Commentary: Codifying Resolution 42 – A Domestic Credit Rating Agency’s Perspective

Resolution 42/2017/QH14was enacted in the context of a sharp increase in non-performing loans (NPLs) during 2012–2017, granting credit institutions (CIs) greater authority to liquidate collateral assets. However, after more than six years of implementation, the Resolution still retained its pilot nature and limited scope.

Accordingly, the codification of Resolution 42 into the amended Law on Credit Institutions (2025) – effective from October 15, 2025 – marks a structural milestone to address these limitations, enhance debt recovery for CIs, and strengthen the resilience of Vietnam’s banking system.

Amid these significant regulatory changes, FiinRatings – A Strategic Partner of S&P Global – has released its Market Commentary titled “Codifying Resolution 42: A Local Credit Rating Agency’s Perspective,” providing an independent and in-depth analysis of the implications for credit risk and the rating outlook of Vietnamese banks.

Key Highlights from the Commentary:

🔹 Alignment with International Standards: The codification of Resolution 42 helped bring Vietnam’s banking system closer to international practice, narrowing the legal gap with countries that have long-established legal systems such as Hong Kong and Australia.

🔹 Strengthening the Systemic Risk Framework: A more comprehensive legal foundation also supports an improved assessment of Vietnam’s Banking Industry Country Risk Assessment (BICRA), as recently noted by S&P Global Ratings.

🔹 Increasing Differentiation Among Bank Groups: State-owned banks and the Top 4 private joint-stock commercial banks are expected to benefit further from their scale, governance capabilities, and solid track record in NPL resolution. Meanwhile, smaller banks may face pressure to enhance risk management and invest more heavily in debt restructuring to remain competitive.

🔹 Core Tier 1 Capital (CET1) and Capital Adequacy Ratios (CAR) remain decisive factors for credit outlooks and the long-term resilience of the banking system amid robust credit expansion.

Codifying Resolution No. 42 not only accelerates the resolution of non-performing loans (NPLs) but also paves the way for an improved credit outlook for Vietnam’s banking sector over the medium to long term. This establishes a critical foundation for a more transparent, sustainable, and trustworthy financial market.

Building on this milestone, FiinRatings offers comprehensive credit rating and advisory services to help enterprises strengthen credibility, raise capital efficiently at optimized costs, and enable investors to identify quality opportunities.

👉 READ THE FULL COMMENTARY HERE

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