Banking on Vietnam via AI and risk management

Banking cycles may differ in timing, but the drivers of credit losses are remarkably consistent: rapid lending growth, rising leverage, concentrated exposures, and ultimately a correction.

- By John Argiro

One of the clearest indicators of warning signs is when credit growth consistently outpaces economic output.

Over the past five years, credit in Vietnam has expanded by around 15 per cent annually, compared with average GDP growth of about 6 per cent. As a result, Vietnam’s credit-to-GDP ratio has reached approximately 145 per cent, among the highest levels for lower- and middle-income economies. Such levels inevitably raise questions around leverage, asset concentration, and the potential for market distortions.

Against this backdrop, it is encouraging to see Vietnam taking a more disciplined approach to balancing risk and return. The State Bank of Vietnam’s accelerated adoption of Basel III is a positive step, strengthening credit, capital and liquidity management while improving transparency across the banking sector. It also creates an opportunity to support Vietnam’s growth ambitions with world-class risk management capabilities.

Vietnam’s banks are currently navigating a demanding strategic agenda: cyber risk, anti-money laundering and counter-terrorism financing compliance, digital transformation, and improved credit risk modelling. Three structural challenges sit beneath all of these priorities.

The first is data access. The ability to move towards open banking, connect seamlessly to credit bureaus, and integrate strategic data assets remains constrained. Without reliable, structured, and timely data flows, risk models can only be as good as the data that feeds them.

The second is technology adoption. Legacy banking systems continue to slow decision-making and innovation. While banks are moving towards AI-enabled, cloud-based architectures, legacy infrastructure often prevents valuable new tools from being deployed at the speed required.