SBV Raises Short-Term Funding Ratio to 40%: Liquidity Risks for MBB, OCB, BVB, VIB

Overview

The State Bank of Vietnam (SBV) raised the limit on short-term funds used for medium- and long-term loans (SMLR) from 30% to 40% and exempted certain infrastructure loans from credit growth caps. The policy, announced on June 22, 2026, aims to support lending for infrastructure and real estate but increases liquidity risk for banks with high SMLR exposure, including MBB, OCB, BVB, and VIB. The SBV also proposed tighter liquidity regulations aligned with Basel III, to be phased in from 2028.

Key Facts

• SBV raised the SMLR limit from 30% to 40% on June 22, 2026.
• Certain infrastructure loans (e.g., airports, railways) are exempted from credit growth limits, totaling about VND 752 trillion for projects in 2026-2033.
• The exemption could add approximately 1.2 percentage points to annual credit growth over the next 12-18 months.
• Banks approaching the previous 30% SMLR limit include MBB, OCB, BVB, and VIB.
• VIS Rating warns the higher SMLR increases reliance on short-term market funding, amplifying maturity mismatch and refinancing risk.
• The SBV proposed replacing the loan-to-deposit ratio (LDR) with a broader credit-to-deposit ratio (CDR) and introducing LCR, NSFR, and leverage ratio requirements from 2028.
• Recent prices: MBB at VND 24,650 (+0.20%), OCB at VND 11,100 (-1.77%), BVB at VND 13,300 (flat), VIB at VND 15,950 (-0.93%) as of July 10, 2026.

What Happened

On June 22, 2026, the State Bank of Vietnam announced a relaxation of two key prudential limits. First, the ratio of short-term funds used for medium- and long-term loans (SMLR) was raised from 30% to 40%, giving banks more flexibility to extend longer-dated credit. Second, certain loans for priority infrastructure projects—including airports and railways—were exempted from the credit growth ceiling. According to the SBV, these measures are intended to channel bank lending into infrastructure and real estate to support economic growth.

VIS Rating assessed that the higher SMLR limit increases credit risk for banks, as it encourages greater reliance on short-term market funding—which is less stable and sensitive to market sentiment—to finance long-term loans. The exemption of infrastructure loans from credit limits could add about 1.2 percentage points to system-wide credit growth annually over the next 12-18 months, further straining bank funding needs. The SBV acknowledged these risks and simultaneously proposed tighter liquidity rules, including the introduction of the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), and leverage ratio, with implementation starting in 2028.

Market Context

Banks with high SMLR exposure—MBB (listed on HOSE), OCB (HOSE), BVB (UPCOM), and VIB (HOSE)—are most affected by the policy change. As of July 10, 2026, MBB shares traded at VND 24,650 (+0.20%), OCB at VND 11,100 (-1.77%), BVB at VND 13,300 (flat), and VIB at VND 15,950 (-0.93%). The banking sector has been under pressure from slow deposit growth and rising credit demand. The SMLR relaxation provides short-term lending capacity but raises structural liquidity concerns, reminiscent of the 2022 liquidity squeeze. The SBV’s proposed Basel III rules aim to address these vulnerabilities over the long term.

Strategic Significance

The policy shift reflects a trade-off between supporting near-term economic growth and maintaining financial stability. By allowing banks to use more short-term funds for long-term loans, the SBV is effectively increasing the system’s maturity mismatch. Banks with high real estate exposure, such as OCB and VIB, face elevated refinancing risk if market confidence wanes. The proposed transition to Basel III standards from 2028 signals a commitment to stronger liquidity buffers, but the interim period could see heightened volatility in bank funding costs and margins. For investors, the key risk is that banks aggressively expand lending without commensurate deposit growth, leading to tighter liquidity conditions and higher cost of funds.

What to Watch

• Q3 2026 earnings reports for MBB, OCB, BVB, and VIB, focusing on SMLR ratios and net interest margins.
• SBV’s final draft of Basel III regulations, expected later in 2026, and any adjustments to the implementation timeline.
• Deposit growth trends across the banking system, particularly for banks with high SMLR exposure.
• Credit growth data for infrastructure loans exempted from limits, and their impact on system-wide credit expansion.
• Any changes in SBV’s policy rate or reserve requirements that could affect bank funding costs.