Vietnam Credit Law: Lending Limits & Ownership Caps

What does banking & finance regulation in Vietnam cover in 2024?

Banking and finance in Vietnam in 2024 is governed by a dense framework centered on the new Law on Credit Institutions 2024, SBV regulations, foreign exchange controls, and security law under the Civil Code. It regulates who can lend, how much they can lend to each customer or group, how funds move in and out of Vietnam, and how security and guarantees are created and enforced.

For B2B players - banks, corporates, funds, and foreign lenders - the key pillars are:

• Licensing and activities: which entities can take deposits, grant credit, provide guarantees, issue cards, or operate as finance companies or factoring companies.
• Prudential ratios and credit limits: solvency, liquidity, large exposure limits, related-party lending caps, and sectoral risk limits.
• Ownership and governance: caps and disclosure duties for bank shareholders, fit-and-proper standards for management, and restrictions on cross-ownership.
• Foreign exchange and cross-border loans: rules for borrowing foreign currency, SBV registration, and capital account controls.
• Security and enforcement: how lenders take mortgages, pledges, and guarantees, and how they enforce in distress or restructuring situations.

Core statutes and regulators

• Law on Credit Institutions 2024 (replacing and amending the 2010 law) - core statute for banks, foreign bank branches, finance companies, and related prudential rules.
• Law on the State Bank of Vietnam 2010 - sets out the SBV's mandate and powers.
• Civil Code 2015 - general contract law, security (mortgage, pledge, guarantee), set-off, and assignment.
• Law on Enterprises 2020 - corporate capacity, representation, and approvals for Vietnamese borrowers and guarantors.
• Law on Securities 2019 and bond regulations (including Decree 153/2020/ND-CP as amended) - govern corporate bonds and listed financial instruments.
• Foreign Exchange Ordinance 2005 (as amended 2013) and SBV circulars - regulate cross-border lending, lending in foreign currency, and offshore payments.

Key authorities

• State Bank of Vietnam (SBV) - prudential supervisor, licensing authority, FX regulator, and the main body issuing detailed banking regulations and ratios.
• Ministry of Finance (MOF) - bond market regulator, state capital manager in SOEs, and insurer regulator.
• State Securities Commission (SSC) - regulator for securities firms, stock exchanges, and public offerings.

How have Vietnam's 2024 rules reduced single-borrower credit limits?

The 2024 regime moves away from a flat 15% legal cap for exposures to one borrower and introduces lower, tiered limits set by the SBV for single customers and groups of related customers. The effect is a material reduction in how much any one bank can lend to a single corporate group, forcing risk-sharing across the banking system.

From a flat 15% cap to multi-tier ratios

Under the previous Law on Credit Institutions 2010, the headline rule was simple:

• Total outstanding credit to one customer could not exceed 15% of the bank's own capital.
• Total outstanding credit to one customer and its related persons could not exceed 25% of own capital.

The new Law on Credit Institutions 2024 keeps the concept of "large exposures" but:

• Removes fixed percentages from the statute.
• Empowers the SBV to issue detailed, lower caps differentiated by:
  • Type of credit institution (commercial bank vs policy bank vs finance company).
  • Type of borrower (single entity vs group of related persons).
  • Nature of exposure (secured vs unsecured, related-party vs non-related).
• Requires phased reductions over several years, with transitional relief for existing exposures above the new caps.

In practice, SBV regulations now drive single-borrower limits below the old 15% level and restrict group exposures more tightly, especially for high-risk sectors such as real estate and corporate bonds.

Group of related customers - closing the SCB / Van Thinh Phat gap

The SCB - Van Thinh Phat crisis exposed how one economic group could borrow massive amounts via dozens of related entities and individuals. The 2024 law reacts directly to this:

• Broader definition of "related persons": includes common control, common management, family ties, nominee arrangements, and other circumstances where one person can significantly influence another's decisions.
• Aggregation of exposures: banks must aggregate all credit exposures to a borrower and its related persons when applying large exposure limits.
• Enhanced KYC and ownership tracing: banks must trace beneficial ownership and control chains, not only legal shareholding, when mapping a customer group.
• Special caps for insiders: lending to major shareholders, board members, and their related persons is heavily restricted and often subject to lower quantitative caps and stricter approval processes.

Transitional treatment of existing large exposures

Many banks already exceed the new ratios because they built business models around very large anchor borrowers. The 2024 framework therefore:

• Prohibits increasing exposures that already exceed the applicable cap.
• Requires banks to submit reduction plans to the SBV, detailing how they will bring exposures within limits over a defined period (often several years).
• Pushes banks to:
  • Refuse top-ups and new facilities to over-limit groups.
  • Encourage early repayments or refinancing with other banks.
  • Use syndication or risk participation to redistribute risk.

Old vs new approach to large exposures

What new shareholder disclosure and ownership rules apply to Vietnamese banks?

Any person or entity owning from 1% of a Vietnamese bank's charter capital must now disclose identity, beneficial owners, and related persons to the bank and the SBV. The 2024 law also tightens caps on individual and group ownership, and attacks the use of nominees and cross-ownership structures that previously hid real control.

1% threshold - who must disclose?

The new regime uses 1% of charter capital as a low threshold for enhanced transparency:

• Shareholders with 1% or more of a bank's charter capital must:
  • Provide full identification details (including for corporate shareholders, their ownership chain).
  • Disclose beneficial owners and persons acting on their behalf.
  • Declare related persons and entities where they or their related persons hold positions or stakes.
• Banks must:
  • Maintain a detailed register of significant shareholders.
  • Report such ownership and any changes to the SBV.
  • Refuse to recognize shareholder rights (voting, dividends) if disclosure is incomplete or misleading.

Caps on ownership and "acting in concert"

The 2024 law continues to restrict how much one individual or entity can own in a bank, while making it harder to circumvent caps through nominees:

• Individual shareholders: generally capped at a small percentage of charter capital (historically 5%), counting both direct and indirect holdings.
• Institutional shareholders: capped at a higher but still limited percentage (historically 15%), with stricter scrutiny for non-financial groups.
• Groups of related persons: total holdings aggregated and capped (historically 20%).
• Acting in concert: any coordinated exercise of voting rights or common beneficial owner can cause several small stakes to be treated as one for cap purposes.

In practice, this pushes business groups that previously controlled banks via layers of nominees or affiliated companies to unwind or regularize their structures.

Enhanced SBV powers and enforcement

To prevent another SCB-type situation where a hidden shareholder effectively captured a bank, the 2024 law gives the SBV stronger tools:

• Power to refuse or revoke approval for significant shareholders who fail fit-and-proper or disclosure requirements.
• Power to require banks to freeze or cancel voting rights of non-compliant shareholders.
• Ability to order divestment of shares exceeding caps or held in violation of cross-ownership rules.
• Stricter rules on:
  • Banks lending to finance the purchase of their own shares.
  • Cross-lending between banks and companies in the same group as significant shareholders.

How do the 2024 rules change corporate financing and loan structuring in Vietnam?

The reduced single-borrower limits mean that large Vietnamese corporates can no longer fund big projects from a single bank and must increasingly rely on multi-bank syndications or a mix of loans and capital markets. Financing will take longer to arrange, involve more documentation and negotiation, but provide more diversified banking relationships and less dependency risk.

Bigger borrowers must structure multi-bank deals

For large groups, especially in real estate, infrastructure, and manufacturing, practical impacts include:

• More syndications and club deals: a VND 10-20 trillion facility will almost always require several local banks and sometimes foreign lenders.
• Lead-bank model: one or two relationship banks act as arrangers and security agents, bringing in other banks for portions of the loan.
• Standardized documentation: LMA-style or harmonized Vietnamese loan templates become more common to handle multi-lender structures.
• Intercreditor arrangements: for groups with bonds and multiple bank lines, clear ranking and enforcement mechanics are increasingly necessary.

Example: indicative cost implications

Multi-bank financing usually costs more to arrange than bilateral loans, though pricing depends on risk, sector, and borrower strength. Indicative local cost components for a mid- to large-sized domestic syndication might look like:

These are broad ranges only; high-complexity or cross-border structures can exceed them significantly.

Operational changes for corporate borrowers

To access bank financing efficiently under the new rules, large corporates should:

• Map the group: prepare clear charts of all Vietnamese and offshore subsidiaries, shareholders, and cross-guarantees so banks can assess "related persons" quickly.
• Plan capacity per bank: estimate how much headroom each relationship bank has under its new exposure caps and concentration limits.
• Standardize security packages: ensure corporate approvals, land use right certificates, and pledged shares can support multi-bank security structures.
• Enhance reporting capability: be ready to deliver frequent, detailed financial and operational reports required under syndicated facilities.
• Diversify funding channels: consider a mix of domestic bonds, offshore loans, and equity to reduce reliance on any single bank's balance sheet.

How should banks adjust their credit policies and risk management to comply?

Banks must upgrade group exposure monitoring, tighten related-party lending controls, and redesign credit policies to fit the lower, more granular SBV limits. They also need to build stronger syndication capabilities and improve governance over large credit decisions.

Key policy and systems changes

• Exposure aggregation tools: implement systems that can:
  • Identify related persons based on ownership, control, and key management overlaps.
  • Aggregate all credit products (loans, guarantees, L/Cs, derivatives) to each customer group.
  • Produce real-time or near real-time reports against SBV-set limits.
• Revised credit concentration limits:
  • Update internal limits in line with new SBV tiers, often stricter than the regulatory minimum.
  • Set sectoral caps (for example, for real estate or bond-backed lending) to avoid clustering risk.
• Strengthened related-party lending controls:
  • Enhance conflict checks for loans involving managers, major shareholders, or their affiliates.
  • Require higher approval levels and stricter collateral standards for any insider-related transaction.

Syndication and portfolio management

Banks that historically acted mainly as bilateral lenders now need to develop portfolio management skills:

• Syndication desks: ability to originate, structure, and distribute portions of large loans to other banks or investors.
• Risk participation and sub-participation: use of contractual risk transfers to stay within exposure caps without disrupting client relationships.
• Secondary loan trading: frameworks for selling down exposures if concentration or capital pressures arise.
• Pricing for capital and concentration: internal models that price the extra capital cost of high-concentration exposures and reflect this in margins and fees.

Governance and SBV interaction

• Board oversight: risk and audit committees should receive regular reports on large exposures, related-party lending, and compliance with new caps.
• Early engagement with SBV: where exposures exceed new caps, banks should proactively submit credible reduction plans and status updates.
• Internal audit focus: audits should target:
  • Correct classification of related persons.
  • Accuracy of exposure aggregation.
  • Compliance with approval procedures for large and insider-related loans.

How do the 2024 rules interact with foreign loans and offshore financing?

The new concentration limits apply to Vietnamese banks' exposures, but they indirectly push large borrowers to seek more offshore loans and diversify funding. Foreign financing still faces Vietnam's foreign exchange, registration, and security rules, so structuring remains critical.

Key rules for foreign loans to Vietnamese borrowers

• Purpose restrictions: medium and long-term foreign loans generally must fund investment projects, business expansion, or restructuring of existing foreign debts, not speculative uses.
• Registration with SBV:
  • Foreign loans with tenor greater than 1 year must be registered with the SBV.
  • Changes to key terms (amount, tenor, interest mechanism) usually require amendment registration.
• FX payments: all drawdowns and repayments must flow through the borrower's designated "loan account" at a licensed bank in Vietnam.
• Security: foreign lenders can take Vietnamese security (land use rights, buildings, shares, receivables), but must follow Vietnamese law on security contracts and registration.

Interplay with domestic credit limits

As domestic banks face tighter caps, foreign deals may appear attractive, but:

• SBV still monitors total external debt: macro-prudential concerns can lead to tighter rules on foreign currency borrowing by residents.
• Onshore support may still be needed: many foreign lenders require:
  • Onshore security agent banks.
  • Vietnamese-law guarantees or mortgages from project companies or sponsors.
• Blended structures: large projects often use a mix of:
  • Onshore syndicated VND loans up to domestic banks' exposure limits.
  • Offshore loans from international banks and ECAs, often in USD.
  • Domestic or international bond issues.

Practical points for foreign lenders

• Conduct robust due diligence on the borrower's group, especially ownership structures and related-party relationships, to avoid violating Vietnamese concentration rules indirectly.
• Coordinate with the borrower's relationship banks about intercreditor positions and any existing SBV-mandated restructuring plans.
• Work with Vietnamese counsel to align:
  • Security structure and enforcement mechanics with local law.
  • Tax and withholding implications of interest and fees.
  • Foreign loan registration timelines with deal closing schedules.

What are the key regulators, approvals, and timelines in Vietnamese banking & finance deals?

Most corporate lending in Vietnam does not require case-by-case governmental approval, but foreign loans, bond issues, and certain bank activities require specific filings or clearances with the SBV, MOF, or SSC. Timelines vary from several weeks for foreign loan registration to several months for complex bond programs or bank restructuring.

Core approval and registration items

• Foreign loan registration (SBV):
  • Applies to loans to Vietnamese residents with maturity over 1 year.
  • Documentation includes loan agreement, corporate approvals, FX plan, and security overview.
  • Processing time is usually several weeks, depending on SBV workload and deal complexity.
• Corporate bond issues (SSC / Stock Exchange / MOF):
  • Private placements subject to eligibility, rating, and disclosure requirements under Decree 153 (as amended).
  • Public offers require an approved prospectus and listing application.
• Security registration:
  • Land and buildings: land registry offices under provincial Departments of Natural Resources and Environment.
  • Movables and receivables: National Registration Agency for Secured Transactions (NRAST).
  • Shares in joint stock companies: registration with the issuer and, if listed, with the Vietnam Securities Depository and the stock exchange.

Typical transaction timeline for a large syndicated loan

1. Mandate and term sheet: 2-4 weeks for negotiation and internal approvals.
2. Due diligence and documentation: 4-8 weeks, depending on asset complexity and number of lenders.
3. Corporate and regulatory approvals:
   • Borrower and guarantor corporate approvals: 1-3 weeks.
   • Foreign loan registration (if applicable): several weeks from filing.
4. Signing and conditions precedent: 2-6 weeks to complete security perfection, registrations, and CPs.
5. First drawdown: usually 1-2 weeks after CP satisfaction and SBV registration (if needed).

When should you hire a banking & finance lawyer or expert in Vietnam?

You should involve a Vietnamese banking and finance lawyer as soon as you plan a sizeable loan, bond issue, or restructuring, especially if exposures approach large-borrower limits or involve multiple banks or foreign lenders. Early legal input reduces the risk of deal-blocking regulatory issues and helps structure transactions around the new 2024 constraints.

For corporate borrowers and sponsors

• Large or multi-bank facilities: where total funding needs exceed what one bank can provide under the new caps.
• Group or project restructurings: especially if your main relationship bank is under SBV pressure to reduce exposure to your group or sector.
• Cross-border elements: offshore loans, guarantees, or security, or when repayment cash flows come from exports or offshore revenues.
• Complex security packages: land banks, future assets, receivables, or multiple guarantors that must satisfy Vietnamese security law.
• Compliance-sensitive sectors: real estate, corporate bonds, or sectors singled out by SBV for tighter oversight.

For banks, finance companies, and foreign lenders

• Policy updates: when updating credit manuals and risk policies to reflect the 2024 law and new SBV circulars.
• New product launches: such as structured finance, securitization, or new guarantee products.
• High-profile large exposures: any borrower approaching group exposure caps, or where related-party questions arise.
• Regulatory investigations or inspections: if SBV raises concerns about concentration, related-party lending, or shareholder structures.
• Portfolio acquisitions or disposals: NPL sales, loan portfolio trades, or risk participations.

What are the practical next steps for businesses and banks under Vietnam's 2024 banking rules?

Businesses and banks should proactively map exposures, restructure relationships, and update internal frameworks rather than waiting for SBV pressure or a blocked transaction. A short, focused action plan can materially reduce both regulatory and deal execution risk.

Next steps for large corporate borrowers and groups

1. Conduct a group exposure review:
   • List all Vietnamese and offshore entities in your group and related-person links.
   • Compile current facilities, lenders, and outstanding amounts.
   • Identify banks where your group's exposure is likely to exceed new internal limits.
2. Engage relationship banks early:
   • Discuss each bank's headroom and appetite under the new concentration rules.
   • Agree on which bank will act as arranger for upcoming large facilities.
3. Design a diversified funding strategy:
   • Split large needs into onshore syndications, bonds, and offshore loans where feasible.
   • Align maturities and covenants across products to avoid unnecessary constraints.
4. Strengthen governance and transparency:
   • Clean up nominee or informal ownership arrangements that could raise red flags.
   • Prepare robust financial reporting packages and forecasts for lenders.
5. Retain experienced local counsel:
   • Use them to structure deals, draft or review documentation, and manage SBV filings.
   • Ask them to stress-test your structure against large exposure, related-party, and FX rules.

Next steps for banks and foreign lenders

1. Update concentration and shareholder monitoring:
   • Ensure systems capture all exposures to each customer group across products.
   • Implement procedures to comply with new 1% shareholder disclosure rules.
2. Review top 50 exposures:
   • Identify breaches or near-breaches of new large exposure caps.
   • Prepare reduction or syndication strategies where needed.
3. Enhance syndication and risk-transfer tools:
   • Develop standardized intercreditor and participation templates under Vietnamese law.
   • Build relationships with potential participant banks and investors.
4. Train front-office teams:
   • Explain the 2024 reforms in business terms, including what they mean for deal sizes and structures.
   • Embed checks for related persons and concentration limits in the deal origination workflow.
5. Align with legal and compliance:
   • Set up a recurring forum between business, legal, risk, and compliance to track regulatory developments.
   • Use it to review complex or borderline deals before term sheets are issued.