August 21, 2012 / 11:18 AM / 5 years ago

UPDATE 1-Vietnam banking tycoon arrested, banking shares drop

HANOI, Aug 21 (Reuters) - Vietnamese police have arrested a high-profile banking tycoon on accusations of conducting illegal business at three companies, the government and central bank said on Tuesday, reigniting concern over Vietnam's fragile banking industry.

The news sent bank shares lower as it added to investors' worries about a sector strained by years of high inflation, tumbling asset prices and ties to a state sector plagued by red ink, corruption and cronyism.

Nguyen Duc Kien, multi-millionaire founder of Asia Commercial Joint Stock Bank (ACB), was detained on Monday in connection with violations at three companies of which he was chairman, the government said in a statement.

As of late Tuesday, Kien remained in custody.

Police have launched a formal criminal investigation, the statement said, without disclosing details of Kien's alleged violations. None of the three companies is listed.

The central bank affirmed that Kien's alleged violations did not relate to business at ACB, one of Vietnam's largest banks.

The government said Kien was not involved in running ACB's business, and ACB Deputy Chief Executive Nguyen Thanh Toai told Vietnam Television that Kien was not a major shareholder, holding less than 5 percent of the stock.

Even so, ACB's shares tumbled nearly 7 percent on Tuesday, pushing the broad stock market index down nearly 5 percent. The bank is 15 percent owned by Standard Chartered Plc .

Police also summoned a senior ACB executive for questioning on Tuesday, official news website VNExpress reported.

Police Ministry officials were not available for comment.

The State Bank of Vietnam, in a statement, said it is "monitoring closely the monetary market." The central bank added that it stood ready to provide liquidity support "to ensure the stabilisation and safety of the (banking) system."

Kien, 48, is deputy chairman of the Vietnam Professional Football Joint Stock Co, which runs Vietnam's top-tier professional football league. He is also chief executive of Hanoi-based Asia Financial Group Joint Stock Co, according to ACB's annual report for 2011.

Stocks in other publicly listed banks such as Vietnam Export Import Commercial Joint Stock Bank (Eximbank) and Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) ended lower.

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