Factors Affecting Loan Loss Provisions of Commercial Banks in Vietnam

Abstract

The study uses generalized method of moments (GMM) estimation to evaluate macro and micro factors affecting credit risk provision of commercial banks in Vietnam. Data was collected from 30 commercial banks in Vietnam from 2008 to 2020. Our model has seven variables, which include a group of factors representing the bank's characteristics and a group of factors representing the macroeconomic situation. The results show that profitability, size, and bad debt have positive impacts on credit risk provision. In contrast, credit balance ratio, capital adequacy ratio, economic growth, and unemployment rate have negative effects on credit risk provision. Therefore, the article proposes some policy implications to reduce credit risk at commercial banks in Vietnam.