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Banks (Finance)

Proposed Changes to Law on Credit Institutions to Benefit Commercial Banks

Strategic Insights

— 1 min read

Analysts forecast that proposed changes to the Law on Credit Institutions will benefit commercial banks that focus on retail lending due to their ability to quickly process small loans. The amendments aim to include provisions from Resolution No 42/2017/QH14 on piloting bank bad debt settlement, as proposed by the State Bank of Vietnam (SBV). According to VNDirect Securities Company analysts, banks like MB, HDBank, VPBank, and VIB will benefit greatly from the policy change. The amended law will also support banks like Vietcombank and MB in restructuring weak credit institutions, promoting credit flows back to the market.

Key Takeaways:

  • Commercial banks that focus on retail lending, such as MB, HDBank, VPBank, and VIB, will benefit greatly from the policy change due to their ability to quickly process small loans.
  • The amended law will support banks like Vietcombank and MB in restructuring weak credit institutions, promoting credit flows back to the market.
  • The new policy will create a dual driving force to improve the quality of bank assets, with the legalisation of Resolution 42 and the recovery of the real estate market.
  • Banks with high bad debt ratios, such as VPBank, OCB, VIB, SHB, BIDV, or VietinBank, will benefit from a more efficient process of seizing and liquidating collateral.
  • The legal change is expected to reduce the bad debt ratio of the whole banking industry from 4.3% recorded in January 2025 to below 3% in the first year of implementation.
  • Experience from the 2017-2021 period showed that Resolution 42 effectively supported the handling of debts with mortgaged assets, especially real estate.

Statistics:

  • 4.3%: bad debt ratio of the whole banking industry recorded in January 2025
  • Below 3%: expected bad debt ratio in the first year of implementation
  • 2017-2021: period during which Resolution 42 effectively supported the handling of debts with mortgaged assets
  • 2024: year in which Resolution No 42/2017/QH14 expired
  • 2025: year in which a sharp increase in bad debt was recorded in the first quarter

Sources:

  • "Proposed Changes to Law on Credit Institutions to Benefit Commercial Banks"
  • VNDirect Securities Company, Saigon Securities Incorporation, and Yuanta Vietnam Securities Company analysts' forecasts and estimates
  • State Bank of Vietnam (SBV)
  • Resolution No 42/2017/QH14 on piloting bank bad debt settlement

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