HANOI—The chairman of Vietnam’s state-run oil firm has been fired and arrested for alleged financial irregularities in his previous job as the Southeast Asian country presses to accelerate economic reforms and root out corruption.

Nguyen Xuan Son, 53, was arrested Tuesday on accusations of “deliberately acting against the State’s regulations on economic management, causing serious consequences” and “abusing powers while performing official duties,” the Ministry of Public Security said in a statement Wednesday.

Mr. Son and his lawyers were not reachable for comment. Mr. Son has not been charged.

Mr. Son was removed Sunday from his position at PetroVietnam, officially known as Vietnam Oil & Gas Group, by Prime Minister Nguyen Tan Dung, but no reason was given at the time, according to the government in a statement released Monday.

The ministry said he was arrested for alleged fraud stemming from his tenure as chief executive officer at the Ocean Commercial Joint Stock Bank from late 2008 to early 2011. The bank suffered heavy losses and in April was forcibly taken over by the State Bank of Vietnam, the country’s central bank.

State-media reports said Wednesday that Mr. Son is suspected of being responsible for the loss of 800 billion dong ($37.2 million) that PetroVietnam had invested in Ocean Bank. The reports said PetroVietnam and other shareholders of the bank lost all their investments in the bank after the takeover. The reports didn’t cite any sources.

The Public Security Ministry said that further investigation is under way.

PetroVietnam said in a statement Tuesday that chief executive officer Nguyen Quoc Khanh has been appointed as interim chairman. The company said Wednesday that the arrest doesn’t affect its operations because the police are investigating Mr. Son’s activities committed before he joined PetroVietnam. He was appointed chairman of the oil firm in July 2014.

The arrest comes as Vietnam has been trying to tackle corruption, especially at government agencies and state-owned enterprises, to attract more foreign investment into the economy. Vietnam has been the region’s star performer this year, growing at 6.44% in the second quarter from a year earlier. Still, Vietnam is facing pressure to reform its SOEs, whose inefficiencies are seen to be a drag on economic growth, which is estimated at 6.2% this year, down from an average of 7.3% in the 2000-2010 period.

Speaking to citizens in Hanoi over the weekend, Communist Party General Secretary Nguyen Phu Trong said that factors contributing to corruption included loopholes in the legal system and the lack of a mechanism to monitor the income and assets of officials, according to reports on Vietnam’s state radio.

Le Dang Doanh, an economist and former government economic adviser, said that corruption remains widespread despite years of crackdowns.

“When an official is arrested for violating economic regulations, it’s very likely that it’s all about corruption,” Mr. Doanh said.

Key to Hanoi’s efforts is the restructuring of the banking sector, which is burdened with high levels of nonperforming loans following a surge in lending five to seven years ago, mostly to real-estate projects in a market that later deflated. The prime minister in early 2012 approved a plan, scheduled to run through 2015, under which the country would speed up the privatization of state-owned financial institutions through mergers or acquisitions of weak banks. The central bank has this year taken over three unlisted banks, all of which were suffering from losses.

As part of the country’s economic reform, Vietnam has also attempted to restructure state-owned enterprises through privatization, but progress has been sluggish due partly to inefficiencies of government agencies and a lack of investor interest. The government said it managed to privatize just 61 SOEs in the year to June 23, or only 21.1% of the number of those it plans to privatize this year.

Vietnamese law prescribes a prison term of up to 20 years for anyone found guilty of violating state economic regulations, while an abuse of power charge may carry a prison term of up to 15 years.

By Vu Trong Khanh - The Wall Street Journal - July 22, 2015