State Bank of Vietnam consults on draft bank prudential rules to phase in Basel III liquidity and funding ratios

The State Bank of Vietnam has published a consultation on a draft circular setting prudential limits and safety ratios for banks and foreign bank branches, with the main change being the introduction of Basel III-aligned liquidity coverage ratio and net stable funding ratio requirements. Under the proposal, banks would have to hold enough high-quality liquid assets to cover 30-day net cash outflows under the liquidity coverage ratio, which would rise from 70% to 100% over four years, while the net stable funding ratio would increase from 90% to 100% over three years to strengthen longer-term funding stability. The draft does not immediately impose a leverage ratio, with any formal requirement to be introduced later if the Governor of the State Bank of Vietnam considers it necessary. The proposal also allows banks that meet the required conditions to adopt the liquidity coverage ratio and net stable funding ratio early at a minimum of 100%, without following the transition path. Those banks would be exempt from certain corresponding prudential ratios under Circular 22/2019/TT-NHNN. In addition, the draft revises the ratio of outstanding credit to mobilised funds by using total outstanding credit rather than total outstanding loans in the numerator and by adjusting the denominator to include additional eligible funding sources for commercial banks and foreign bank branches. Until a leverage ratio is formally required, commercial banks and foreign bank branches would manage it under their internal rules.