Tightened regulations promote security, limit cash withdrawals
The banking sector in Vietnam is undergoing a significant transformation, with new capital safety regulations set to reshape dividend practices across the industry. These changes, outlined in Circular 14/2025 issued by the State Bank of Vietnam, aim to prioritise capital consolidation and financial stability over shareholder cash payouts.
Under these tighter regulatory standards, commercial banks and foreign bank branches can only pay cash dividends if they meet strict capital adequacy conditions. To qualify for cash profit distribution, banks must meet minimum standalone capital adequacy ratios: Tier 1 core capital at 4.5%, Tier 1 capital at 6%, and a capital adequacy ratio (CAR) of at least 8%. For banks that have subsidiaries, these thresholds must be met both on a standalone and consolidated basis.
In light of these new regulations, several banks have already begun raising their charter capital in anticipation. For instance, NCB aims to raise its charter capital to VND19.28 trillion this year, while KienlongBank plans to increase its charter capital from VND3.65 trillion to VND5.82 trillion.
Some banks, like TPBank, are taking a dual approach, distributing more than VND2.6 trillion in cash (10%) and issuing up to 5% in new shares. Others, such as VPBank, are allocating nearly VND4 trillion to shareholders, and VIB is planning to distribute over VND2 trillion in cash and issue bonus shares of up to 14% to boost charter capital.
Notably, some banks have announced second-quarter cash dividends. VPBank, TPBank, and VIB announced dividends of 5%, 10%, and 7% respectively. LPBank, meanwhile, paid out the highest dividend amount in the sector this year, equivalent to VND2,500 per share and approximately VND7.47 trillion in total.
The era of widespread cash dividends may be drawing to a close as capital rules become more stringent. However, only banks with solid balance sheets and forward-looking strategies will be positioned to continue rewarding shareholders in this way. The landscape is changing, and with it, the expectations of both regulators and investors.
As of early 2025, total charter capital across 28 domestic commercial banks had reached over VND823.5 trillion (approximately US$33 billion), up 15% from the end of 2023. The number of banks with charter capital exceeding US$1 billion increased from twelve to fifteen, with privately held banks leading the momentum.
These changes are part of a broader effort to ensure the stability and growth of Vietnam's banking sector. As the new regulations take effect from September 15, 2025, it will be interesting to see how banks adapt and navigate this new landscape.
- In light of the new regulations outlined in Circular 14/2025, the banking sector in Vietnam is raising charter capital to meet the stricter capital adequacy conditions for cash dividends.
- Under the new policies, banks that fail to meet the minimum standalone and consolidated capital adequacy ratios will be unable to distribute cash dividends, forcing them to consider alternative strategies like issuing new shares.
- The era of widespread cash dividends might be shifting towards a focus on business growth and investments, as banks start to prioritize capital consolidation and financial stability.
- With these regulatory changes in the banking sector, investors may need to reevaluate their strategies for investing in the Vietnamese economy, considering the ability of banks to meet the new conditions for cash dividends and the potential impact on economic growth.
