Monetary Policy and Bank Credit Risk in Vietnam

Abstract

The paper empirically analyzes the impact of monetary policy on the credit risk of Vietnamese commercial banks from 2008 to 2021. Using three different monetary policy measures, including the growth rate of money supply, the difference of refinancing rates and rediscounting rates of the central bank, the paper’s main findings do not support the view of the bank risk-taking channel of monetary policy transmission. In other words, relaxing monetary policy does not harm the bank’s operations in terms of credit risk. More precisely, the paper shows that banks tend to achieve a higher level of credit safety in response to easing monetary policy. This conclusion is robust and consistent across different credit risk measures.