SBV to Remove Interbank Lending Limits, Simplifying Rules for Banks

Overview

The State Bank of Vietnam (SBV) plans to eliminate regulations on interbank lending and deposit limits between credit institutions, simplifying rules based on industry feedback. The move, reflected in a draft circular, removes the concept of “lending and deposit limits” and related provisions, streamlining interbank transactions for banks including BID (BIDV), LPB (LPBank), and VCB (Vietcombank).

Key Facts

• SBV will remove all regulations on interbank lending and deposit limits between credit institutions.
• The decision follows feedback from banks such as MSB, NCB, and MB, who argued the limit concept was misleading.
• Article 7 and Article 8 of the draft circular are revised to eliminate limit-related provisions.
• The SBV also clarified rules for credit institutions under special control, excluding support transactions from the circular’s scope.
• Definitions for “deposit commitment,” “lending date,” and “extension of deposit term” are added.
• The draft circular is based on the Law on Credit Institutions 2024.
• BID closed at 35,850 VND, LPB at 54,400 VND, and VCB at 54,500 VND on July 22, 2026.

What Happened

The State Bank of Vietnam, during the public consultation period for its draft circular regulating interbank lending, borrowing, deposits, and repurchase agreements, has accepted numerous recommendations from commercial banks and the Vietnam Banks Association. A key change is the removal of the concept of “lending and deposit limits” between credit institutions, which many banks argued was impractical and could be misinterpreted as a binding commitment. Instead, banks manage risk through internal limits without formal contracts.

Consequently, the SBV has revised several articles, including removing provisions on limit-based transactions and simplifying the classification of transaction types. Additionally, the SBV has clarified that support transactions for credit institutions under special control are excluded from the circular, as they are already governed by the Law on Credit Institutions 2024. The draft also refines definitions to enhance clarity.

Market Context

The regulatory simplification comes as Vietnamese banking stocks have shown mixed performance. BID (HOSE) closed at 35,850 VND, LPB (HOSE) at 54,400 VND, and VCB (HOSE) at 54,500 VND. The removal of interbank limits is expected to reduce compliance costs and increase operational flexibility for banks, potentially improving interbank market liquidity. This aligns with the SBV’s broader push to modernize banking regulations and align with international practices.

Strategic Significance

For long-term investors, the removal of interbank lending limits signals a shift toward a more market-driven interbank system. Banks like BID, LPB, and VCB, which are active in the interbank market, may benefit from reduced administrative burdens and faster transaction execution. The move also reflects the SBV’s responsiveness to industry feedback, which could foster a more collaborative regulatory environment. However, the impact on risk management remains to be seen, as banks will rely on internal limits rather than regulatory caps.

What to Watch

• Final issuance of the circular and its effective date.
• Any changes in interbank lending volumes or rates following the rule change.
• Feedback from credit institutions on the revised draft during the remaining consultation period.
• Potential adjustments to banks’ internal risk management frameworks.
• SBV’s next steps on other regulatory simplifications for the banking sector.