Decree 329's AA- Floor Is Blocking JPMorgan, MUFG, and Bank of America from the VIFC

Four months into VIFC operations, not a single foreign bank holds a VIFC banking licence. The reason is a two-line requirement buried in Decree 329/2025/ND-CP: foreign institutions must hold a credit rating of AA- or above from S&P or Fitch, or Aa3 or above from Moody's, with a stable or better outlook at application. That threshold — confirmed publicly on 16 May 2026 by Assoc. Prof. Nguyen Huu Huan, Vice Chairman of the VIFC–Ho Chi Minh City (HCMC) Executive Agency — is currently blocking JPMorgan, Bank of America, Bank of China, MUFG, and more than ten other named international institutions that have expressed interest in joining.

What Decree 329 Actually Requires#

The existing explainer of Decree 329 covers the framework's liberalised foreign exchange provisions, dual-track accounts, and ex post supervision model in detail. It does not address the admission condition that precedes all of those benefits.

Under Decree 329, a foreign institution wishing to establish either a 100% foreign-owned commercial bank or a foreign bank branch within the VIFC must satisfy a minimum credit rating at the time of licence application:

• AA- or above from Standard & Poor's or Fitch Ratings, or
• Aa3 or above from Moody's,
• with a stable or positive outlook

This is not a financial soundness assessment or a regulatory standing check. It is a hard cut-off: an institution either holds the rating or it does not. No discretionary review, no equivalence pathway, no provisional licence while a rating is being upgraded.

The threshold was confirmed publicly by Assoc. Prof. Nguyen Huu Huan at the 16 May 2026 'Café Doanh nhân' event in Ho Chi Minh City.

The Sovereign Ceiling Problem#

The AA-/Aa3 floor is operationally distinctive because it interacts with a structural feature of credit markets: bank ratings are almost always capped at the sovereign ceiling of their home country.

Rating agencies treat a bank's home government as the implicit backstop of last resort. When a sovereign is rated A+, the agencies generally will not rate domestic banks above A+, regardless of individual balance-sheet strength. The logic is that a banking crisis deep enough to threaten a major institution will likely trigger sovereign intervention — and the intervention is only as reliable as the sovereign's own creditworthiness.

This creates an immediate problem for most of the institutions the VIFC was designed to attract. Japan carries a sovereign rating of A1 from Moody's (equivalent to A+ on the S&P scale). That ceiling places MUFG, SMBC, and Mizuho — three of the world's largest banks by assets — below the VIFC's Aa3 floor regardless of their capitalisation, liquidity, or operational track record. BIDV Senior Economist Can Van Luc made this point explicitly: many large Japanese banks sit at A or A+, one notch below the VIFC threshold, because of their sovereign ceiling.

The same ceiling effect applies broadly. France, Italy, Spain, South Korea, and most emerging-market countries rate below AA-. Their domestic banks, however strong individually, cannot exceed the sovereign cap. In practice, only institutions domiciled in sovereigns rated AAA or AA — a short list that includes the United States, Germany, the Netherlands, Switzerland, Australia, Singapore, and Hong Kong — could plausibly qualify. Even within that group, qualifying is not guaranteed: Huan noted that American banks themselves told a VIFC delegation that only JPMorgan meets the AA threshold in the US.

Stricter Than Any Peer IFC#

No comparable international financial centre applies a minimum credit rating floor as a binary entry condition for foreign bank licensing.

The Dubai International Financial Centre operates under the Dubai Financial Services Authority's risk-based authorisation framework. The DFSA considers regulatory standing, capital adequacy, governance, and the supervisory quality of the home regulator — not a specific rating floor. An institution rated A or BBB+ with a strong regulatory history and adequate capital can be authorised.

The Astana International Financial Centre in Kazakhstan uses a tiered authorisation model based on capital levels, professional experience, and home-country regulatory standing. No minimum credit rating appears in its licensing criteria.

India's GIFT City, regulated by the International Financial Services Centres Authority, focuses on net worth requirements, capital adequacy ratios, and home-country regulatory oversight. The IFSCA framework does not impose a credit rating threshold.

This comparison is worth stating directly: the VIFC's AA-/Aa3 requirement appears to be structurally stricter than any peer IFC currently operating. Peer IFCs use holistic, risk-based assessments that allow regulators to weigh multiple factors. The VIFC uses a single, mechanical cut-off that excludes institutions before any substantive assessment begins.

What the Current Membership Reveals#

The consequences are visible in the VIFC's actual membership. After more than four months of operations, the banking membership is entirely domestic. VIFC-HCMC's founding and strategic bank members include MB, TPBank, SHB, Nam A Bank, and HDBank (via Sovico). Vietcombank joined as an official VIFC-DN member. Seven domestic banks — Vietcombank, HDBank, SHB, MB, TPBank, LPBank, and Nam A Bank — have received AGM approval to establish dedicated VIFC subsidiaries. VietinBank remains in the research phase.

This domestic banking cohort brings genuine scale. The domestic bank subsidiary wave is the subject of separate analysis. But domestic banks cannot substitute for international ones in a centre whose stated purpose is to connect Vietnam to global capital markets. Huan acknowledged this directly: anchoring the VIFC on domestic banks alone is "a disadvantage."

The strategic evaluation framework for financial institutions considering the VIFC — covered in Vietnam's VIFC: What Global Financial Institutions Must Evaluate Before 2027 — assumes a pathway exists for foreign participation. The current threshold removes that pathway for the majority of institutions that would otherwise consider it.

What Officials and Economists Are Calling For#

Huan was unambiguous at the 16 May 2026 event: "Adjusting the criteria to be more appropriate will help expand scale, increase liquidity and raise the international character of Vietnam's financial market." BIDV Senior Economist Can Van Luc confirmed that international investors have been petitioning the government to lower the threshold, at least in the initial formation phase.

Neither official specified a target threshold. The most logical direction is a tiered or phased structure:

• A lower initial floor — A or A- with stable outlook — that admits a broader set of qualified international institutions during the VIFC's first three to five years
• A review mechanism that restores the higher threshold once the centre achieves critical mass
• Or a risk-based review process that allows regulators to admit institutions below the floor on a case-by-case basis, subject to enhanced capital or supervisory conditions

None of these options has been formally proposed in a draft amendment. Da Nang's broader push to amend the implementing decrees — covered in Da Nang's Implementing Decrees Are Too Strict: The Case for Amending Resolution 222 — touches related licensing concerns but does not specifically address the credit rating floor for banking members.

What Comes Next#

The reform call is now on record from the VIFC's own vice chairman. What matters is whether it produces a formal amendment proposal and, if so, how quickly.

Three things to monitor:

1. A draft amendment to Decree 329. Any change to the AA-/Aa3 floor requires a government decree amendment. Watch the Ministry of Finance and the State Bank of Vietnam for consultation notices.

2. The VIFC's supervisory body constitution. The HCMC May 15 deadline to constitute the VIFC's enforcement arm may produce a supervisory framework capable of administering a more nuanced, risk-based entry process — a prerequisite for moving away from a hard rating cut-off.

3. Foreign bank signalling. If institutions like MUFG or Bank of America formally submit expressions of interest despite the current barrier, that paper trail creates political pressure for reform. Huan's reference to US banks communicating directly with the VIFC delegation suggests that channel is already active.

For international financial institutions evaluating the VIFC now: the barrier is real, the reform discussion is real, and the timeline for any change is genuinely uncertain. Institutions rated below AA- should track the amendment process but not build business plans around a threshold reduction that has not yet been formally proposed.

This article was last updated on 17 May 2026. We will update it as amendments to Decree 329 are proposed or enacted.