Vietnam's Central Bank Tightens Liquidity Rules to Meet Basel III Standards
The State Bank of Vietnam (SBV) has proposed changes to how banks assess liquidity, moving towards stricter, substance-based rules. Draft amendments to Circular No.22/2019/TT-NHNN now exclude certain deposits from funding calculations. The shift aims to align local banking practices with global Basel III standards while offering incentives for early compliance. Under the revised methodology, interbank deposits and 80% of State Treasury term deposits will no longer count toward a bank’s funding base. This adjustment could push several major lenders—including VPBank, VIB, MB, VietinBank, BIDV, and Sacombank—beyond the 85% credit-to-deposit ratio (CDR) cap if their capital structures remain unchanged. State-owned banks currently hold nearly all State Treasury deposits, totalling around $24.97 billion of the system’s $25.07 billion.
The new CDR calculation also includes corporate bond balances in total credit while deducting equity. To ease the transition, the SBV is encouraging early adoption of Basel III standards. Banks that register now and meet liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) requirements will be exempt from CDR compliance. These Basel III metrics assess a bank’s ability to handle short-term cash demands and sustain long-term lending. ACB Securities (ACBS) expects the impact on overall system liquidity to be limited. The changes are designed to bring Vietnam’s banking sector closer to international norms. Mandatory compliance with Basel III is set for 2028, but institutions can opt in earlier. As of March 31, key lenders like Vietcombank, VietinBank, and BIDV were already near the current CDR limit, with ratios of 84.5%, 83.5%, and 82.9% respectively.
The proposed amendments will reshape how banks calculate liquidity, with stricter rules on deposit inclusion and new incentives for Basel III adoption. Lenders exceeding the CDR cap may need to adjust their capital structures before the 2028 deadline. The SBV’s approach balances tighter regulation with flexibility for early compliance.
