Vietnam arrests CEO, four other executives of Dong A Bank

HANOI (Reuters) - Vietnam's police have arrested the chief executive officer and four other staff of a troubled partly private bank which has been under central bank surveillance since August last year, the bank said on Saturday.

Former CEO Tran Phuong Binh and four staff of the Ho Chi Minh City-based Dong A Bank, who have been suspended since August 2015, were taken into custody as the police were investigating the lender over its banking and monetary operations, the unlisted bank said in a statement.

The State Bank of Vietnam, the country's central bank, placed Dong A Bank, under special supervision on Aug. 13, 2015 "for violations in financial management and credit grants" by some executives, the statement said.

Vietnam's fragmented banking sector has undergone major reform in the past few years, with stricter lending and debt classification, forced takeovers, numerous fraud investigations and the formation of a state-run asset management company to support commercial lenders.

Bad debts have been cut to 2.62 percent of the sector's total outstanding loans in September, from 2.93 percent in September 2015, based on central bank data.

Dong A Bank, 6.87 percent owned by the Communist Party chapter in Ho Chi Minh City as of late 2013, said it recorded positive lending growth since this August, while the ratios of its reserves for ensuring liquidity and repayments have now been above the central bank's requirements.

The bank statement reaffirmed "all its business activities have been normal, clients' benefits are ensured."

On Friday Prime Minister Nguyen Xuan Phuc said the government was seeking to step up dealing with banks' bad debts and that the Asian Development Bank and a Vietnamese private partner were planning to buy one of the country's weak banks.

He did not name the bank in question.

Earlier this month, Moody's said its "outlook for Vietnam's banking system over the next 12-18 months was stable, as it has been since December 2014."

Vietnam's macroeconomic stability and resilient economic growth will continue to support the banks' weak credit profiles, "while capital buffers will continue to deteriorate because of high loan growth," Moody's said.

The central bank estimated loans to grow 18 percent this year from 2015, accelerating from an annual expansion of 17.26 percent last year.

(Reporting by Ho Binh Minh; Editing by David Evans)

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