Factors affecting the financial stability of Vietnamese commercial banks
Main Article Content
Abstract
Purpose - This paper presents the rationale for analyzing the factors affecting the financial stability of commercial banks in Vietnam.
Design/methodology/approach - The study utilizes panel data from 25 Vietnamese commercial banks over the period 2013–2023. The empirical analysis employs Pooled Ordinary Least Squares (Pooled OLS), Fixed Effects Model (FEM), and Random Effects Model (REM). Finally, the Generalized Method of Moments (GMM) is applied to address potential endogeneity problems in the econometric model.
Findings - The research results show that bank size and capital adequacy ratio (CAR) have a positive impact on financial stability, implying that large and well-capitalized banks are more stable. In contrast, return on equity (ROE), non-performing loan ratio (NPL), loan-to-deposit ratio (LDR) and non-interest income (NII) all reduce bank stability. Regarding macroeconomic factors, inflation negatively affects bank stability. GDP variable also shows a negative impact, contrary to the initial theoretical expectations, suggesting that economic expansion may encourage excessive credit growth and risk accumulation in the banking sector. Among them, the bad debt ratio has the strongest impact with a statistical significance level of 1% and a regression coefficient of -17.221, reflecting that credit risk is still a major challenge for the Vietnamese banking system in this period.
Originality/value - This paper provides updated empirical evidence on banking stability in an emerging market context. It extends prior literature by integrating both bank-specific indicators and macroeconomic factors within a unified analytical framework.
Practical implications - The findings offer actionable insights for policymakers and bank managers to formulate strategies aimed at enhancing capital adequacy, controlling credit and liquidity risks, and designing regulatory frameworks that foster sustainable banking stability in Vietnam.
Social implications - Strengthening banking sector stability safeguards public savings, reinforces stakeholder trust, mitigates systemic financial contagion, and supports stable, sustainable economic growth.
Keywords
Commercial banks; Financial stability; Vietnam
Article Details
Field of Economic (JEL Codes)
E44 - Financial Markets and the Macroeconomy - Money and Interest Rates, G21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages - G28 - Government Policy and Regulation - Financial Institutions and Services
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