Vietnam's Banking Crossroads: Can SCB's Restructuring Plan Stabilize the Sector?

The State Bank of Vietnam (SBV), the country’s central bank, is navigating uncharted waters as it accelerates its long-awaited restructuring plan for the nation’s banking sector. With a focus on digital transformation, risk management, and tackling systemic vulnerabilities, the SBV’s efforts have entered a critical phase in 2025. Yet delays in addressing non-performing loans (NPLs) and uneven progress across state-owned banks have raised doubts about whether the plan can deliver the stability investors demand.

Digital Progress vs. Lingering NPL Challenges
The SBV’s push for digitization has borne fruit. Cashless transactions now account for over 70% of retail payments in urban areas, up from 45% in 2023, according to the Vietnam Payment Association. This shift has streamlined operations for banks like Vietcombank (VCB) and Techcombank (TCB), which have invested heavily in fintech platforms. However, the sector’s NPL ratio remains stubbornly high—hovering around 2.5% for state-owned banks, compared to 1.2% for private lenders.

The SBV’s revised timeline, extending key compliance deadlines to 2026, reflects the scale of the challenge. While this provides banks more breathing room to recapitalize and offload NPLs, it also underscores systemic weaknesses. Analysts warn that without faster progress, Vietnam’s banks could struggle to meet Basel III capital adequacy requirements by the 2028 deadline, risking their ability to attract foreign investment.

Governance Reforms and M&A Scrutiny
A key pillar of the restructuring plan is stricter oversight of mergers and acquisitions (M&A). The SBV has already blocked two high-profile deals involving state-owned lenders this year, citing poor risk assessments and governance gaps. This shift signals a departure from the “bigger is better” mindset that previously dominated the sector, where rushed consolidations often exacerbated NPLs.

However, critics argue that reforms are moving too slowly. A recent World Bank report highlighted that only 30% of state-owned banks have implemented real-time NPL monitoring systems, compared to 80% of private banks. Without transparency in credit allocation—a priority under the SBV’s plan—investors will remain wary of systemic risks.

The Economic Context: A Delicate Balance
Vietnam’s economy, growing at 6.5% in 2024, faces headwinds that complicate the restructuring process. Rising inflation and a slowdown in export growth have forced the SBV to hike interest rates three times since early 2025, tightening credit conditions. This could further strain borrowers’ ability to service debt, potentially swelling NPLs.

Meanwhile, foreign investors hold over 25% of shares in Vietnam’s largest banks, a stake that could shift sharply if confidence wavers. The recent outflow of $1.2 billion from VCB and TCB stocks in Q1 2025—driven by NPL concerns—offers a cautionary glimpse of what lies ahead.

Conclusion: A Plan with Potential, but Execution is Everything
The SBV’s restructuring plan holds significant promise. Digital transformation has already reshaped customer behavior, while the revised timeline allows banks to address NPLs without panic. But success hinges on two critical factors:

1. NPL Resolution: Reducing state-owned banks’ NPL ratios to below 2% by 2026 would signal progress. Current projections, however, suggest this may require at least $4 billion in capital injections—a politically fraught step.
2. Governance Overhaul: Closing the gap in risk management between state-owned and private banks is non-negotiable. The SBV’s recent crackdown on opaque M&A deals is a positive sign, but consistent enforcement is key.

Investors should monitor the SBV’s quarterly NPL reports and capital adequacy ratios closely. If the sector can meet its 2026 targets, Vietnam’s banks could emerge as resilient engines of growth. Fail, and the risks to both the economy and equity markets will loom large.

The clock is ticking—but the SBV’s roadmap, while imperfect, offers a path forward. Whether it succeeds depends on execution, not just ambition.