The impact of bank liquidity, monetary policy and global crises on bank risk-taking: evidence from Vietnam

Phan Dinh Nguyen

Journal of Financial Regulation and Compliance, 2024, vol. 32, issue 5, 684-698

Abstract: Purpose - This paper aims to examine the impact of bank liquidity, monetary policy and global crises on bank risk-taking behavior of Vietnamese banks. It provides evidence for a risk-taking channel of monetary policy through bank liquidity and global crises. Design/methodology/approach - The study uses the data set of 572 observations from 35 banks operating in Vietnam between 2005 and 2022, using the GMM regression technique. Findings - The findings indicate that banks with higher liquidity tend to take more risks in the long run. Additionally, expansionary monetary policies encourage banks to take on more risk. Bank liquidity and global crises, such as the global financial crisis and the COVID-19 pandemic, not only directly affect bank risk-taking but also indirectly through monetary policy. Originality/value - This paper expands the existing literature by examining the effect of bank liquidity, monetary policy and global crises on bank risk-taking by using the GMM and two models of which the authors regress the impact with and without bank liquidity and global crises. New factors affecting risk-taking, including operating cost, financial crisis and the COVID-19 pandemic are added into the model.

Keywords: Bank liquidity; Risk-taking; Global crises; Monetary policy; G20; G21; G28 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-03-2024-0052

DOI: 10.1108/JFRC-03-2024-0052

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