Amendments to Circular 22/2019

On April 29, 2026, the State Bank of Vietnam (SBV) sought feedback from banks regarding amendments to Circular 22/2019, which regulates prudential ratios and safety limits in banking operations.

Overall, we believe the replacement of the LDR ratio with the CDR ratio represents a tighter and more substance-based approach compared to the previous regulation, while also encouraging banks to adopt international standards earlier. Our estimates suggest that the CDR of several banks may exceed the regulatory cap of 85%. However, as banks are allowed to choose between applying the standard ratios (i.e. CDR) or Basel III-based ratios, we believe the overall impact of the draft amendments on banking system liquidity and credit growth capacity will likely be limited.

Specifically, the SBV revised the calculation methodology from LDR to CDR to better reflect the liquidity status, while also introducing several new ratios in line with international practices (Basel III standards), most notably LCR, NSFR, and LEV.

CDR (Credit-to-Deposit Ratio) replaces the traditional LDR ratio. Under the draft, corporate bond balances are added to, while equity is deducted from, total credit (C). On the funding side (D), interbank deposits are excluded, while 20% of term deposits from the State Treasury are included. Overall, the revised methodology would result in a higher CDR compared to the previous LDR calculation. The regulatory threshold remains unchanged at 85%.

LCR (Liquidity Coverage Ratio) measures a bank’s ability to meet net cash outflows over a 30-day stress period. It is calculated as high-quality liquid assets (cash, government securities, etc.) divided by projected net cash outflows over the next 30 days. The ratio is intended to measure short-term liquidity resilience.

NSFR (Net Stable Funding Ratio) measures the stability of a bank’s funding structure. It is calculated as available stable funding (deposits, equity, etc.) relative to required stable funding. The ratio is intended to assess a bank’s ability to sustain ongoing operations such as credit over the longer term.

Banks are required to comply with the minimum thresholds according to a phased roadmap starting from the beginning of each year as follow:

However, banks may voluntarily adopt LCR and NSFR earlier. Banks that comply early with both ratios at the 100% threshold will be exempt from complying with the CDR ratio as well as the short-term funding for medium and long-term lending ratio, although they will still be required to report CDR periodically.

Another ratio introduced is LEV (Leverage Ratio), calculated as Tier 1 capital divided by total exposure. Banks are required to maintain a minimum threshold of 3%. For systemically important banks, dividend distributions are only permitted if LEV exceeds 3% + 50% of the capital conservation buffer (CCB), equivalent to approx 3.3%–4.2%. The purpose of this ratio is to prevent excessive leverage within the banking system. However, the SBV does not yet mandate implementation of LEV, and this ratio requirement is less stringent than the existing CAR framework.