Verification of the Impact of Central Bank Digital Currency (CBDC) Issuance on Net Interest Income of Vietnamese Commercial Banks

Abstract

This study aims to predict the impact of Central Bank Digital Currency (CBDC) issuance on the net interest income (NII) of commercial banks in Vietnam – the main and most important source of revenue for financial institutions with the assumption that CBDCs issued by the State Bank of Vietnam would be widely accessible, coexist as a supplement to cash, and be viewed by consumers as an alternative to bank deposits, thereby the net interest income of commercial banks would be adversely affected. The predictive analysis with the panel data model is applied to this study to specifically assess the impact of the CBDC issuance on the NII of 13 typical commercial banks in Vietnam. The result shows that even in the backdrop of favorable growth in macroeconomic data, issuing CBDC will have a direct impact on percent cash and will slow commercial banks' NII growth in which large banks may be more vulnerable than smaller banks with higher return savings deposits. This opens up a quest for the future to continue to study and evaluate the impact on other performance indicators of the bank in comprehensively to identify adaptive solutions in the inevitable context of the digital economy.