Vietnam’s central bank has instructed the country’s two largest commercial banks, VPBank and HDBank, to acquire weaker rivals to strengthen the country’s financial stability.
The move is part of a broader effort to overhaul the banking system and address the problem of bad loans, a move seen as important to maintain political and social stability.
According to ReutersVietnam Prosperity Co., Ltd. Commercial Bank (VP bank) was tasked with absorbing GPBank.
Similarly, Ho Chi Minh City Development Bank (HDBank) plans to acquire Bank of East Asia, an official statement from authorities confirmed. State Bank of Vietnam (SBV).
The central bank considers these forced transfers to be essential to safeguard macroeconomic stability, ensure the security of national finances and monetary systems, and maintain political stability and social order.
This initiative is in line with SBV’s previously announced 2023 plan to restructure four underperforming banks through compulsory takeover by healthier institutions.
Last year saw two such acquisitions, with Vietcombank acquiring Construction Bank and Military Commercial Stock Bank absorbing Ocean Bank.
HDBank said the acquisition of Toa Bank will facilitate its business expansion, strengthen its lending capabilities and facilitate the development of new business models.
The bank has received guarantees from the central bank for support for a smooth transition.
HDBank will leverage its resources and restructuring expertise to guide Toa Bank to a sound and sustainable financial position.
VPBank said in a statement that it will allocate up to 20% of its established capital to support state-run GPBank.
After the transfer, VPBank can choose to retain GPBank as a subsidiary or sell it.
The main objective of this acquisition is to revitalize GPBank’s operations, address its shortcomings and ensure its continued viability.
In addition to these measures, the SBV is providing special supervision to the Saigon Joint Stock Commercial Bank (SCB) from October 2022.
This follows the central bank’s unprecedented rescue operation last year after the SCB was implicated in a major financial fraud case.
According to a Reuters report in April, SBV injected special loans worth $24 billion to avoid bank failure.
