Hanoi – Banks must gradually reduce the credit limits of large customers over the next five years to meet the requirements of the new Credit Institutions Law. Under the Credit Institutions Law, which came into effect last month, the credit limits of customers will be reduced by 1% each year over the next five years, and the credit limits of customers and their related parties will be reduced by 2%.

A bank teller counts money at a trading office in Hanoi. In 2029, the credit limit for customers will be reduced from 15% to 10%, and the credit limit for customers and their affiliates will be reduced from 25% to 15%.

Specifically, in the first year of implementation, the credit limit for a single customer will be reduced from the current 15% of equity to 14%, and the credit limit for customers and their related parties will be reduced from the current 25% of equity to 23%. Subsequently, the credit limit will be gradually reduced until 2029, when the credit limit for customers will be 10% and the credit limit for customers and their related parties will be 15%.

The State Bank of Vietnam (SBV) said that according to the roadmap, credit limit regulations for customers and their related parties have been clearly defined to control risks and maintain the financial stability of the banking system. In addition, the new policy will also promote the accumulation of own capital and contribute to the sustainable development of the banking industry.

Experts said that under the new rules, banks with customers who exceed their credit limits will face pressure to restructure loans for such customers. Banks’ outstanding loans may also decrease as this customer group will have to find other sources of funds to repay existing loans to meet the ratios stipulated in the new regulations.

Dr Nguyen Hau Hoan, a lecturer at Ho Chi Minh City University of Economics, said banks with more outstanding loans from big clients will have to reduce those loans and find other clients to make up for it.

At the same time, large companies must accept a reduction in outstanding loans. This means they will have to scale back their business activities or seek additional capital from other banks, Huân said. Despite the impact of the policy, Nguyen Quoc Hung, secretary general of the Vietnam Banking Association, believes that the five-year roadmap for banks to reduce credit limits from 2024 to 2029 is appropriate.

He hopes that banks can work together to deploy loans so that all individuals and businesses can obtain bank loans and large projects do not have to worry about funding shortages.

In summary, Vietnam’s banking industry will face new credit policy challenges and opportunities in the next five years. Banks need to adapt to the gradually reduced credit lines for major customers by diversifying customer groups and optimizing loan portfolios. At the same time, large enterprises also need to adjust their financing strategies and actively seek new sources of capital to cope with the reduction in loan limits.

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Key Summary:

• Reduction in credit limits: Over the next five years, the credit limit for large customers will be reduced from 15% to 10%, and the credit limit for related parties will be reduced from 25% to 15%.
• Policy objectives: control financial risks, maintain bank stability, and promote bank capital accumulation.
• Banks’ challenges: Need to adjust loan structure to cope with pressure from large customer loan restructuring.
• Corporate response: Large companies need to find new financing channels and adjust their business strategies.
• Expert opinion: The plan to gradually reduce credit lines will help long-term development.