of Vietnam (SBV)’s office.

There were several rumours that Tan had been arrested in 2012 but this is the first time the rumour had been officially confirmed.

In the last months of 2012, high-ranking Agribank staff were continuously changed.

In November 2012, Trinh Ngoc Khanh was appointed Deputy General Managing Director to replace Kieu Trong Tuyen. Currently, Tuyen is Agribank’s Deputy General Director.

In October 2012, the SBV decided to appoint a new member to Agribank’s Board of Directors, Nguyen Minh Tri who was Chairman and CEO of the Saigon Jewelry Company Limited (SJC) cum Chairman of Agribank Leasing Company No. 2.

At the same time, Agribank appointed two new deputy General directors who were Tiet Van Thanh, chief of Agribank’s southern representative office, and Nguyen Tuan Anh, Director of Agribank My Dinh.

According to information on its website, Agribank has yet to select anyone as CEO to date.

Agribank is Vietnam’s largest bank in terms of assets in Vietnam, at over VND560 trillion (USD26.8 billion). Its capital is estimated to total over VND540 trillion (USD25.8 billion) and its total outstanding loans stand at VND480 trillion (USD23 billion).

Dan Tri International News - January 24, 2013

Vietnam : banker’s arrest puts agribank in the spotlight

Vietnam’s minister of public security announced on Wednesday that Pham Thanh Tan, ex-chief of the state-owned Agribank, had been arrested for “irresponsibly causing serious consequences.”

Just when Vietnam’s weary investors were breathing a little easier amid improved economic data and an unexpected upturn in its stock markets, a long-simmering bank scandal burst back into the open with the arrest of another high-profile banker. Vietnam’s minister of public security announced on Wednesday that Pham Thanh Tan, ex-chief of the state-owned Agribank, had been arrested for “irresponsibly causing serious consequences.”

While his actions are still unclear, the news followed the arrests of at least four Agribank executives late last year on charges of theft and embezzlement amounting to a combined $2m plus, according to local media.

Tan’s arrest also follows the detention of several prominent figures in Vietnam’s banking sector. The arrest of Nguyen Duc Kien in August last year, co-founder of Vietnam’s giant Asia Commercial Bank, triggered fears of a run on the bank and sent the country’s stock markets plunging, further eroding investor and consumer confidence.

Tan’s arrest is unlikely to cause such panic. A senior manager at a commercial bank in Hanoi told the FT that people working in the sector were “not surprised” by the news, as the market had a sense of the impact of the growing Agribank scandal following the arrests of executives in October and November. “We all know how messy the situation in this bank is,” he said.

Vietnam’s communist government has acknowledged that serious banking sector reforms are needed. In January the prime minister, Nguyen Tan Dung, spoke of “shortcomings in the government’s management” and promised to tackle “economic structural weaknesses”.

Yet, the government’s reform efforts may not be enough to allay widespread fears about further instability in the banking sector. Further arrests may also stoke concerns that personality politics are still playing a role in the downward trajectory of the country’s state-owned enterprises, which accounted for up to 33 per cent of the country’s GDP in 2011.

Agribank, which is officially called the Vietnam Bank for Agriculture and Rural Development, is fully state-owned and the country’s largest lender by assets. According to its 2010 annual report (the latest available), its assets reached VND524tn ($25bn).

“There are many problems inside Agribank,” said Dinh Tuan Minh, a policy consultant for the National Assembly’s Economic Committee. “The best solution now is to make the bank more transparent by equitising and listing it on the market like other state commercial banks. We need to have a clearer management system and separate the social development purpose and business purpose.”

Already, Agribank, under new management since Tan was removed from his post in 2011 amid a growing number of questions about the bank’s management, has been making a concerted push to prove it is cleaning itself up. The bank’s chair, Nguyen Ngoc Bao told local reporters in December that the bank’s bad debt had fallen to around 4 per cent of loans, from 6.1 per cent at the beginning of 2012 – the highest figure of all state banks at the time. That compares well to the banking system’s current average level of around 8 per cent.

Signs of a crackdown on a once-powerful institution may help to convince investors that long-standing problems of corruption are being tackled, but it will also serve to remind them that Vietnam’s banking sector has many more problems still to be overcome.

The Agribank saga could be seen as a metaphor for Vietnam’s broader financial industry – cleaning things up even as more scandals are revealed. The end result, as one western investor in Vietnam noted, could well be a smaller, leaner banking sector with some disgruntled investors and, possibly, heavier and better regulation. “We live in hope,” he added.

The Financial Times - January 25, 2013