CaliToday (17/11/2025): Rating agency "more worried than in 5 years" as government prepares to scrap credit growth caps to fuel 10% annual economic targets.
Global ratings agency Fitch Ratings has sounded a sharp alarm over soaring systemic risks in Vietnam's banking sector, warning that a government-led push for aggressive economic growth is fueling a credit boom of "abnormal" proportions.
Credit outstanding is on track to hit 145% of the nation's GDP by year-end, a level of leverage that Fitch warns is highly unusual for a developing economy and leaves the system dangerously exposed to future shocks.
The warning comes as Hanoi prepares to dismantle its most significant monetary policy brake. Prime Minister Pham Minh Chinh recently directed the State Bank of Vietnam (SBV) to develop a roadmap for completely abolishing the long-standing credit growth cap system by 2026. This move is part of an ambitious strategy to achieve 8% GDP growth this year and sustain a remarkable 10% annual growth rate for the next five years.
The "Red-Hot" Growth Problem
This state-mandated push for growth is pouring fuel on an already "red-hot" credit fire.
"Credit growth will continue to accelerate—from what is already a very high level—compounding already-large leverage," said Willie Tanoto, Fitch's Senior Director for APAC Financial Institutions, speaking at a recent forum in Hanoi.
While Fitch maintains a "neutral to positive" outlook on the sector, Tanoto expressed significant personal concern: "I have been more worried in the last 6-12 months than I have been in the last five years."
The numbers support this anxiety:
The World Bank noted an 18.1% surge in credit in the first half of 2025 alone.
The SBV estimates full-year credit growth for 2025 could reach 19-20%.
Fitch itself forecasts 18% growth next year, even before the credit caps are fully lifted.
This credit deluge has successfully fueled one of the world's fastest-growing economies, which posted a stellar 8.2% GDP expansion in Q3. However, Tanoto cautioned that credit has consistently outpaced GDP for years. This 145% credit-to-GDP ratio, he noted, makes the system "more vulnerable, even if the risks do not necessarily crystallize in the short term."
Structural Cracks: Thin Capital and Hidden Risks
Beyond the headline numbers, Fitch highlighted two "structural weaknesses" endemic to Vietnamese banks: a high-risk appetite and thin capital buffers.
Tanoto pointed out that while banks are profitable, "the vast majority [of profits] are retained to fund rapid asset growth," rather than to build up capital cushions for a potential downturn. This leaves them with little room to absorb losses.
This concern is echoed by the World Bank. A September report noted that the non-performing loan (NPL) ratio for 27 large banks rose to 3.8% in Q1. However, the report warned that "hidden risks remain" due to widespread debt restructuring, forbearance, and declining loan-loss provisioning rates, suggesting the true quality of assets may be weaker than it appears.
The Government's Tightrope Walk
For its part, the State Bank of Vietnam insists it can manage the risks while still meeting its growth targets.
Pham Thi Thanh Tung, Deputy Director of the SBV's Credit Department, stated that the central bank will continue to strictly control credit flowing into high-risk sectors like real estate. She affirmed that capital will be prioritized for "production, business, and key growth drivers" while also expanding consumer lending.
Despite this, the pressure to maintain growth is immense. To meet its 8% target for 2025, Vietnam's economy must expand by at least 8.4% in the fourth quarter, a goal that will almost certainly require banks to keep the credit taps wide open.
While Fitch acknowledged Vietnam's positive medium-term growth prospects and favorable foreign debt structure, the immediate message is one of caution: the high-speed pursuit of economic growth is coming at the cost of rapidly escalating financial instability.