Abstract
In this study, we tried to identify determinants of the credit risks at Vietnamese commercial banks. By applying the quantitative model using the unbalanced panel data of 20 banks in the period from 2006 to 2014, coupled with surveying the dependent variable, that is non-performing loan (NPL), in order to express the credit risks in business activities of commercial banks, the study has made conclusions on two groups of determinants that may have influence on the credit risks: (i) Bank-specific determinants and (ii) macro determinants. Specifically, the quantitative results showed that most correlations affirmed the accuracy of theory and relevant previous research findings, of which some notable results obtained by the author included: (i) For bank-specific determinants, the credit risks were highly inertia, requiring the continuous management of credit risks. Besides, the bank size and market share negatively influenced the credit risks of commercial banks due to adverse impacts on the readiness of acceptance of risks in business activities. In addition, the rapid credit expansion, ineffective capital use and credit control and management also caused future credit risks. (ii) For macro determinants, the estimated results re-affirmed the relationship between impacts of economic cycles though GDP growth and credit risks of commercial banks. (iii) Additionally, the study has not found any correlation between the effectiveness of general management, real lending interest rate and credit risks in business activities of Vietnamese commercial banks.
Highlights
In this study, we tried to identify determinants of the credit risks at Vietnamese commercial banks
By review and assessment of actual credit risk situation, we carried out identifications and qualitative analysis of potential factors possibly affecting credit risks in business activities of Vietnamese commercial banks
Based on previous studies, we used panel data and dynamic regression model to control the existence of inertial effects though time of credit risks and Generalized Moment of Method and the approach of Arellano and Bond (1991) to analyze factors affecting credit risks of commercial banks in Vietnam in the period 2006-2014 including bank-specific factors as well as macro factors
Summary
As a financial intermediary in the economy, credit capital flows of banks always play such an important role in the growth and development the national economy, especially for developing countries. Brajovic Henuievan Greuning – Sonja Bratanovic defined that: Credit risk is defined as that borrowers fail to pay interests or repay the principal compared to required time as set out in credit contracts. This is the inherent natures of business activities of commercial banks. Credit risk is the delay of repayment or in worse cases, the complete failure in payment This causes problems for cash flows, affecting the liquidity of commercial banks (The World Bank). Credit risk may be broadly defined as risk of financial loss (direct or indirect) when the borrowers do not perform their payment obligation in accordance with commitments or they are unable to pay back
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