Fitch Ratings issues warning on the risks in the Vietnamese banking industry

Fitch Ratings warns that the rapid growth of lending in Vietnam's banking sector is increasing risks, and the cancellation of the long-standing credit quota system by the government may further exacerbate these risks. Willy Tanoto, Senior Director of Fitch Ratings' Asia-Pacific Financial Institutions team, stated in an interview, "This will accelerate credit growth which is already at high levels and inevitably raise leverage, which is already not low." He noted that Fitch maintains a "neutral to positive" outlook on the prospects of Vietnam's banking industry, but his concerns have been much higher in the past 6 to 12 months compared to the last five years. Vietnamese Prime Minister Pham Minh Chinh has urged the State Bank of Vietnam to quickly develop a roadmap to eliminate credit growth quota limits for banks from 2026 onwards. This is one of Vietnam's efforts to achieve its ambitious economic goals the country aims to achieve 8% economic growth this year and an average of 10% economic growth annually over the next five years. World Bank data shows that Vietnam's credit surged by 18.1% year-on-year in the first half of this year; the State Bank of Vietnam stated last month that overall credit growth in Vietnam could reach 19%-20% by 2025. Fitch Ratings predicts that even if there are no adjustments to credit quota policies, Vietnam's credit growth is expected to remain around 18% next year.