The State Bank of Vietnam has proposed the mandatory transfer of DongA Bank to HDBank as part of its structured effort to resolve institutions that have remained under special supervisory arrangements for an extended period. The proposal forms part of a broader banking sector clean-up plan that the SBV has been advancing over several years, targeting a group of weaker banks that accumulated difficulties prior to being placed under regulatory control.
DongA Bank has been subject to special supervision by the State Bank of Vietnam since 2015, following the identification of serious financial and governance problems at the institution. Over the decade since that intervention, the bank's situation has been the subject of sustained regulatory and government attention, with various resolution approaches considered as the SBV sought a pathway that would protect depositors and restore the institution to viable status.
MANDATORY TRANSFER AS RESOLUTION MECHANISM
The mandatory transfer mechanism under Vietnamese banking law allows the State Bank to direct the transfer of a troubled institution to an acquiring bank without requiring the consent of the transferring bank's existing shareholders, reflecting the state's overriding interest in financial stability. Unlike a commercial acquisition negotiated on market terms, the mandatory transfer framework places the SBV in the role of directing the transaction and setting the conditions under which the acquirer takes on the troubled institution.
For HDBank, the proposed acquisition of DongA Bank through this mechanism would represent a significant expansion of its customer base and branch network, though it also entails taking on an institution that has accumulated losses and asset quality challenges over the years of special supervision. The SBV's role in structuring the transfer is likely to include determining the terms on which HDBank assumes DongA Bank's obligations to depositors.
The transaction is part of the SBV's programme to reduce the number of banks under special supervision, a group that has also included other institutions dealt with through separate resolution processes. The Vietnamese government and the SBV have publicly committed to completing the resolution of these institutions as a prerequisite for a healthier banking sector capable of supporting the country's continued economic development.
SECTOR CLEAN-UP WITH LONG ROOTS
DongA Bank's difficulties trace back to a period of rapid credit expansion in the Vietnamese banking sector in the years before the SBV tightened its supervisory framework. The bank's problems, which included governance weaknesses and problematic loans, were among the most severe identified in that era, and its management came under criminal scrutiny. The decade-long special supervision period reflects the depth of the challenges involved in resolving the institution.
Vietnam's banking sector has undergone considerable consolidation and regulatory strengthening since the earlier period of fragility, with the SBV raising capital adequacy requirements, tightening loan classification rules and conducting more intensive on-site supervision. The resolution of DongA Bank through a transfer to a stronger institution such as HDBank is consistent with the global regulatory preference for resolving failing banks through absorption by viable acquirers rather than liquidation.
HDBank is an established mid-sized commercial bank with retail and corporate banking operations and a presence in consumer finance through affiliates. The SBV's proposal marks a step forward in the DongA Bank resolution process, though the regulatory and due diligence work required to complete a mandatory transfer of this nature means that the timeline for finalisation will be subject to the SBV's own process and the findings of that process.