Vietnamese Commercial Banks Research Articles

The Relationship between Credit Risk and Bank Financial Stability: The Mediating Role of Bank Profitability

This study aims to investigate the influence of credit risk on bank financial stability of Vietnamese commercial banks, understanding the impact channels and patterns of Vietnamese commercial banks in particular by proposing implications for solutions to reduce credit risks and promote financial stability for banks. We employed the POOL, FEM, REM, GMM techniques, and Monte Carlo approach and used secondary data collected from 2005 to 2019. The findings reveal a direct relationship between bank credit risk, profitability, and bank financial stability, as well as a partly indirect association. The above suggests that bank credit risk and bank profitability can explain the stability of the Vietnam commercial banking sector. In the first step, we examine the relationship between bank credit risk and bank profitability. The findings reveal that size and previous period profitability positively affect bank profitability, while non-performing loans, loan loss provision, non-interest income, efficiency, and bank credit growth positively correlate with bank profitability. Bank profitability does not affect bank credit risk. In the second phase, we examine the effects of bank profitability on bank stability. Regression results demonstrate that previous-period profitability and bank stability impact current-period bank financial stability. We test the impact of bank credit risk on bank financial stability in the third step, and the results suggest that non-performing loans, non-interest income, loan loss provision, and prior bank stability positively impact current bank financial stability. This study offers a new understanding of the channel's effect of credit risk on bank financial stability. The results indicated that the credit risk had a direct and partly indirect impact on bank financial stability.

Impact of the COVID-19 pandemic on bank efficiency in Vietnam

Banking system is an important part of the financial system of each country. The operating efficiency in the commercial banking system will provide the tools and financial products more attractive and relevant to the needs of actors in the economy. The purpose of this paper is to analyze the impact of COVID-19 on the efficiency of 26 Vietnamese commercial banks. The paper uses a quantitative method with the nonparametric frontier analysis, data envelopment analysis (DEA) approach, to measure the efficiency of Vietnamese commercial banks. The paper adopts an intermediation approach as the banks are viewed as financial intermediaries providing financial services and payment services to entities in the economy. Research findings reveal that Vietnamese commercial banks have effectively leveraged the positive impacts of the COVID-19 pandemic, since the average efficiency in 2020 improved over the pre-pandemic period in 2019 on the same models for comparison and estimation. Based on such findings, the study makes some suggestions and recommendations to help Vietnamese commercial banks increase their operational efficiency in the context of the prolonged pandemic. AcknowledgmentThe author wishes to acknowledge support from the Banking University – Ho Chi Minh City. This research was made possible thanks to all valuable support from relevant stakeholders.

The Impact of Digital Transformation on Performance: Evidence from Vietnamese Commercial Banks

The role of digital transformation in creating value for commercial banks has been interesting to researchers for a long time. While many commercial banks have significantly investigated digital transformation, researchers and managers have still met many difficulties examining the distribution of digital transformation to business performance. This paper aims to evaluate the impact of digital transformation on Vietnamese commercial banks’ performance by different sizes, from there proposing policy implications of digital transformation to improve the banking performance. To achieve this goal, we used a quantitative research method. Specifically, we applied the GMM system (SGMM) of Blundell and Bond for the data of 13 joint-stock commercial banks in Vietnam in the period from 2011 to 2019. Then Bayesian analysis is performed to test the robustness of the models estimated by the SGMM method. The result shows that the digital transformation has a positive impact on the performance of Vietnamese commercial banks. Besides, we also find that the larger the banks, the greater the positive impact of digital transformation on bank performance. Therefore, the efficiency of digital transformation depends on a bank scale.

Regulatory Capital and Risk in Vietnamese Commercial Banks

Regulatory Capital and Risk in Vietnamese Commercial Banks

Determinants Influencing the Intention to Cause the Moral Hazard of Vietnam Commercial Banks’ Staff

Vietnamese commercial banks are complying with Basel 2 regulations, particularly those pertaining to pillar 2. This article concentrates on moral hazard and the elements that influence bank employees' intentions to produce a moral hazard. We distributed a questionnaire to persons now employed in the banking industry, combining the Theory of Planned Behavior (TPB) was produced by Ajzen (1991) with the attribution theory was created by Weiner (1985) . The structural equation modeling (SEM) res

Fintech Development and Cooperation Strategies of Vietnamese Commercial Banks

The digital technology platform with the Industrial Revolution 4.0 has created favorable conditions for the combination of finance and technology (Fintech) to create new products and services in the financial - banking sector. With the advantage of creativity and the ability to apply advanced digital technology platforms such as blockchain technology, cloud computing, artificial intelligence, data analysis, the Fintech field has been developing strongly globally in general and in Vietnam in particular. Therefore, the cooperation between commercial banks and Fintech companies will bring benefits to both parties and increase new experiences for customers. The article focuses on analyzing cooperation strategies between Vietnamese commercial banks and Fintech companies as well as proposing solutions to solve obstacles hindering this cooperation.

Disparities in banking information transparency in Southeast Asian countries

As the banking industry has an inevitable position in the economy, more information transparency is always required (Nguyen, Nguyen, Hoang, & Tran, 2020). Being transparent not only helps the banking system to develop sustainably but also constructs a basis for investors, regulators, and depositors to build their trust in banks (Le & Truong, 2019). This comparative research marks the first attempt in measuring and contrasting information disclosure and transparency within Vietnamese, Thai, and Singapore commercial banks. In doing so, we employ the S&P’s transparency and disclosure (T&D) index to investigate the disclosure and transparency of Vietnam, Thailand, and Singapore. The results indicate that there is a clear disparity between the level of Vietnamese commercial banks’ information transparency compared with other countries in the region, while the transparency score is the lowest regarding non-financial information including investors’ rights, board remuneration, and process. Results of this study call for improvement in information transparency in Vietnamese commercial banks. Another implication is that the size of the bank has a positive relationship with the amount of T&D, with larger banks having better total T&D ratings. This will increase the need for smaller banks to improve their T&D in order to continue to grow sustainably.

Uncertainty and bank funding liquidity risk in Vietnam

This paper examines the impact of uncertainty on bank funding liquidity risk. Based on a sample of Vietnamese commercial banks from 2007 to 2019, we show evidence that micro uncertainty in the banking sector leads to higher funding liquidity risk, as proxied by lower deposit ratios. Additional analyses reveal that this nexus widely depends on bank heterogeneity. More precisely, various bank-specific forces that improve banks? financial strength (i.e., an increase in bank return, loan quality, capitalization, liquid assets, and bank size) tend to mitigate the adverse impact of uncertainty on bank funding liquidity risk. Our findings are robust to changes in multiple combinations of regressors, different key bank-level variables to calculate the dispersion of shocks as banking uncertainty measures, and alternative econometric approaches.

The impact of economic freedom on the risk-taking behaviours of Vietnamese commercial banks

This paper investigates the impact of economic freedom and its sub-components on bank risk-taking behaviour in the context of Vietnam. We utilise the generalised method of moments (GMM) for a sample of 22 commercial banks during the period from 2006 to 2020. The economic freedom indicator is collected from the annual publication of The Heritage Foundation. The results reveal that economic freedom will increase bank stability, which is also enhanced by monetary freedom, financial freedom, and investment freedom. Nevertheless, the higher the business freedom index is, the more probable the bank can face risks. High economic growth and low inflationary control also improve bank stability. Besides, some internal banking factors, such as size, diversification, and operating expense control, also affect the risk-taking behaviour of Vietnamese banks. The result underpins the precise policies of the Vietnamese government in promoting global economic and financial integration along with boosting the efficiency in management and scrutiny of state-owned institutions.

The impact of economic freedom on risk-taking behaviours of Vietnamese commercial banks

The impact of economic freedom on risk-taking behaviours of Vietnamese commercial banks

Non-Performing Loans of Commercial Banks, and Their Causes: Evidence from Vietnam

Non-Performing Loans (NPLs) are a significant issue for all banks in Vietnam, attracting considerable attention from scholars. Our research aims to nd out the factors that affect the NPLs of Vietnamese commercial banks. The study uses Pooled Ordinary Least Square (OLS), Fixed effect, Random effect, and Generalized Least Square to examine secondary data of 28 commercial banks annually for the period 2008-2019. Consistent with previous research, the main finding shows that macroeconomic and microeconomic factors impact NPLs. Remarkably, provision for credit risk (PCR) has a significantly positive effect on the NPL ratio. Besides, foreign investor ownership (FOR) and bank size (SIZE) negatively affect the NPL ratio. Especially, for the positive correlation between foreign investor ownership and bank performance, the commercial bank should expand to enhance operational efficiency. Regarding macro factors, the results conclude that gross domestic product (GDP) growth and the unemployment rate (UEP) have a significantly negative relationship on NPLs. Therefore, the State Bank of Vietnam and the banks need to understand the leading causes as they directly relate to the banks in the context of the prevailing economic environment.This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium provided the original work is properly cited.

The Impact of Equity Capital on the Bank’s Profitability: Evidence From Vietnam’s Banking System

From 2008 to 2019, this research examines the effect of equity capital on the profitability of 24 Vietnamese commercial banks. The research findings indicate that, when ROAA and ROAE are used to measure the bank's profit, the equity capital ratio (CAP) has a statistically significant positive effect on the ROAA while having a negative effect on the ROAE. Between 2013 and 2019, the CAP variable has a positive effect on the ROAA and ROAE, indicating that banks with a larger equity capital ratio achieved higher profitability. Furthermore, the deposits-to-assets ratio (DTA) and loan-loss reserves ratio (LLR) both have a negative effect on both proxies for bank profitability, although bank size (SIZE) has a negligible effect on bank profits in the majority of circumstances. Additionally, the rate of GDP growth and inflation (INF) have a beneficial effect on the bank's profitability. The study's objective is to present some critical policy implications for bank executives about the importance of adequate equity capital for the bank's sustainability development.

Determinants of Banks Profitability: Case of Vietnam Listed Commercial Banks

The authors aim at investigating factors impacting the profitability of Vietnamese Listed Commercial Banks during the period of 2011–2020. Through the Panel Tobit model, the study figured out that the CIR (Cost to Income) has the inverse relationship with the profitability while LDR (Loans to Deposits) positively correlates to the profitability. Based on findings, some recommendations were proposed to enhance the profitability of Vietnamese Commercial Banks in the future.

Monetary policy and bank performance: The role of business models

This paper examines the relationship between monetary policy and bank performance in a multiple-instrument environment, particularly highlighting the conditioning role of bank business models. Employing a unique dataset of Vietnamese commercial banks from 2007 to 2019, we display that banks react to monetary policy changes, either when the central bank increases policy rates or injects money into the economy through open market operations, by decreasing overall returns and increasing financial instability. Additionally, we document that the accumulation of foreign exchange reserves benefits bank outcomes, contrasting to open market operations, albeit the central bank uses both of these policy instruments to alter money supply in the economy. Our key analysis of interest reveals that business models considerably matter in the effects of monetary policy on bank performance. Collectively, our findings demonstrate that banks’ business models that yield more non-interest income or diversify more into different income sources may mitigate the pass-through of monetary policy to bank performance. This finding holds across all interest- and quantitative-based monetary policy indicators and across all the functions of risk-taking behavior, earning-profit capacity, and financial stability. Furthermore, while plotting the marginal effects of monetary policy, we realize that they are insignificant for banks whose business models heavily rely on non-traditional segments.

Capital adequacy ratio and a bank’s financial stability in Vietnam

The objective of this study is to provide more empirical evidence on the impact of the capital adequacy ratio, as well as control and micro variables, on the financial stability of commercial banks in emerging markets such as Vietnam. The study analyzes the impact of the capital adequacy ratio on the financial stability of 18 Vietnamese commercial banks in the period 2010–2020 using the Generalized method of moments (GMM) model. Empirical research results show that the capital adequacy ratio has a positive correlation with the financial stability of Vietnamese commercial banks during the study period. Besides, the study also uses control variables such as Profitability through ROA and ROE, Bank Size (SIZE), Loans to Assets Ratio (LTA), Deposits to Assets Ratio (DTA), and Loan Loss Ratio (LLR), to analyze their impact on the financial stability of Vietnamese commercial banks. Based on the above results, the study proposes some policy implications to enhance the financial stability of Vietnamese commercial banks using the capital adequacy ratio and the control variables from the GMM model that are statistically significant. The paper also pointed out four limitations of the study in terms of data, research samples, methods and research models, so that further research can be more complete. AcknowledgmentThe author wishes to acknowledge support from the Banking University of Ho Chi Minh City. This research was made possible thanks to all valuable support from relevant stakeholders.

Bank Ownership vs Credit Growth: Empirical Evidence from Vietnamese Commercial Banks

This paper is aimed at analyzing the relationship between bank ownership and credit growth of Vietnamese commercial banks. With the data of 20 commercial banks in period 2009-2018 period, the REM method is applied. The key findings are: First, credit growth rate of state-owned commercial banks in Vietnam is higher than of private commercial banks, which is opposite to the expected signal. The main reasons are (i) decision making of state-owned commercial banks on lending are backed by the government, which is more straight-forward than private banks; (ii) State Bank of Vietnam considers credit policy as one of the important monetary policy tools, of which state-owned commercial banks are the key drivers; (iii) state-owned commercial banks have stable and cheap funding sources, which create the good base for expanding credit with cheap interest rates. Second, asset size does not have any impact on credit growth. Credit growth rates are determined by the bank’s overall performance and maximum growth rate set by State Bank of Vietnam, not on assets. Third, the other bank-specific factors are statistically significant with credit growth, of which liquidity and ROA have the strongest influences. Recommendations for better credit growth management of commercial banks include: (i) State Bank of Vietnam and the Government to ensure soundness of the banking system, including applying the Basel II requirements to all banks; and establish more support packages in order to boost the lending activities of privately-owned banks. (ii) Commercial banks to reduce its non-performing loans in order to stimulate the growth in lending. Keywords: bank liquidity, bank ownership, credit growth, non-performing loans, ROA.

Implementation of Internal Capital Adequacy and Assessment Process in Vietnamese Commercial Banks

The internal capital adequacy and assessment process (ICAAP) was first introduced in the second pillar of Basel II in 2004 to offset the deficiencies of Basel I and capital adequacy regulations in the first pillar of Basel II. This process is aimed at identifying and measuring risks generated in banks’ activities, and then provides the requirements for internal capital levels and methods to raise capital to deal with these risks. In fact, the implementation of Basel II and ICAAP in Vietnamese commercial banks has attained notable achievements, but it also revealed some major weaknesses. The purpose of this research is to evaluate the implementation of ICAAP in Vietnamese commercial banks in eight components of the ICAAP addressed by Basel II using the survey method and then to simulate the implementation of ICAAP in a Vietnamese commercial bank. From the facts and the simulation of the ICAAP framework in this study, the authors offer some suggestions for Vietnamese commercial banks to implement ICAAP effectively in their banking operations.

The Impact of Service Quality on the Competitiveness of Retail Banking Service in Vietnam

This study aims to measure the impact of service quality factors on the retail banking competitiveness of commercial banks from the customer perspective. The initial hypothesis is that there are 5 service quality components affecting the competitiveness of retail banking services including: reliability, tangibility factors, assurance, responsiveness and empathy. The research data was collected through a survey of 346 individual customers who had been using banking services in Vietnam. Descriptive statistical methods, exploratory factor analysis (EFA), factor confirmation analysis (CFA) and structural equation modeling (SEM) are used in the study. The results show that the factors that have the strongest impact on the competitiveness of retail banking services are: reliability and assurance, responsiveness, and tangibility. The empathy factor does not have a positive impact on the competitiveness of retail banking services. From these results, discussions and some policy implications have been made to improve the retail banking competitiveness of Vietnamese commercial banks.

Effect of digital banking-related customer experience on banks’ financial performance during Covid-19: a perspective from Vietnam

PurposeThis study aims to investigate customer experience (CE) and its relationship with intermediate variables to analyze the impact of digital banking (DB) on banks’ financial performance (FP) before Covid-19 and during the lockdown in Vietnam.Design/methodology/approachThese research data are from a survey of Vietnamese customers. The survey was deployed to a sample of 238 and 218 customers of 20 Vietnamese commercial banks via email in 2018Q4 and 2020Q2, respectively. FP is measured using banks’ quarterly financial statements before Covid-19 and during the lockdown.FindingsCE with DB had a significant and positive impact on FP via customer satisfaction before Covid-19, while the other two intermediate variables (word-of-mouth [WoM] and trust) had no considerable impact. During the lockdown, only WoM had a positive impact on FP. These findings indicate that before Covid-19, when customers could easily interact with their bank through many touchpoints, customer satisfaction with DB services created higher FP for the bank. However, during the lockdown, DB became the customer’s main touchpoint and WoM mediated the CE–FP relationship.Originality/valueDuring the national lockdown from the beginning of the Covid-19 pandemic in January 2020, customers in Vietnam may have had different experiences with DB when no alternate modes of payment were available. The study uses Covid-19 as a moderator variable to offer different viewpoints and findings related to CE with DB and its impact on FP.

The impact of credit risk on the financial stability of commercial banks in Vietnam

This study investigates the impact of credit risk on the financial stability of Vietnamese commercial banks. The paper uses the Z-score to proxy the financial stability of banks. We use the data of 27 Vietnamese commercial banks on BankScope, during 2010 - 2019. The paper applied a dynamic panel data approach; the selected method is the difference GMM (DGMM). The key question discussed is which factor impacts on Z-score. Analysis results show the negative effect of non-performing loans on the financial stability of banks. When commercial banks have higher non-performing loans, the lower the financial stability is. Additionally, bank-specific variables such as equity on asset ratio, the return on equity, the size of the bank and set of macroeconomic variables affect the bank’s financial stability. Based on the analysis results, we imply relevant policies for the State Bank of Vietnam and commercial banks.