How does changing the way to calculate the loan-to-deposit ratio affect banks?

Circular 50 regulating limits and safety ratios in banking operations has just been issued, effective from December 1, 2026.

One of the biggest changes is how the loan-to-deposit ratio (LDR) is determined for the banking industry. The new regulations raise the maximum ceiling of this ratio to 95%, higher than the current ceiling of 85%. That is, if in the past, out of 100 VND mobilized, banks could only lend out a maximum of 85 VND, then from December, it can increase to 100 VND.

At the same time, the State Bank introduced two new liquidity indicators to gradually bring the operation of the system closer to Basel III. The two indicators include solvency ratio (LCR) and net stable funding ratio (NSFR).

In addition, banks can only apply the new LDR calculation method and the 95% ceiling only when they register to comply with LCR and NSFR simultaneously.

From now until October 2028, if banks have not registered for early application of LCR and NSFR, banks will still be subject to the LDR ceiling of 85% and apply the traditional calculation method mainly based on outstanding loans and deposits as currently.

LDR is determined by total outstanding loans divided by total deposits. Circular 50 also changes the components of determining both the numerator and denominator compared to current regulations.

In the numerator, foreign loan capital is no longer deductible from the total loan balance as current regulations.

In the denominator, in addition to the current deposit component, the new regulations also include a number of capital sources such as entrusted capital, net mobilization on the interbank market, foreign loans, a part of equity and undistributed profits. At the same time, some items such as corporate bond investment and non-operational credit will be excluded from the deposit section.

According to the analysis team of MB Securities Company (MBS), the actual impact of raising the LDR ceiling depends on the balance sheet structure of each unit.

Banks with large equity capital, retained profits, foreign loans and interbank net deposits will benefit more from the new LDR calculation. Meanwhile, the impact is less positive for banks with a high proportion of corporate bonds and non-lending credit.

In general, MBS evaluates that Circular 50 has a positive impact on listed banks. In particular, early adopters of LCR and NSFR can help banks move to the 95% LDR ceiling, thereby reducing liquidity pressure and creating more lending space.

According to the roadmap, from October 1, 2028, banks must start applying LCR and NSFR simultaneously. However, banks can register to apply these two rates early from the end of this year.

LCR reflects a bank’s ability to maintain enough liquid assets to meet cash outflow needs during a 30-day stress period. The starting minimum threshold is 50% in 2028, then increases by 10 percentage points each year and reaches 100% from October 2033.

Meanwhile, NSFR is determined by available stable capital divided by required stable capital, reflecting the balance between stable capital and asset financing needs. This rate will be at least 90% from October 2028, increasing to 95% one year later and reaching 100% from October 2030.

By applying the 100% minimum threshold for both LCR and NSFR, banks are no longer required to comply and report the three old liquidity ratios, and are also not required to comply with the LDR limit, although they still must report this ratio.

According to MBS, the adjustments of Circular 50 compared to the previous draft are more flexible during the transition period, to continue to support liquidity for banks but still create a roadmap for the system to comply with Basel III standards.

Although still lower than the ceiling of 85%, the LDR level of 27 listed banks has increased compared to previous periods, reflecting increased pressure to balance capital resources. In this context, the State Bank has recently applied a number of short-term technical measures to reduce liquidity pressure and support the system’s credit funding capacity. However, these are still short-term supports and may increase term gap risks as well as liquidity pressure if credit growth continues at a high level.

Therefore, the issuance of Circular 50 with a clearer roadmap for liquidity management and capital structure, according to the analysis team, is necessary to both support credit growth and ensure balance sheet quality and system safety in the medium and long term.