SBV Restores 40% Short-Term Capital Ratio as Circular 25 Takes Effect

Vietnam's State Bank has reversed a four-year tightening cycle in a single instrument. Circular No. 25/2026/TT-NHNN, signed by Deputy Governor Doan Thai Son on June 22, 2026, restores the maximum ratio of short-term capital sources usable for medium- and long-term lending to 40% — up from the 30% floor that had been in effect — and takes effect in nine days, on July 1, 2026. Every bank and foreign bank branch operating in Vietnam must comply from that date.

Two Changes, Not One#

Coverage of the draft amendment — including our earlier analysis of the draft amendment — focused primarily on the ratio restoration. The final text confirms that change but adds a second amendment to Article 20 of Circular 22/2019/TT-NHNN that received less attention in draft coverage and carries independent significance for how banks calculate their permissible lending envelope.

Change 1: The 40% Ratio#

For every VND 100 of short-term deposits and other short-term liabilities, banks may now lend up to VND 40 into medium- and long-term instruments. Before July 1, the ceiling was VND 30 — a ten-percentage-point restoration, particularly consequential for banks with large short-term deposit bases that were running against the old floor.

The SBV progressively tightened this ratio beginning in 2020, citing concern about maturity mismatch. Circular 08/2020/TT-NHNN launched the tightening cycle; the ratio reached 30% through subsequent amendments. Circular 25 reverses the entire sequence in one step.

Change 2: State Treasury Term Deposits Now Count at 80%#

The amended Article 20 redefines how State Treasury deposits enter the short-term capital base calculation:

• State Treasury demand deposits: excluded entirely from the short-term funding base. This treatment is unchanged.
• State Treasury term deposits: 80% of the balance — or another ratio set by the Governor — is now included in the short-term funding base denominator.

The practical effect runs through the ratio arithmetic. A bank's permissible medium- and long-term lending volume equals 40% of its short-term capital base. If that base grows because State Treasury term deposits are now partially counted, the absolute lending ceiling rises even at the same 40% ratio. Banks holding significant State Treasury term deposits — state-owned commercial banks such as BIDV, Vietcombank, and Vietinbank are likely candidates, though the SBV has not published institution-level impact data — will see their short-term capital base expand accordingly. The SBV's own system-wide assessment of how much additional capacity this creates has not been disclosed.

Whether this treatment appeared in the June consultation draft or was introduced in final drafting is not confirmed in the available text of Circular 25. What the circular text establishes clearly is the operative rule: 80%, effective July 1.

Repeal and Consolidation#

Circular 25 fully repeals two predecessor instruments:

1. Circular 08/2020/TT-NHNN — which launched the tightening cycle
2. Circular 08/2026/TT-NHNN — a 2026 interim amendment to Article 20 governing State Treasury deposit treatment

Both nullifications take effect July 1. The compliance stack for banks simplifies: the governing instrument is now Circular 22/2019/TT-NHNN as amended by Circular 25/2026. The interim Article 20 terms in Circular 08/2026 are superseded — though whether those interim terms differed materially from the final Circular 25 version is not confirmed in the available source.

Who This Affects#

Banks with infrastructure and project finance pipelines gain immediate additional capacity to deploy long-dated credit. Vietnam's corporate bond market remains underdeveloped relative to the scale of infrastructure financing the economy requires, so bank balance sheets carry disproportionate responsibility for long-tenor project lending. The ten-percentage-point restoration directly addresses that constraint.

VIFC subsidiary banks — eight institutions have received approval so far, according to the SBV, including LPBank and HDBank — will operate under the 40% regime from the moment they are established. The circular's scope covers all banks and foreign bank branches operating in Vietnam, which will include VIFC-zone entities once they begin operations. Our earlier coverage of LPBank's VIFC subsidiary approval and HDBank's capital markets activity provides context on the institutions entering this framework.

Green energy and specialty finance structures benefit from expanded long-tenor bank lending headroom. The SBV's draft green loan subsidy decree and the VIFC's infrastructure sandbox both depend on banks being willing and able to extend long-dated credit. A 40% ceiling creates more room to do so than a 30% ceiling.

The Risk the SBV Is Taking#

The original tightening from 2020 to 2024 was motivated by a genuine prudential concern: Vietnamese banks were funding medium- and long-term loans — including real estate developer loans — with short-term retail deposits. When asset quality deteriorates, that maturity mismatch becomes a liquidity risk, not just a credit risk.

Circular 25 does not address that underlying structural dynamic. It restores capacity the SBV itself decided to constrain. The reversal is consistent with the macro policy direction — Vietnam is targeting GDP growth above 8% in 2026, and credit supply is a primary lever — but it reintroduces the headroom the 2021–2024 tightening was designed to remove. Whether banks deploy that headroom into productive long-term infrastructure lending or into the real estate and corporate loan categories that historically generate maturity-mismatch stress is the operational question regulators will need to monitor.

It is also worth noting that Circular 25 operates in Circular 22/2019 territory — the Basel II-era prudential ratio framework. The SBV's stated Basel III implementation trajectory, covering the Liquidity Coverage Ratio, Net Stable Funding Ratio, and updated Capital Adequacy Ratio, runs on a separate legal track. The two are not in formal conflict, but a 40% short-term capital ratio and a strict NSFR are in strategic tension: the NSFR is explicitly designed to limit exactly the kind of short-funding-for-long-lending that the 40% ratio permits.

What Comes Next#

By July 1: compliance is mandatory. Banks should confirm their current ratio against the 40% ceiling and assess whether the Article 20 change alters their short-term capital base calculation.

In the near term: the SBV has not published an impact assessment for the Article 20 change. Banks with large State Treasury term deposit balances should model the effect on their permissible lending envelope before deploying additional capacity.

Watch for: whether the SBV issues supplementary guidance on the Governor-set ratio option in the Article 20 amendment. The circular sets 80% as the default but preserves the Governor's authority to set a different figure — leaving one parameter formally open.

Basel III timeline: the SBV's intentions on LCR and NSFR implementation remain the longer-term prudential counterweight to this easing. Any timeline announcement on that front will reframe how much of the restored 40% headroom banks can practically use without creating future compliance friction.

This article was last updated on 23 June 2026. We will update it if the SBV issues supplementary guidance on the Article 20 Governor-set ratio provision or publishes a system-wide impact assessment.