The State Bank of Vietnam is currently soliciting feedback on a draft amendment to Circular 22/2019, which outlines safety limits and ratios for banking operations. The central bank's key proposal is to raise the maximum proportion of short-term capital that commercial banks can allocate to medium and long-term loans from the current 30% to 40%.

This proposed adjustment would essentially restore the ceiling to levels seen before 2020. Under existing regulations, this ratio had undergone a gradual reduction, decreasing from 40% in 2020 to 30% effective October 2023. If approved, the amendment would grant banks greater flexibility to extend medium and long-term credit, which is particularly beneficial for large-scale development projects requiring substantial capital. However, this policy shift also introduces the potential for increased liquidity risks within the banking system.

According to the State Bank of Vietnam, this policy change aims to implement the directives of the Party and Government to stimulate socio-economic growth and support the 5-year medium-term public investment plan for 2026-2030. The overarching objective is to achieve double-digit economic growth while maintaining macroeconomic stability across the nation.

A transaction office at a commercial bank. Photo: *Giang Huy*

In addition to the capital ratio, the draft also includes proposed revisions to the method for calculating total deposits when determining the loan-to-deposit ratio. Specifically, 80% of the State Treasury’s term deposits would be included in a bank’s total deposits. Alternatively, the Governor of the State Bank of Vietnam could establish a different ratio for specific periods, based on prevailing economic conditions.

The State Bank of Vietnam emphasized that these proposals are designed to implement directives from competent authorities to foster economic growth. Furthermore, they align with recent conclusions, resolutions, and directives issued by both the Government and the State Bank of Vietnam regarding credit mechanisms and overall banking operations.

Quynh Trang