Cleaning the Books: Vietnam Codifies Bad-debt Rules to Unlock Lending Momentum

That codification sits inside a wider compliance and risk-management framework overseen by the State Bank of Vietnam (SBV). Banks and foreign bank branches must meet a minimum capital adequacy ratio of 8% (or higher if the SBV governor determines), follow SBV rules on asset classification and provisioning, and comply with liquidity ratios and restrictions on net open positions in foreign exchange and gold relative to own capital. Vietnam’s rules also impose exposure limits, including a maximum lending/exposure of 14% of equity to a single borrower and 23% to a group of related borrowers, with those caps phased down to 10% and 15% respectively by 2029. From January 1, 2030, additional Basel III–aligned requirements will apply, including minimum core tier 1 and tier 1 capital ratios, plus capital conservation and countercyclical buffers.

Collateral, Creditor Rights, and the Practical Mechanics of Recovery

Legal clarity on collateral is a second lever in the clean-up. One guide notes the law clarifies that banks may seize and liquidate collateral for non-performing loans where this is pre-agreed with borrowers, a change expected to accelerate bad-debt recovery, particularly in the real estate sector. Decree 304/2025/ND-CP further clarifies when banks can retain collateral tied to bad debts, while adding protections when the collateral is the borrower’s sole residence or their primary labor tool. If the collateral is the borrower’s sole residence, the lender must provide support equivalent to 12 months of the minimum wage; for a primary labor tool (not purchased with loan funds), the required support equals six months of minimum wage. In practice, these guardrails aim to balance recovery with social protections while still enabling enforcement when conditions are met.

Policy discussions also focus on market infrastructure and timelines. At a Vietnam Banking Association seminar on non-performing loans that drew over 200 in-person participants and more than 100 online attendees, speakers argued that non-performing loans have become a macroeconomic issue tied to financial stability and growth potential. Dr. Can Van Luc, Chief Economist of BIDV, described challenges that differ from international practices: creditor rights are not adequately protected and tend to favor borrowers, and the time to resolve bad debts can be measured in years or decades because the debt trading market is almost non-existent. He also highlighted Vietnam’s reliance on bank credit, noting credit accounted for approximately 36% of total capital supply to the economy in 2020 and is projected to increase to 51% by 2025, with liquidity pressure rising from the fourth quarter of 2025 onward if solutions are not timely.

Attracting new capital is another stated objective of the clean-up agenda. Decree 69/2025/ND-CP raises the foreign ownership ceiling from 30% to 49% for private banks involved in restructuring weaker financial institutions, explicitly aiming to attract deeper foreign participation in sector clean-up efforts. Meanwhile, Decree 94/2025/ND-CP establishes a sandbox for credit scoring, open APIs, and peer-to-peer lending, with SBV-issued licences for up to two years, extendable twice by one year each, and a testing completion certificate that supports full market roll-out. Together with the codified Resolution 42 framework—often discussed under the topic of “vietnam bad debt resolution 42” in market commentary—these steps point to a strategy: speed recovery, widen participation, and make lending growth less constrained by legacy non-performing loans.