Vietnam Shows How To Clean Up The Banking System

Vietnam Shows How To Clean Up The Banking System: Ex-Banker Sentenced To Death For Fraud

by Tyler Durden

Sep 29, 2017 3:43 PM

 http://www.zerohedge.com/news/2017-09-29/vietnam-shows-how-clean-banking-system-ex-banker-sentenced-death-fraud

 

The lack of prosecution of US bankers responsible for the great financial crisis has been a much debated topic over the years, leading to the coinage of such terms as "Too Big To Prosecute", the termination of at least one corrupt DOJ official, the revelation that Eric Holder is the most useless Attorney General in history, and of course billions in cash kickbacks between Wall Street and D.C. And, naturally, the lack of incentives that punish cheating and fraud, is one of the main reasons why such fraud will not only continue but get bigger until once again, the entire system crashes under the weight of accumulated theft, corruption and Fed-driven malinvestment. But what can be done? In this case, Vietnam may have just shown the way - sentence embezzling bankers to death. Because if one wants to promptly stop an end to all financial crime, few things motivate as efficiently as a firing squad. 

 

According to the BBC, the former head of a major Vietnamese bank has been sentenced to death for his role in a fraud case involving some 800 billion dong (which sounds like a lot of dong, but equals roughly $35 million) of illegal loans. Nguyen Xuan Son, who served as general director of OceanBank, was convicted of embezzlement, abuse of power and economic mismanagement. Bank founder, tycoon Ha Van Tham, and dozens of other banking officials are also on trial, accused of lending violations.

Nguyen Xuan Son was sentenced to death at the People's Court in Hanoi

Meanwhile, dozens of former employees also received lengthy prison sentences in the major corruption trial. Because OceanBank is partially-state owned, Son's crime of mishandling state money was thought to be particularly serious. After leaving the bank, he rose to be head of state oil giant PetroVietnam. As Reuters reported previously, PetroVietnam and Vietnam’s banking sector are at the heart of a sweeping corruption crackdown in the communist state.

The four officials are accused of intentional breaches of state rules over a loss-making investment in Ocean Group’s banking unit, police said in an online statement.

Investigations into PetroVietnam made global headlines last month when Germany accused Vietnam of kidnapping Trinh Xuan Thanh, a former official of a PetroVietnam unit, from a park in Berlin and forcing him home to face charges of financial mismanagement.

A Politburo member who was a former PetroVietnam chairman and a vice trade minister have also been sacked from their positions as part of the crackdown -- unusual moves in a country where such senior officials are rarely dismissed.

To be sure, Vietnam is one of the world's biggest executioners, according to Amnesty International, but this is said to be the first time in years that the death penalty has been given to such a high-flying former official. Back in 2013, another former banker, Vu Quoc Hao, the former general director of Agribank Financial Leasing Co, was also sentenced to death by lethal injection for embezzling $25 million (or what Goldman would call "weekend lunch money") a case which however was relatively low profile and received little international attention. 


Earlier in the day, OceanBank's ex-chairman Ha Van Tham, once one of the richest people in Vietnam, was jailed for life on the same charges, and for violating lending rules. Judge Truong Viet Toan said: "Tham and Son's behaviour is very serious, infringing on the management of state assets and causing public grievances, which requires strict punishment."

The bank's ex-chairman Ha Van Tham was jailed for life
More details from BBC:

In total, 51 officials and bankers stood trial, accused of mismanagement leading to losses of $69m (£50m).

The case comes amid a massive anti-corruption crackdown in Vietnam, which is ranked as one of the most corrupt countries in Asia. It is ranked 113th out of 176 countries on Transparency International's corruption perceptions index.

The government has vowed to tackle the issue in order to boost the country's economic growth. In May, a top Vietnamese official was sacked for "serious violations" while running PetroVietnam.

And yet,  while one could be left with the impression that this is a case of justice finally being done, even today's sentences appears to have an element of corruption to them: according to BBC, the blitz, while tackling corruption, has mainly targeted opponents of Communist Party chief Nguyen Phu Trong.

Still, no matter the circumstances, an outcome such as this in the US remains impossible: after all it is America's very own embezzling bankers that control the legislative and judicial branches, and most recently, the executive not to mention the central bank, which is why deterrence of any substantial scale will never take place in the US and small, medium and large-scale theft will continue unabated, with the occasional slaps on the wrist, until there is nothing left to steal.

FT: Undercapitalisation. Martin Wolf commented by Marco Saba

Banking remains far too undercapitalised for comfort

Leverage ratios closer to 5:1 will help give creditors confidence in liabilities

Martin Wolf

https://www.ft.com/content/9dd43a1a-9d49-11e7-8cd4-932067fbf946

Banking sector stability still faces issues 10 years on from the run on Northern Rock © Getty

September 21, 2017

by Martin Wolf

Just over 10 years ago, the UK experienced, with Northern Rock, its first visible bank run in one-and-a-half centuries. That turned out to be a small event in a huge crisis. The simplest question this anniversary raises is whether we now have a safe financial system. Alas, the answer is no. Banking remains less safe than it could reasonably be. That is a deliberate decision.
Banks create money as a byproduct of their lending activities. The latter are inherently risky. That is the purpose of lending. But banks’ liabilities are mostly money. The most important purpose of money is to serve as a safe source of purchasing power in an uncertain world. Unimpeachable liquidity is money’s point. Yet bank money is least reliable when finance becomes most fragile. Banks cannot deliver what the public wants from money when the public most wants them to do so.
This system is designed to fail. To deal with this difficulty, a source of so much instability over the centuries, governments have provided ever-increasing quantities of insurance and offsetting regulation. The insurance encourages banks to take ever-larger risks. Regulators find it very hard to keep up, since bankers outweigh them in motivation, resources and influence.
A number of serious people have proposed radical reforms. Economists from the Chicago School recommended the elimination of fractional reserve banking in the 1930s. Mervyn King, former governor of the Bank of England, has argued that central banks should become “pawnbrokers for all seasons”: thus, banks’ liquid liabilities could not exceed the specified collateral value of their assets. One thought-provoking book, The End of Banking by Jonathan McMillan, recommends the comprehensive disintermediation of finance.

Reforms have not yet made the banks’ role as risk-taking intermediaries consistent with their role as providers of safe liabilities

All these proposals try to separate the risk-taking from the public’s holdings of unimpeachably safe liquid assets. Combining these two functions in one class of institutions is a recipe for disaster, because the first function compromises the second, and so demands huge and complex interventions by the state. That is simply not a market solution.
Radical reforms are desirable. But today this is politically impossible. We have to build, instead, on the reforms introduced since the crisis. I was involved in the recommendations from the UK’s Independent Commission on Banking for higher loss-absorbing capacity and the ringfencing of UK retail banks. Both are steps in the right direction. Even so, as Sir John Vickers, chairman of the ICB, noted in a recent speech, the reforms have not yet made the banks’ role as risk-taking intermediaries consistent with their role as providers of safe liabilities. That is largely because they remain highly undercapitalised, relative to the risks they bear.
Senior officials argue that capital requirements have increased 10-fold. Yet this is true only if one relies on the alchemy of risk-weighting. In the UK, actual leverage has merely halved, to around 25 to one. In brief, it has gone from the insane to the merely ridiculous.
The smaller the equity funding of a bank, the less it can afford to lose before it becomes insolvent. A bank near insolvency must not be allowed to operate, since shareholders have nothing left to lose from taking huge bets. There is, however, a simple way of increasing the confidence of a bank’s creditors in the value of its liabilities (without relying on government support). It is to reduce its leverage from 25 to one to, say, five to one, as argued by Anat Admati and Martin Hellwig in The Bankers’ New Clothes.
As Sir John notes, this would impose private costs on bankers, which is why they hate the idea. But it would not impose significant costs on society at large. Yes, there would be a modest increase in the cost of bank credit, but bank credit has arguably been too cheap. Yes, the growth of bank-created money might slow, but there exist excellent alternative ways of creating money, especially via the balance sheets of central banks. Yes, shareholders would not like it. But banking is far too dangerous to be left to them alone. And yes, one can invent debt liabilities intended to convert into equity in crises. But these are likely to prove difficult to operate in a crisis and are, in any case, an unnecessary substitute for equity.
The conclusion is simple. Banks are in better shape, on many fronts, than they were a decade ago (though the questionable treatment of income and assets in banks’ accounts continues to render their financial robustness highly uncertain). But their balance sheets are still not built to survive a big storm. That was true in 2007. It is still true now. Do not believe otherwise.

Marco Saba:

 

"banks’ liquid liabilities could not exceed the specified collateral value of their assets" - this is like to say that the face value of the money creation must not exceed the face value of the loot on the other side of the balance... No author do analyze seriously the problem, i.e. that money creation is a liability for the public, not for the bank that created the money, in a FIAT regime where the bank liability is a liability only in name, as William Buiter pointed out in 2007. Commercial banks do create digital currency (deposits) denominated like the legal tender because their money is a legal tender de facto. 

 

The aggregate value of all money created by the banks - and not accounted for as a revenue in their cash flow accounts at the time of creation - is the biggest stealth tax that the public at large is paying without knowing, and it is 'taxation without representation.' In Italy this tax is twofold the state balance per year: 1.8 trillion Euros. 

 

There is a simple solution that is in accord with US-GAAP and IAS-IFRS accounting rules: to account for money creation as a revenue in the bank's books before lending or spending. There is no more need to hide money creation in the books  (i.e. clandestine money creation) because the public now know well - after eight centuries - that the banks are engaged in money creation, the biggest game in town. 

 

If the banks become compliant with the cash flow reporting rules, the client deposits will be segregated from the banks balance sheet while today the only thing segregated from the books remains the truth...

The Insane Asylum in Brussels and the Horrors That Happened There

To: Thomas Wieser, President of the Eurogroup Working Group


The Insane Asylum in Brussels and the Horrors That Happened There

Rome, September 1, 2017


 Dear President,

let me set the record straight.

From the birth-place of the common sense and economics knowledge lobotomy, the institutions in Brussels are more and more becoming a junkyard for mentally disabled old people.

Is there a chance of redemption ?

I think almost everyone is terrified of insane asylums. Think of all the horror movies that have taken place in one. American Horror Story set its second (and best) season within the walls of a ‘60s asylum.
They’re scary because they force us to confront the fact that our brains can turn on us any minute and turn us into an entirely new person.

There are plenty of famous insane asylums but the Brussels-one stand tall among others because it is not yet publicly recognized as that.

By reading "Adults in the room", the last available psichiatric report on the conditions of the European burocrats, one has to put forward some common sense observation.

Take this quote from the above report by Doctor Varoufakis:

"Given that I was not willing to plunder the remaining reserves as he had suggested, I asked Wieser whether we could use this credit to meet our IMF payments for March, buying us both extra time to negotiate. ‘It sounds reasonable,’ replied Wieser, advising me to send a formal request to Jeroen, his boss, for access to that €1.2 billion. (Days later, when I did so, Jeroen referred me to the president of the Eurogroup Working Group ... Thomas Wieser! And what was Wieser’s verdict, now that he had been given the authority to decide? That what I was requesting was ‘too complicated’.)"

How we can help those poor people ? Containement is not enough. The new ECB tower headquarters hosts some of the most dangerous cases, those that are willingly destroying the European dream by their insane policies of stealing by stealth - through accounting abracadabra - most of the wealth of the European Union citizens.

How so ? The European Central Bank - who think to be the Overlord of the place, a common disease in the asylums - don't publish the cash flow statement because they don't even know how to account for money creation... And the ECB has been put in charge of the Asylum !

Three suggestions

The first suggestion that comes to mind is to ascertain if the ECB people are only insane or maybe they are part and parcel of a secretive terrorist group that want to turn European states in the same pityful condition as Greece. To ascertain any of the above, I suggest to establish the 'Insane or Terrorist Working Group' (ITWG) but, in the meantime, to cordon-off those people awaiting for the results of the ITWG study by taking care that all the communications from the ECB Tower and aliens be curtailed off just in the case they want to try to escape from the tower.

The second suggestion is to nominate an extraordinary commissioner in place of the actual plunderer in chief  Mr. Draghi and give to the new man (woman, transgender, whatever) only the powers normally attribuable to a mint chief. I.e. all the gains from the Euro creation must be returned to the Treasuries of the European member states.

The third suggestion is the 'extended Brussels holiday' i.e. sending the European Commission to Maldive Islands where they will be tought economics by Varoufakis and the likes until they can distinguish the difference from creating new money and imposing more taxes to the exhausted European subjects.

In my humble opinion You should read this letter to your friends at the next sex gathering so as to see if they share my suggestion to enact the three measures above as soon as possible.

Thank you and best regards from a concerned citizen.

Marco Saba



 

See also:

Greece repays a loan: an ECB typical shenanigan