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Vietnam's Banking Sector Braces for Tighter Capital Adequacy Rules
Starting September 15, 2025, Vietnam's banking sector will witness stricter capital adequacy regulations with the implementation of Circular No.14/2025/TT-NHNN. Issued by the State Bank of Vietnam (SBV), the new circular aims to align Vietnam's banking standards more closely with Basel III international standards.
The key changes include raising the minimum Common Equity Tier 1 (CET1) ratio to 7%, and requiring the overall Capital Adequacy Ratio (CAR), including the Capital Conservation Buffer (CCB), to reach at least 10.5%. A flexible Countercyclical Capital Buffer (CCyB) of 0% to 2.5% is also introduced, depending on economic conditions.
The circular also introduces capital buffers for systemically important banks and tightens dividend distribution rules. Banks that meet Basel III standards will enjoy more freedom in credit growth, while those with weak capital buffers face tighter restrictions. Banks must enhance equity capital and limit lending to high-risk sectors, such as real estate, by adjusting risk weights.
The implementation of Circular 14 is phased, with a transitional period until the end of 2029 where banks may choose between the new and old calculation methods for CAR; full compliance with the circular's requirements is mandatory from January 2030.
Vietnam's current average CAR of around 12% is lower than many regional peers and global standards. The stricter capital requirements aim to strengthen the banking system’s resilience against shocks, improve internal risk management, and align capital buffers closer to international benchmarks.
The circular encourages banks, particularly state-owned banks ("Big 4") and private banks, to proactively improve financial capacity and maintain stronger capital bases to protect against unexpected fluctuations. Compared to regional and global standards, Vietnam’s previous capital adequacy levels were relatively thin, but Circular 14 positions banks to meet or approach Basel III norms.
In addition, Circular 14 includes adjustments to support specific lending segments. Loans to Small- and Medium-sized Enterprises (SMEs) will have their risk weight slightly reduced from 90 to 85%. Personal loans with outstanding balances under VND8 billion ($320,000) will see their risk weight reduced from 100 to 75%.
Despite the low CAR, the CAR of several banks, especially among state-owned commercial banks, has been improving slowly over the years. In the first quarter of 2025, the total charter capital of state-owned commercial banks listed on the stock exchange was VND207.47 trillion ($8.3 billion), a 2.1-fold increase from 10 years ago. Private commercial banks in Vietnam showed a more impressive surge, with charter capital rising to almost VND609 trillion ($24.36 billion), a 3.3-fold increase over the same period.
The circular's aim to align more closely with Basel III capital adequacy standards and its support for specific lending segments, such as agriculture, rural areas, and SMEs, is expected to encourage safer credit growth and enhance the resilience of Vietnam's banking sector.
In light of the upcoming stricter capital adequacy regulations in Vietnam's banking sector, there will be a significant focus on increasing equity capital and improving financial capacity among banks, particularly the state-owned banks and private banks. To meet the Basel III standards, businesses in the industry, finance, and banking-and-insurance sectors will need to adapt to the new rules, such as the increased minimum Common Equity Tier 1 (CET1) ratio and changes in risk weights for certain lending segments, like Small- and Medium-sized Enterprises (SMEs).
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