The stability of Vietnamese commercial banks - Does liquidity creation matter?

Linh Thi My Nguyen and Oanh Thi Kim Tran
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Linh Thi My Nguyen: University of Finance
Oanh Thi Kim Tran: University of Finance

HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, 2025, vol. 15, issue 1, 81-98

Abstract: The study offers insights into whether liquidity creation, capital growth rate, and their interaction have affected the stability of Vietnamese commercial banks by employing the Bayesian method for a sample of 25 commercial banks during 2008 - 2022. Our empirical findings reveal that the more liquidity a bank creates and the higher the capital growth rate is, the more stable the bank is. Especially the results show that capital growth has a moderating role, as it allows banks to absorb potential loss due to liquidity risks in the course of liquidity creation. Moreover, other bank-specific factors, including the Capital Adequacy Ratio (CAR), Non-Performing Loan (NPL), Cost to Income Ratio (CIR), Net Interest income (NIM) ratio, Liquidity Ratio (LIR), Loan To Deposit ratio (LTD), and marco ecomomic factors including GDP growth and inflation are determinants of bank stability. The study suggests some implications for the State bank of Vietnam with regard to liquidity creation policies to maintain the stability of the Vietnamese banking sector.

Keywords: bank stability; Bayesian approach; liquidity creation (search for similar items in EconPapers)
JEL-codes: B26 G21 G31 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bjw:econen:v:15:y:2025:i:1:p:81-98

DOI: 10.46223/HCMCOUJS.econ.en.15.1.3145.2025

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