SBV Eases LDR Calculation for State-Owned Banks via Circular 08

Overview

The State Bank of Vietnam (SBV) issued Circular 08 on May 15, amending Circular 22 on prudential ratios, to ease the loan-to-deposit ratio (LDR) calculation for banks. The key change allows banks to include 20% of State Treasury term deposits in the LDR denominator, previously excluded entirely. This regulatory adjustment improves liquidity and credit growth capacity, particularly for state-owned banks BID, VCB, CTG, and AGR, which hold the vast majority of Treasury deposits.

Key Facts

• Circular 08 amends Circular 22 and took effect on May 15.
• Banks can now count 20% of State Treasury term deposits in the LDR denominator, versus full exclusion before.
• As of March 31, State Treasury deposits at the four state-owned banks (Vietcombank, BIDV, Agribank, VietinBank) totaled over VND 626,700 billion, representing more than 99% of system-wide Treasury deposits.
• LDR ratios at the four state-owned banks as of March 31: VietinBank 83.5%, BIDV 82.9%, Vietcombank 84.5%, Agribank 83% — all near the 85% cap.
• The SBV stated the move aims to alleviate liquidity pressure in the banking system, following a government directive in April.
• The circular excludes from LDR calculation: margin deposits, special-purpose deposits, demand deposits, and 80% of State Treasury term deposits.

What Happened

The State Bank of Vietnam issued Circular 08 on May 15, amending Circular 22 on safety limits and ratios for banking operations. The amendment modifies the calculation of the loan-to-deposit ratio (LDR) by allowing banks to include 20% of State Treasury term deposits in the denominator, whereas previously these deposits were fully excluded. The SBV explained that the change is intended to improve banks’ liquidity and provide additional room for credit growth, especially for state-owned commercial banks.

The circular also specifies that other items such as margin deposits, special-purpose deposits, and demand deposits continue to be excluded from the LDR calculation. The adjustment comes amid rising LDR ratios at the four largest state-owned banks, which had approached the regulatory ceiling of 85% as of March 31.

Market Context

On the announcement date (May 15), BID closed at VND 42,950 (-1.38%), CTG at VND 35,800 (-0.42%), VCB at VND 60,700 (-0.49%), and AGR at VND 14,600 (+0.34%) on their respective exchanges (HOSE for BID, CTG, VCB; UPCOM for AGR). The banking sector has faced liquidity pressures in early 2026, with credit growth outpacing deposit mobilization. The SBV’s move is seen as a targeted measure to ease constraints for state-owned banks, which dominate Treasury deposit holdings and play a key role in government bond underwriting and policy lending.

Strategic Significance

For long-term investors, Circular 08 directly enhances the lending capacity of BID, VCB, CTG, and AGR without requiring additional capital or deposit mobilization. By including 20% of Treasury deposits in the LDR denominator, these banks can increase their loan books while staying within the 85% LDR cap. This is particularly relevant given their high LDR ratios and the government’s push for credit expansion to support economic growth. The circular also signals the SBV’s willingness to adjust prudential rules to accommodate state-owned banks’ operational needs, potentially reducing the risk of liquidity-driven credit tightening.

What to Watch

• Q2 2026 earnings reports from BID, VCB, CTG, and AGR for evidence of accelerated loan growth.
• Any further SBV circulars adjusting other prudential ratios (e.g., capital adequacy, reserve requirements).
• Changes in State Treasury deposit balances at these banks in monthly banking statistics.
• Market reaction in banking stocks, particularly if credit growth data for May/June shows a pickup.
• Potential spillover effects on private banks, which hold minimal Treasury deposits and may face competitive disadvantages.