Abstract
Through the secondary data collected from 2005 to 2019, we used the BK approach in which, Pooled OLS, FEM, REM, and GMM methods and Sobel's test are used to check the relationship between bank credit risk and bank stability of Vietnam commercial bank system. The results show that bank credit risk, profitability, and bank stability have a direct relationship and have a partial indirect relationship. The size and profitability of the previous period have a positively correlated with bank profitability, nonperforming loan, loan loss provision, non-interest income, efficiency, and bank credit growth have a negative impact on bank profitability, bank profitability has no impact on bank credit risk. Profitability and bank stability of the previous period have an impact on current bank stability. Nonperforming loans, non-interest income hurt bank stability, loan loss provision and bank stability of the previous period have a positively correlated with current bank stability.
Highlights
Financial stability is the foundation for sustained economic growth in every country
The results show that bank credit risk, profitability, and bank stability have a direct relationship and have a partial indirect relationship
The size and profitability of the previous period have a positively correlated with bank profitability, nonperforming loan, loan loss provision, non-interest income, efficiency, and bank credit growth have a negative impact on bank profitability, bank profitability has no impact on bank credit risk
Summary
Financial stability is the foundation for sustained economic growth in every country. The commercial banks want to earn high profits, they must recover all loans to customers, only need a small percentage of non-performing loan can lead to commercial bank failures [30] Because of this importance, the operation of the banking system is subject to a lot of different rules, one of the principles applied by the global commercial banking system in the governance process is Basel Accord, developed by the Basel Committee. As the main source of capital in the economy, the profitability of Vietnam's commercial bank system has a great impact on the operation of corporations and the stability of the financial system. Improve efficiency and reduce bank credit risk in the coming period, Vietnam's banking system needs to have effective and appropriate management measures, as well as to identify the overall factors including internal and external elements, to make appropriate forecasts and strategies for hedging the increasingly complex developments of the macro environment
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