Vietnam banks face credit split as quota phaseout looms and Basel III rolls out

Weaker, capital-constrained banks may struggle to meet regulatory changes.

Vietnam’s push to adopt international norms for its banking sector may lead to credit divergence between small and larger banks, said S&P Global Ratings.

Weaker, capital-constrained banks may struggle to meet regulatory changes, whereas larger and stronger banks will be better placed to adapt, the ratings agency said in a report on 9 February 2026.

“In our view, this could widen the credit divergence between large, well-capitalized banks and smaller, more vulnerable lenders,” it wrote.

Regulatory changes to Vietnam's bank‑capital and credit‑growth frameworks reflect the country's broader shift toward private sector liberalization, which is a key driver of the country’s growth, S&P said.

Two key developments will influence the potential divergence in financial performance of the banks: the possible phaseout of a long-standing quota on credit growth, and the implementation of Basel III, which equates to stricter capital ratios and capital buffer requirements.

“Abolition of credit growth quotas could result in banks growing aggressively, increasing credit risk in the economy. The concurrent transition toward Basel III capital requirements may be a mitigating factor,” S&P said.

Vietnam is expected to enjoy rapid credit growth in the short-term, but banks could get hurt from correction risks, according to a separate report by Fitch Ratings.

Whilst rapid credit growth can boost activity in the short-term, it can also steer lending to low-return or speculative uses, warned Fitch. This could inflate asset prices and raise the risk of a later correction that can hurt banks, investment and overall growth.