The Vietnamese central bank has directed two of the country’s leading commercial banks – VPBank and HDBank – to take over their weaker rivals, in a move to fortify the nation’s financial stability.

This move is part of a broader effort to overhaul the banking system and address the issue of bad debt, a move deemed crucial for maintaining political and social stability.

According to Reuters, Vietnam Prosperity Joint Stock Commercial Bank (VPBank) has been tasked with absorbing GPBank.

Similarly, Ho Chi Minh City Development Bank (HDBank) will take over DongA Bank, as confirmed in an official statement from the State Bank of Vietnam (SBV).

The central bank views these compulsory transfers as vital for safeguarding macroeconomic stability, ensuring the security of the national finances and monetary system, and preserving political stability and social order.

This initiative aligns with the SBV’s previously stated plan in 2023 to restructure four underperforming banks through forced takeovers by healthier institutions.

Two such takeovers were executed last year, with Vietcombank taking over Construction Bank and Military Commercial Joint Stock Bank absorbing Ocean Bank.

HDBank has indicated that the takeover of DongA Bank will facilitate the expansion of its operations, enhance lending capabilities, and foster the development of new business models.

The bank has received assurances from the central bank regarding support for a smooth transition.

HDBank plans to leverage its resources and restructuring expertise to guide DongA Bank towards a healthy and sustainable financial position.

VPBank, in a statement, has committed up to 20% of its charter capital to aid the state-owned GPBank.

Following the transfer, VPBank has the option to retain GPBank as a subsidiary or to divest it.

The primary objective of this takeover is to revitalise GPBank’s operations, address its shortcomings, and ensure its continued viability.

In addition to these measures, the SBV has been providing special supervision to Saigon Joint Stock Commercial Bank (SCB) since October 2022.

This follows an unprecedented rescue effort by the central bank last year after SCB’s involvement in a major financial fraud case.

According to an April report by Reuters, the SBV injected a substantial US$24 billion in special loans to avert the bank’s collapse.

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