Macroprudential Policy and Bank Stability: Empirical Evidence in Vietnam

Abstract

The study was conducted to evaluate the impact of macroprudential policy on the stability of the banking system in Vietnam. Using the Bayesian simulation algorithm, the study has provided empirical evidence on the role of macroprudential policy tools, including Limits on Domestic Currency Loans (CG), Time-Varying/Dynamic Loan-Loss Provisioning (DP) and Limits on Foreign Currency Loans (FC) in maintaining the stability of commercial banks. The study also shows that bank size positively impacts banking stability. Meanwhile, macro factors, including GDP growth rate and inflation, did not obviously impact banking stability. Finally, the study also found evidence of a negative impact of the Covid-19 pandemic on banking stability.