HANOI (Reuters) - Panicky Vietnamese are withdrawing money from a major bank founded by arrested tycoon Nguyen Duc Kien, state media reported on Thursday, prompting the central bank to make a rare public assurance that their funds are safe.
Monday's arrest of Nguyen Duc Kien, 48, sent shockwaves through the Communist-run country, triggering a 9.2 percent slide in Vietnam's stock market this week and causing a run on deposits at Asia Commercial Bank (ACB), one of Vietnam's biggest lenders which Kien helped found in 1994.
The official Tuoi Tre newspaper said depositors began withdrawing money on Tuesday when the arrest was made public. "But thanks to advance preparation we still ensured good repayment," ACB Deputy Chief Executive Officer Do Minh Toan was quoted by the newspaper as saying.
Economists were already worried about the fragility of Vietnam's banking system and some Vietnamese have quickly turned to the traditional safe haven of gold: bankers said demand had jumped from Monday, pushing up the retail price by about 5 percent.
A Ho Chi Minh City resident told Reuters that depositors were standing in large crowds at ACB branches waiting to withdraw money.
Kien's arrest concerned irregularities at three investment companies he now runs.
ACB says Kien, a member of one of Vietnam's 30 wealthiest families, holds less than 5 percent of its stock and the government has said he plays no part in management.
However, Chief Executive Officer Ly Xuan Hai is absent, ACB told the central bank in a statement on Wednesday. He was summoned on Tuesday for police questioning after Kien's arrest and had not returned to work, said the An Ninh Thu Do newspaper, run by the Hanoi police.
Shares in ACB, which is 15 percent owned by Standard Chartered Plc, have lost nearly a fifth of their value this week. On Thursday they fell 6.7 percent to 21,000 dong.
STOCK MARKET HIT
The State Bank of Vietnam, the central bank, said it and the entire banking sector "will commit to standing ready to provide, funding support to ACB to ensure it meets its obligations for repaying deposits".
The central bank pumped 13 trillion dong ($624 million) in short-term funds into the banking system through open market transactions on Wednesday, more than double its injection of 5 trillion dong on Tuesday, its data showed.
Toan was quoted as saying the volume of cash withdrawn from ACB was higher on Wednesday than Tuesday. Toan, who is running the bank in the absence of the CEO, told the newspaper ACB could access up to 46 trillion dong ($2.2 billion) in funds if needed to meet demand for withdrawals.
It had borrowed 10 trillion dong from the central bank on August 21-22 and could also gradually withdraw 36 trillion dong from the interbank market, Toan said.
That sum represents around a third of the total weekly dong-denominated transactions on the interbank market of between 110 trillion and 130 trillion dong over the past month.
News of Kien's arrest helped send the stock market down 4.7 percent on Tuesday, the biggest one-day loss since late 2008.
Kien is considered influential in Vietnam's banking and financial sectors, with investment in several banks. His family is ranked fifth among Vietnam's 30 richest families in terms of stock market holdings, based on a list compiled by online news website VNExpress.
Kien is also deputy chairman of the Vietnam Professional Football Joint Stock Co, which runs Vietnam's top-tier professional football league.
(Reporting by Ho Binh Minh; Editing by Alan Raybould and Alex Richardson)
