Dr.

Le Anh Tuan

Problems for Session 1

S1.1 Article analysis

Case 1. Vietnam’s Saigon Joint Stock Commercial Bank under ‘special scrutiny’

The State Bank of Vietnam has placed Saigon Joint Stock Commercial Bank (SCB) under ‘special
scrutiny’ after depositors started withdrawing their money from the bank last week.
The move is aimed at ensuring ‘smooth’ functioning of the privately-owned bank after it
experienced bank run for a couple of days.
The bank run happened over an allegation that SCB has links to a real estate conglomerate that has
been put under an inquiry of fraud, reported Bloomberg.

Truong My Lan, chairperson of the conglomerate Van Thinh Phat, along with other executives of
the company were detained by the police on 8 October 2022, over accusation of procuring property
through forged activities.
However, any links between the two is yet to be established.
Vietnam’s central bank has already asked four banks to help manage SCB, which is the country’s
fifth largest commercial bank in terms of deposits and assets. The four banks include Bank for
Foreign Trade of Vietnam (Vietcombank), Bank for Investment and Development of Vietnam
(BIDV), Vietnam Bank for Agriculture and Rural Development (Agribank) and Vietnam Joint
Stock Commercial Bank for Industry and Trade (VietinBank).

The State Bank of Vietnam will supervise the operations of SCB. In a statement, the central bank
said: “In order to stabilize SCB’s operations, the central bank decided to put the bank under special
scrutiny.”
In the beginning of this week, the regulator took measures to pacify markets after financial stocks
took a plunge and SCB’s bank run. The statement added: “The central bank will also coordinate
with other relevant ministries to take necessary and comprehensive measures to ensure SCB’s
operations are safe and sound.”
 Dr. Le Anh Tuan

Case 2. Vietnam places DongA Bank under special supervision; leaders face
dismissal
The DongA Joint Stock Commercial Bank (DongA Bank) has been placed under special supervision
by the State Bank of Vietnam (SBV), whereas many of its leaders will be dismissed, the country’s
central bank said Friday.
DongA Bank has been found violating many regulations on financial management, credit granting
and other businesses, which already caused serious consequences, the SBV said in an announcement
of the results of its comprehensive inspection of the lender’s operations from the year 2012
backward.
The central bank has thus decided to put DongA Bank under special supervision, and will suspend
and remove many of its executives from their posts.
Those involved in the alleged wrongdoings at the bank will also be strictly penalized, according to
the SBV.
“The SBV will choose and assign competent bankers from BIDV [Bank for Investment and
Development of Vietnam] to take over some main posts [at DongA Bank] to administer, manage
and supervise that bank,” the announcement reads.
The BIDV is still controlled by the state.

The central bank also guaranteed that it will enact necessary measures to ensure that DongA Bank
will remain operational safely and protect the rights and interests of its depositors.
“The SBV will also put DongA Bank under a comprehensive restructuring so that it can have safe
and sustainable development,” the central bank said.
DongA Bank only posted a pretax profit of VND35 billion (US$1.61 million) in 2014, a massive 96
percent decline from 2013, according to news website VnExpress.
The lender’s credit growth rate last year was only one percent, whereas its non-performing loan
ratio was 3.7 percent.
DongA Bank thus did not pay dividends to its shareholders last year, while CEO Tran Phuong Binh
had to apologize to the shareholders at a meeting on July 21.
 Dr. Le Anh Tuan

Questions:
Please discuss the following questions. The solution is not limited to the above articles but should
reflect the understanding of the role of regulation in banking. SCB and DongA in the cases as good
examples for the answers.
1. Describe a bank run situation.
2. Describe why banks are heavily regulated.
3. Describe the disadvantages that regulation poses on banks.

Reference:
https://www.retailbankerinternational.com/news/vietnam-scb-special-scrutiny/
https://tuoitrenews.vn/news/business/20150814/vietnam-places-donga-bank-under-special-
supervision-leaders-face-dismissal/14770.html

S1.2
1. What is shadow banking?
2. What are the advantages/disadvantages of shadow banking?
3. Is shadow banking illegal?