The draft amendments, announced on June 17, would increase maturity mismatches in banks' funding structures and heighten liquidity risks, according to a Moody's Ratings report.
The proposed change follows a period of rapid credit expansion by Vietnamese banks that supported robust economic growth but also contributed to tighter systemwide funding conditions. To alleviate these pressures, the State Bank of Vietnam (SBV) has proposed allowing banks greater flexibility in using short-term funding to finance longer-term lending.
While this may ease competition for long-term funding and reduce pressure on net interest margins, Moody’s expects the increased reliance on short-term funding to raise refinancing risks and exacerbate maturity mismatches, thereby increasing liquidity vulnerabilities.
In May, the SBV also proposed the introduction of Basel III-aligned liquidity ratios, including the credit-to-deposit ratio (CDR), liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) to be implemented in phases from 2027. These measures will align Vietnamese banks’ liquidity risk management more closely with international standards. The revised CDR will capture a broader range of credit exposures, including loans, corporate bonds held on balance sheet, and other credit extensions where banks bear credit risk.
At the same time, the LCR will require banks to hold sufficient high-quality liquid assets to withstand short-term stress scenarios, while the NSFR promotes more stable funding over 12 months. As of December, banks’ stock of high-quality liquid assets remained modest, at around 8.3 per cent of tangible banking assets. Collectively, Moody's expects these ratios to encourage banks to strengthen liquidity buffers and improve asset-liability management practices overtime. However, the benefits over the next 12–18 months are likely to be limited because of their phased-in implementation and potential execution challenges.
Overall, the two policy directions highlight a trade-off between supporting credit growth and strengthening financial stability. While the relaxation of funding caps may address near-term funding constraints, it also weakens banks’ liquidity risk profiles. Still, the introduction of Basel III-aligned ratios provides a longer-term framework to mitigate these risks, although their effectiveness will depend on the pace and quality of implementation.
