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Hanoi - Vietnam police have arrested a top banking tycoon on suspicion of illegal business activities, the government said on Tuesday, sending ripples through financial markets in the communist state.

Nguyen Duc Kien, 48, a shareholder in some of Vietnam's largest financial institutions, was taken into custody late Monday after police raided his Hanoi home and seized documents.

"Kien was arrested for illegal business activities," according to an announcement posted on the government's official website.

Multi-millionaire Kien is one of the founders of Asia Commercial Bank (ACB), which issued a statement saying the arrest would not impact its performance, even as its share price slumped on the Hanoi Stock Exchange.

His arrest sent "shockwaves across the country", according to the state-run Tuoi Tre newspaper.

Global banking giant Standard Chartered is one of ACB's "strategic partners" in Vietnam.

ACB's share price fell almost seven per cent to 24,100 Vietnam dong (S$1.44) when the Hanoi Stock Exchange opened, dragging down the wider market.

Bank spokesman Nguyen Thanh Toai described the arrest as "a personal issue".

"The detention of Kien is the decision of the authorities so it does not affect the normal operation of the bank," Toai said, adding that Kien held less than five per cent of shares in the group.

Kien is said to hold shares in ACB, Sacombank, Eximbank, VietBank and others and was reportedly involved in drafting the country's new bank reforms.

Eximbank and Sacombank were quick to stress that Kien was not a major shareholder in their institutions.

The banker rose to public prominence as a vocal critic of corruption in Vietnamese football, using his role as chairman of Hanoi Football Club to sound off against Vietnam's Football Federation.

The arrest comes as the communist party broadens an anti-corruption drive launched last month, and may signal deep political infighting among the country's elite, said Vietnam expert Carl Thayer, emeritus professor at the University of New South Wales in Australia.

The ruling party is keen to demonstrate it is tackling high-level corruption, he told AFP, adding "the atmosphere for some reason is just right for going after big fish".