Disgraced bank chief forced out
Vietnam's State Bank governor was yesterday forced to step down in a rare show of parliamentary displeasure at a myriad of problems facing the country's fledgling banking sector.
Cao Si Kiem received just 195 votes from the National Assembly's 450 delegates during sessions to rubber-stamp the cabinet of new reformist Prime Minister Phan Van Khai.
Mr Kiem was the only official knocked back and will be replaced by a deputy until a new session of the assembly - Vietnam's key law making body - in December.
Powerful young leader Nguyen Tan Dung, Mr Khai's new deputy in overall charge of economic affairs, said mistakes had been made in the past and as head of the bank, Mr Kiem had to take responsibility.
Mr Khai has yet to comment but in his closing speech pledge called for accelerated but cautious reforms.
He expressed a desire to take on the bloated state sector but warned of the need to ensure 'economic and social stability' through any sell-offs.
Foreign bankers expressed little surprise at Mr Kiem's rejection, saying it was 'shocking' Mr Kiem was nominated in the first place following months of woe.
'Let us hope that we will now see some firm management and leadership and the problems tackled head-on,' one said. 'The whole system has just seemed adrift as the problems loomed. There is just so much that needs to be done.' Mr Kiem had been in charge since 1989, when the bank was first separated from commercial banks after years of orthodox Marxist economics.
Previously considered a popular architect of Vietnam's early reforms, foreign institutions had grown disenchanted with his management in recent months.
A string of scandals raised doubt about the State Bank's supervisory ability.
While foreign bankers expressed fear at the lack of a comprehensive banking law, wild shifts in foreign exchange policy and confusion over collateral, Vietnamese state-owned banks found themselves heavily exposed in two key corruption scandals.
One involved the still-unexplained death of a top former official.
In another court case, the US$40 million collapse of Communist Party-affiliated firm Tamexco saw one of Mr Kiem's deputies called as a witness to explain approvals of several key loans.
Furthermore, rampant speculation on commodities and property by Vietnamese firms has raised doubts about an estimated $1 billion in letters of credit due over the coming year.
There is also growing concern at continuing cheap loans given by state-owned banks to prop up Vietnam's vast state sector.
Estimates show just 17 per cent of private savings flow within the banking system, one of the lowest in the region.