Circular 25, which amends and supplements Circular 22 on limits and safety ratios in banking operations, was issued by the State Bank of Vietnam (SBV) and took effect on 1/7.

Under the new regulation, banks can now apply a maximum ratio of 40% for using short-term capital to fund medium and long-term loans. This ratio had previously been gradually reduced from 40% in 2020 to 30% starting from 10/2023.

This relaxation of the ratio provides banks with more capacity for medium and long-term lending, which is particularly beneficial for projects requiring substantial capital. However, this adjustment also carries the potential for increased liquidity risk within the banking system.

The SBV stated that this change is intended to implement the policies and directives of the Party and Government. These directives aim to promote socio-economic growth and medium-term public investment for the 5-year period of 2026-2030, with the goal of achieving double-digit growth while ensuring macroeconomic stability.

Concurrently, the regulator continues to allow 80% of the State Treasury's time deposit balances to be included in the mobilized capital used for calculating the loan-to-deposit ratio (LDR).

Transaction office at a commercial bank. Photo: Giang Huy

In just the last two months, the SBV has made two amendments related to both the ratio of short-term capital for medium and long-term loans and the method for calculating the LDR. Both measures are designed to support liquidity across the banking system.

Earlier, at the government's regular meeting in april, the government directed the SBV to review and amend existing regulations and implement appropriate measures to ensure the banking system's liquidity.

Quynh Trang