We used the BK approach to verify the relationship between bank credit risk and bank stability of the Vietnam commercial bank system using secondary data collected from 2005 to 2019. Pooled OLS, FEM, REM, and GMM methods, as well as Sobel's test, were used. The findings show a direct and partial indirect relationship between bank credit risk, profitability, and bank stability. Nonperforming loans, loan loss provision, non-interest income, performance, and bank credit growth have a negative effect on bank profitability, while nonperforming loans, loan loss provision, non-interest income, efficiency, and bank credit growth have a positive impact on bank profitability. The profitability of a bank has no bearing on the risk of a bank's credit. The previous period's profitability and bank stability have an effect on current bank stability. Nonperforming loans, non-interest profits, loan loss allowance, and previous period bank stability are all positively associated with current bank stability. Finally, banks must develop and perfect their risk management systems in order to meet Basel II requirements. One of the areas that needs to be strengthened and carried out on a daily and consistent basis is credit risk identification and forecasting.
Author (s) DetailsSang Tang My
Ho Chi Minh City University of Economics and Finance (UEF), 141-145 Dien Bien Phu Street, Ward 15, Binh Thanh District, Ho Chi Minh City, VietNam.
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