The State Bank of Viet Nam said it intended to dismiss or suspend many of the senior leaders at the commercial bank and will co-ordinate with authorities to prosecute the violators.

The central bank will designate officials from the Bank for Investment and Development of Viet Nam (BIDV) to manage and supervise DongA and adopt the necessary measures to guarantee the rights and interests of existing depositors and investors at the bank.

It said it would also comprehensively reorganise DongA for the bank's secure, healthy and sustained development.

VnExpress online reported yesterday that DongA planned to sell a 49 per cent stake to foreign investors in a bid to raise its charter capital to about VND10 trillion (US$452.49 million) in the coming months. The stake is worth VND4.9 trillion ($221.72 million).

DongA General Director Tran Phuong Binh told the news website that this move was part of the bank's restructuring plan, adding that the bank had petitioned the government to give it the rest of the year to implement the restructuring scheme.

Binh said the bank had witnessed high ratios of bad debts which had occasionally amounted to 6 per cent of its outstanding loans for the last few years in the face of tough economic conditions. Bad debt ratios of 3 per cent or less are currently considered secure across the domestic banking system.

The restructuring and debt recovering issues had become pressing, and a share transfer to foreign investors would be the best solution, he said.

Binh said two to three foreign investment funds had expressed interest in buying DongA's stake to become strategic investors and help the bank settle its bad debts.

He said negotiations on the deal were still underway, although the process was facing some obstacles related to domestic regulations, which currently limit the stake of a strategic investor in a local bank to 20 per cent.

"We are asking the authorities for approval to transfer the 49 per cent stake to foreign investors. If the decision is favourable, the plan may go into effect within the next three to four months," he said.

Before making the offer to foreigners, DongA had only intended to sell 100 million shares to Kido Group and select the confectionery firm as a strategic investor in a plan to increase its equity from VND5 trillion to VND6 trillion (from $226.24 million to $271.49 million).

However, with DongA's latest plan to increase equity to VND10 trillion, Kido will only represent a stake of some 10 per cent in the bank if it acquires the shares. "We suggest Kido join hands with foreign investors in reorganising DongA Bank," Binh said.

Since its establishment in 1992, the charter capital of DongA has risen from VND20 billion to VND5 trillion ($950,000 to $226.24 million).

VNS