Monetary Policy, Bank Competitiveness and Bank Risk-Taking: Empirical Evidence from Vietnam

Nguyen Tran Thai Ha () and Phan Gia Quyen
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Nguyen Tran Thai Ha: Finance and Accounting Faculty, Saigon University 28 Nguyen Thong Street, Ward 7, Dist. 3, Ho Chi Minh City, Vietnam
Phan Gia Quyen: Saigon Thuong Tin Commercial Joint Stock Bank, Vietnam 266 – 268 Nam Ki Khoi Nghia Street, Ward 6, Dist. 3, Ho Chi Minh City, Vietnam

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2018, vol. 14, issue 2, 137-156

Abstract: This study assesses the impact(s) of monetary policy and further influence of competitiveness on bank risk-taking of the Vietnamese commercial banks over the period of 2007–2016, an unstable period of the domestic monetary policy. The monetary policy is captured by a set of different variables including money supply, refinancing interest rate and treasury bill interest rate. Using the GMM methodology, the study finds that the monetary policy of Vietnam has a significant impact on bank risk-taking level, as measured by Z-score index. The empirical findings also indicate that bank risk-taking increases in the context of a loose monetary policy. In addition, the competitiveness of banks, presented by the Lerner index, is found as a determinant of bank risk-taking levels. By using interacting variables, the findings indicate that the impact of the competitiveness of banks outweighs that of monetary policy on bank risk-taking behaviour. It implies that the banks with high market power demonstrate less risk-taking behaviour even in a loose monetary policy environment. Besides that, liquidity, credit level and cost inefficiency could increase risk-taking behaviour of banks while bank size poses restrictions on bank risk-taking.

Keywords: bank; risk-taking; monetary policy; competitiveness; GMM; Vietnam (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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