The Impact of Uncertainty on Credit Risk of the Vietnamese Banking Industry

Abstract

This study aims to evaluate the impact of banking uncertainty on the quality of lending activities, explicitly focusing on credit risk. A sample of 40 Vietnamese commercial banks from 2010 to 2023 was analyzed to achieve this goal. The two-step system generalized method of moments (GMM) estimation technique was employed to estimate the dynamic model and address the endogeneity issue. The findings indicate a negative relationship between banking uncertainty and credit risk, suggesting that increased uncertainty improves credit quality. Based on these results, several valuable policy implications are proposed.