Capital flows and the challenge of stabilizing interest rates in Vietnam's banking system

Financial markets in the first months of 2026 have shown clear volatility amid geopolitical tensions in the Middle East. While gold has fluctuated, the stock market has undergone deep adjustments after a period of rapid gains, and investors’ defensive sentiment has become more evident. In this environment, capital has been tending to flow back into assets perceived as more stable, with bank deposits emerging as a preferred option. As deposit yields have become more attractive, savings are regaining their role as a capital-preservation channel.

Why deposit rates are rising

Experts say the latest round of rate increases is not driven solely by competition among investment channels. Instead, it is also linked to liquidity-balance pressures within the banking system.

Dr. Chau Dinh Linh of the Banking University of Ho Chi Minh City said that after a long period of keeping rates low, banks are now required to raise deposit rates to attract savers. This additional funding, in turn, is needed to support credit-growth targets for the year.

Outlook for deposit rates

Vietcombank Securities (VCBS) projects that deposit rates will continue to rise, driven by ongoing liquidity-balance pressures in the banking system. This is occurring alongside high credit growth and robust public investment disbursement in 2026. However, VCBS expects the pace of increases to be less sharp than in previous cycles.

The main pressure is anticipated to come from private mid- and small-sized banks, which rely more heavily on customer deposits and have less flexible funding structures.

Risks from aggressive rate competition

Despite the upward pressure on deposit rates, experts caution that banks should not raise rates aggressively “at any cost.” If input costs increase sharply, banks may find it difficult to keep lending rates stable. That could affect enterprises’ ability to absorb capital and, more broadly, weigh on economic activity.

NHNN measures to stabilize lending rates

To address this situation, earlier this week the State Bank of Vietnam (NHNN) issued Official Dispatch No. 2342/NHNN-CSTT on measures to stabilize lending rates in the context of rapidly rising deposit rates.

The dispatch requires credit institutions to strictly implement the Governor’s Directive No. 01/CT-NHNN to carry out the sector’s core tasks for 2026. The stated aim is to support macroeconomic stability, inflation control, sustainable growth, and the safety and stability of the system.

NHNN also urges units to focus on implementing measures to stabilize lending rates and contribute to stability in the money market in line with government and Prime Minister directives.

Monitoring and supervision

NHNN said it will closely monitor developments in deposit and lending rates. It will also require lending rates to be published on the electronic information portal of each TCTD and will intensify inspection, examination, and supervision of TCTDs to ensure compliance with government directives on deposit and lending rates.

NHNN further calls on TCTDs and NHNN regional offices to thoroughly implement assigned tasks and be accountable under law, to the Governor, and to competent authorities.