Agribank charged with violating capital management rules

Wednesday, Jan 29, 2014 15:13

Transactions at Agribank. The bank allegedly violated State regulations on capital management and lending in 2009-12. -- Photo

HA NOI (Biz Hub) -- The Bank for Agriculture and Rural Development (Agribank) allegedly violated State regulations on capital management and lending in 2009-2012, according to the Government Inspectorate's conclusions.

The Inspectorate reports that the bank was charged with illegal credit lending practices in addition to other Credit Law violations and charges of lax management, which resulted in significant losses to the State.

Between 2009-2011, Agribank paid brokerage money for raising capital to people and organisations which were not licensed credit institutions. This made the bank's deposit interest rate exceed the State Bank of Viet Nam's regulation on deposit interest rate ceiling. The brokerage money amounted to VND283 billion (US$13.5 million).

The bank also violated loan regulations under the Credit Law. Between June 2009 and July 2011, 189 customers got loans from the bank without presenting any authorised documents from the bank's general director. By late 2011, the outstanding loans of the 189 borrowers had reached VND13.81 trillion ($657 million), while bad debt was incurred at a rate of nearly 7.6 per cent.

The bank's performance on the inter-bank market was also found ridden with many violations. Agribank implemented gold mobilisation and lending in the interbank market even after the Central Bank terminated both practices.

From January 1, 2011, the Credit Law had put an end to transfer of capital between banks. But in 2011, Agribank continued sending and receiving long-term deposits amounting to tens of billions of dollars. On the other hand, Agribank still offered 3 to 5-year term deposits to credit institutions, thus lowering the ratio of the bank reserve. As a result, at the end of 2009, Agribank had to borrow VND5 trillion from the Central Bank to handle its capital imbalance.

According to the conclusions of the Government Inspectorate, Agribank's non-performing loans (NPLs) ratio was 12.71 per cent and it was reported that the actual ratio of NPLs might be even higher.

The bank's financial investment was reportedly ineffective, causing a great loss of capital. Between 2009 and 2011, Agribank's subsidiaries suffered a loss of VND9 trillion ($428 million). For instance, Agribank spent VND144 billion ($6.9 million) to buy CMC shares at a price of VND72,000 per share. The share value stood at only VND20.3 billion ($953,000) by the end of 2011.

The Inspectorate also found other violations by Agribank, including the determination of the value of land-use rights at two member companies and lax management causing a loss of VND33 billion in a corruption case.

The Inspectorate has made some recommendations to the Prime Minister, the State Bank and Agribank to find solutions to deal with the violations and has also requested the transfer of some cases to the investigation agency. -- VNS

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