Vietnam Banking Sector: Update on Amendments to Circular 22

On June 22nd 2026, the State Bank of Vietnam (SBV) officially issued Circular 25/2026 amending Circular 22, with a focus on relaxing certain prudential safety ratios for banks. Specifically, the ratio of short-term funds used for medium- and long-term loans (SMLR) was raised from 30% to 40%, while the SBV was also granted the authority to flexibly adjust the proportion of State Treasury deposits counted toward the Loan-to-Deposit ratio (LDR), compared with the fixed 20% under Circular 08/2026. These adjustments come as Vietnam accelerates infrastructure investment through numerous large-scale projects, driving a sharp rise in the economy’s demand for medium- and long-term capital, while funding pressure on the banking system remains persistent. The issuance of Circular 25 could help banks ease pressure to mobilize medium- and long-term funding, thereby helping to cool interest rate competition within the system.

Notably, the earlier Draft Circular to replace Circular 22, on which the SBV previously sought public comment, is oriented toward longer-term objectives, with a focus on applying liquidity and funding management standards in the spirit of Basel III. In addition to the three core Basel III metrics –  the Liquidity Coverage Ratio (LCR), the Net Stable Funding Ratio (NSFR) and the Leverage Ratio (LEV),  the Draft also introduces the Credit-to-Deposit ratio (CDR) as a domestic-specific regulation, replacing the current LDR during the transition period before banks fully meet Basel III requirements. There is not yet specific information on when the provisions of this draft will take effect.

Key highlights

• Circular 25 reflects a short-term easing stance to support growth: Raising SMLR from 30% to 40% will help ease the system’s pressure to mobilize medium- and long-term funding, thereby reducing upward pressure on funding costs. At the same time, the added mechanism granting the SBV flexibility to adjust the proportion of State Treasury deposits counted toward the LDR will allow the regulator to proactively support system liquidity when needed.
• Banks that stand to benefit from Circular 25: banks whose SMLR ratios were close to the 30% cap at the end of Q1/2026 (including MBB and VPB) stand to benefit most from the higher ceiling. The group of state-owned commercial banks (BID, CTG, and VCB) – which specialize in disbursing credit for public investment projects – could also benefit from reduced pressure to mobilize medium- and long-term funding.
• The draft aligning with Basel III standards carries long-term reform significance: Introducing the LCR, NSFR, and LEV ratios will strengthen liquidity discipline, funding quality, and the resilience of the banking system.
• CDR is the provision with the greatest impact if implemented: Compared with the current LDR, the CDR reflects a stricter relationship between credit and funding, even though the 85% cap remains unchanged. The scope of outstanding credit is broadened to include forms of credit extension beyond traditional lending, while the funding base excludes interbank funding. Banks that rely heavily on the interbank market for funding will be most affected if the CDR is applied.
• Banks with a competitive advantage in implementing Basel III standards: banks with a solid retail deposit base, a high proportion of long-term funding, and large buffers of High-Quality Liquid Assets (HQLA) will be better positioned, as they already have the foundation to meet the new requirements without needing significant balance sheet adjustments.