State Bank of Vietnam issues Basel III-aligned capital adequacy rules introducing new capital buffers for banks

The State Bank of Vietnam held an implementation workshop on Circular 14/2025/TT-NHNN, which sets how commercial banks and foreign bank branches must calculate and maintain regulatory capital ratios and introduces new Basel III-style capital buffers. The circular specifies the determination and minimum levels for the Common Equity Tier 1 ratio, Tier 1 capital ratio and minimum capital adequacy ratio. It introduces a capital conservation buffer, a countercyclical capital buffer and a buffer for systemically important commercial banks. The framework for credit risk-weighted assets covers both the standardized approach and an internal ratings-based approach; the standardized approach broadly follows the current regime under Circular 41 with adjustments including for real-estate receivables and specialised lending exposures, while the internal ratings-based approach sets rules on calculating total credit risk-weighted assets, classifying exposures, expected loss and risk provisioning, and minimum methodological requirements. Operational risk requirements are updated in line with the Basel Committee’s latest guidance, including requirements on collecting and processing loss data, while counterparty credit risk and market risk provisions are retained from Circular 41. The circular takes effect on 15 September 2025. From that date, banks can register to apply the standardized approach or seek approval to use the internal ratings-based approach for credit risk, and from 1 January 2030 banks that have not registered for the standardized approach or have not been approved for the internal ratings-based approach must calculate capital adequacy using the standardized approach under the circular.