The State Bank of Vietnam has announced changes to its banking regulations that may alleviate pressure on liquidity and expand lending capacity for banks. According to the new Circular 50, which takes effect on December 1, 2026, the maximum loan-to-deposit ratio (LDR) will increase from the current 85% to 95%. This means that banks will be able to lend out the full amount of their deposits, a significant change from the previous limit.

The new regulations also introduce two liquidity ratios aimed at aligning Vietnam's banking system with Basel III standards. These ratios are the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). Banks will only be allowed to apply the new LDR calculation and the 95% cap if they also register to comply with both the LCR and NSFR. If they do not register by October 2028, they will continue to operate under the old LDR cap of 85%.

The LDR is calculated by dividing total loans by total deposits. The new Circular 50 modifies how both the numerator and denominator are determined. Notably, foreign loans will no longer be deducted from total loans, which is a change from the current regulation. Additionally, the new rules consider various funding sources, such as trust capital, net interbank funding, foreign loans, part of equity, and undistributed profits, while excluding certain investments like corporate bonds and non-lending credit.

Analysts from MB Securities (MBS) believe that the impact of raising the LDR cap will vary depending on each bank's balance sheet structure. Banks with substantial equity, retained earnings, foreign loans, and net interbank funding are expected to benefit more from the new LDR calculation. Conversely, banks with a high proportion of corporate bonds and non-lending credit may see less favorable effects.

Overall, MBS assesses that Circular 50 will positively impact listed banks, particularly those that adopt the LCR and NSFR early, allowing them to transition to the 95% LDR cap, thereby easing liquidity pressure and creating more room for lending.

From October 1, 2028, banks will be required to implement both the LCR and NSFR. However, they may opt to apply these ratios earlier starting late this year. The LCR reflects a bank's ability to maintain sufficient liquid assets to meet cash outflow demands during a 30-day stress period, with a minimum starting threshold of 50% by 2028, increasing by 10 percentage points annually until it reaches 100% by October 2033. The NSFR measures the stability of available funding against the demand for stable funding for assets, requiring a minimum of 90% by October 2028, increasing to 95% the following year and reaching 100% by October 2030.

Once the minimum thresholds of 100% for both the LCR and NSFR are met, banks will no longer need to comply with or report on the three previous liquidity ratios, although they will still be required to report the LDR. MBS notes that the adjustments in Circular 50 compared to earlier drafts are more flexible during the transition period, aimed at supporting liquidity for banks while paving the way for compliance with Basel III standards.

Despite remaining below the 85% cap, the average LDR of 27 listed banks has risen compared to previous periods, reflecting increasing pressure on capital balance. In this context, the State Bank has recently implemented several short-term technical measures to alleviate liquidity pressure and support the credit financing capabilities of the system. However, these remain short-term supports and may increase risks related to maturity mismatches and liquidity pressure if credit growth continues at a high rate. Therefore, the issuance of Circular 50, with a clearer management roadmap for liquidity and capital structure, is deemed necessary to support credit growth while ensuring the quality of balance sheets and systemic safety in the medium to long term.