Abstract
The recent crisis of non-performing loans in the banking system has hit the Vietnamese economy hard. The GDP has been fallen down, while the bad debt ratio in the banking system has risen dramatically to 17.2 percent, and it takes more time to restore the economy and banking system. This research aims to define aspects that impact non-performing commercial bank loans in Vietnam. It covers the period of 2008–2017 using 200 identified banks of Ho Chi Minh City Stock Exchange and Hanoi Stock Exchange, and applies methods based on the regression of pooled ordinary least squares, fixed and random effects models, in particular, generalized least squares to confirm the stability of the regression model. The results show that non-performing loans this year will positively affect those in the next year. In addition, a raise in bank performance and credit growth also leads to the reduction in non-performing loans from banks. Regarding macroeconomic factors, higher interest rates would have a major and beneficial influence on failed loans in terms of macroeconomic dynamics, and, therefore, little effect on economic activity and inflation. Therefore, Vietnamese banking system should reduce the systematic risk and improve monitoring processes, drawing on the experience of global banks with extensive experience in risk management.
Highlights
Over the last decades, several banking problems have emerged all over the globe
According to a survey of 20 Vietnam Stock should be remembered that a state-owned bank is Exchange’s commercial banks for the period more likely to handle its bad debt condition well
In the case of a developed country, this study empirically explored the roots of nonperforming loans with the involvement of banks
Summary
Several banking problems have emerged all over the globe. Following the failure of Lehman Brothers and Fannie Mae and Freddie Mac, the subsequent global economic disaster of 2007–2008, which was adversely activated by the liquidity bubble due to a rapid sharp decline in the supply of capital or liquidity from banks and other borrowers of U.S subprime mortgages, influenced an economic downturn and turmoil on world markets. Because of bad lending debts and economic downturn, income in Vietnam’s banking industry deteriorated remarkably during the 2012–2015 era. The bad debt ratio in the country’s on-balance sheet of commercial banks has risen dramatically to 17.2 percent, the entire mechanism would retain a reasonable 2 percent or less of the previous stages’ bad debt ratio
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