HANOI, Vietnam (AP) — Police in Vietnam have arrested a prominent businessman and one of the country's richest men on suspicion of lending fraud, as authorities step up their crackdown on financial crimes in a bid to clean up the debt-ridden banking sector.

Ha Van Tham, former chairman of the board of the private Ocean Bank, was taken into police custody in Hanoi on Friday for "violating lending regulations," the Ministry of Public Security said in a statement posted on its website late Friday. Police searched his house and workplace.

Tuoi Tre newspaper reported Saturday that Tham in 2012 approved a loan of 500 billion dong ($23.5 million) to a private real estate company without proper collateral and the company is likely to default on the loan.

Tham's arrest came as Vietnam is trying to clean up high levels of bad debts in its banking system, which have dragged down economic growth in recent years and caused public anger.

The debts have climbed to 8 percent of the outstanding loans as of July this year, according to the State Bank of Vietnam, which targets to bring the bad debts level down to 6 percent by the end of this year.

The central bank said in a statement it has suspended Tham as chairman of the board of the Ocean Bank after finding he committed "serious law violations" and to ensure the bank's operations are safe, stable and are in line with the law.

Tham was chairman of the conglomerate Ocean Group with business interests in real estate, banking, security, retails and hotels. Ocean Group is a major shareholder of unlisted Ocean Bank.

Ocean Group's shares on the main bourse, Ho Chi Minh City Stock Exchange, tumbled 11 percent since Wednesday amid rumors of Tham's arrest to close at 10,900 dong (51 cents) on Friday. He was the 8th richest man in Vietnam's stock exchange at the end of 2013.

Bad debts are traced to the late 2000s, when Communist authorities encouraged state-owned banks to hand out easy credit to investors and developers as part of an effort to stimulate the economy, particularly the real-estate sector. The property boom crashed and banks are weighed down with bad debt, much of it owed by politically connected conglomerates.

In June, a court in Hanoi sentenced Nguyen Duc Kien, the founder of Asia Commercial Bank, one of Vietnam's largest, to 30 years in jail after finding him guilty of fraud, tax evasion, illegal trade and "deliberate wrongdoing" in scams at investment companies run by him.