Credit View: The mandatory transfer of special-controlled banks and its impact on Vietnam’s banking sector

FiinRatings releases an in-depth analysis, providing a comprehensive view of the effectiveness and potential risks of the mandatory bank transfer mechanism — evaluating the risk absorption capacity of acquiring banks and the recovery and restructuring prospects of the transferred institutions.

FiinRatings releases an in-depth analysis, providing a comprehensive view of the effectiveness and potential risks of the mandatory bank transfer mechanism — evaluating the risk absorption capacity of acquiring banks and the recovery and restructuring prospects of the transferred institutions.

Key Takeaways 

• Timely and strategic execution of mandatory transfers, supported by synergistic, well-aligned acquiring banks: FiinRatings assesses that the mandatory transfer of special-controlled banks a timely and strategic milestone in the State Bank of Vietnam’s 2021–2025 restructuring roadmap. By selecting acquiring banks with operational synergies and complementary strengths, the SBV ensured minimal disruption and enabled more effective integration and recovery.
• Modest impacts of mandatory transfers on acquiring banks: Although the transferred banks carry a high level of bad debts, the compulsory transfer is anticipated to moderately affect acquiring banks' creditworthiness; this assessment is supported by: (i) Favorable support mechanisms from the SBV as well as (ii) Robust capital buffer and sufficient provisions which help reduce exposure to transferred banks’ NPL risks. 
• FiinRatings has also conducted a “what-if” scenario analysis to identify early warning indicators of whether the acquiring banks will remain stable or face financial stress within five years post-merger. This forward-looking approach proactively assesses key risks such as asset quality, funding pressure, and declining profitability. Successful merger signals include consistent (instead of accelerating) growth in lending and deposit volume, supported by strengthening or at least steady capital buffers driven by Tier-1 capital and improved profitability ratios. Meanwhile, “healthy” acquiring banks should demonstrate similar or declining exposure to high-risk sectors or related parties in comparison to pre-acquisition, along with a stable, diversified funding structure.
• Strengthened banking system outlook through mutual gains: The mandatory transfer mechanism is expected to accelerate bad debt resolution and stabilize weak credit institutions. It also presents mutual benefits- enhancing growth prospects and strategic advantages for acquiring banks, while facilitating the recovery of transferred banks through structural reforms. 

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