The indictment against Vietnamese tycoon and former banker Nguyen Duc Kien reads like a "how-to" guide for masterminding fraud in a country with banking oversight so slipshod it brought one of Asia's most promising emerging economies to the brink of crisis.

The founder of Vietnam's number four private lender Asia Commercial Bank (ACB) (>> Asia Commercial Bank), went on trial on Wednesday accused of a litany of crimes that cost depositors 1.4 trillion dong ($66.4 million) in one of the country's most high-profile fraud cases.

His is just the tip of the iceberg, one of many going to trial involving bank executives who stole hundreds of millions of dollars by exploiting loopholes and lax regulation during Vietnam's 2003-2007 economic boom, when dozens of banks grew fast and lent frivolously.

Their weaknesses were exposed when the economy overheated, revealing Southeast Asia's highest ratio of non-performing loans, which made credit off-limit for most Vietnamese, plunged at least 150,000 businesses into bankruptcy and put the brakes on retail and real estate growth.

Kien faces life in prison if found guilty of tax evasion, conducting illegal business, "swindling to appropriate assets" and deliberately violating state laws on economic management.

"I'm innocent, I'm accused unjustly," the silver-haired Kien said as he stood in shackles before the bench with seven other accomplices during a closed hearing.

"I request a public trial, as soon as possible, so everyone can know the truth in this case."

Kien, 50, once owner of former Vietnamese soccer champions Hanoi ACB, is on trial with ACB's former chairman Tran Xuan Gia and seven other alleged accomplices, who each face 20 years in prison.

Gia, 75, was Vietnam's minister of investment from 1996 to 2001 and is now in poor health. He did not attend the hearing and judges agreed to postpone the trial of all nine defendants early in the afternoon.

COMPLEX SCAMS

The prosecution says Kien committed massive fraud as chairman of six investment companies permitted only to trade in gold, which illegally bought stock in ACB, 15.3 percent owned by Standard Chartered Bank and 7.4 percent owned by Jardine Matheson (>> Jardine Matheson Holdings Limited).

He is also accused of forging documents to defraud top steel firm Hoa Phat Group (>> Hoa Phat Group JSC) of 264 billion dong in shares and of conspiring to commit fraud with another banker, 36-year-old Huynh Thi Huyen Nhu.

Nhu was jailed for life in January for co-opting 21 colleagues to steal $190 million of her customers' deposits while at Vietinbank (>> Vietnam Joint Stock Commercial Bank), Vietnam's biggest partly private bank. Some 719 billion dong of that money came from deposits by ACB staff, at Kien's request, according to the indictment.

Fitch Ratings downgraded ACB to negative last year, in part because of potential losses from "exposure to companies where Nguyen Duc Kien holds senior positions".

Toxic debt and rampant fraud have dented the image of Vietnam's fledgling banking sector but economists say it will struggle to win confidence of investors as long as foreign banks remain limited to only small stakes.

A single "strategic foreign investor" - an entity with $20 billion of registered capital - can own just 20 percent of a local bank, within a total 30 percent foreign shareholding.

But experts and foreign bankers say there is little incentive to invest in, overhaul and re-capitalize Vietnam's troubled lenders with only small stakes on offer.

Independent economist and former government advisor Le Dang Doanh said fraud would continue to plague the banking sector as long as cross-ownership, much of which involves state-run firms, and weak regulations, were allowed to continue.

"It's all too clear that the Vietnamese banking system contains many serious problems," he said. "If the laws and supervision in Vietnam were good, we could have avoided all these cases."

($1 = 21,096 Vietnam Dong)

(Writing by Martin Petty; Editing by Jacqueline Wong)

By Nguyen Phuong Linh