Excess Liquidity and Banking Stability in Vietnam

Abstract

The research concerns about the impact of excess liquidity on banking stability. The result provides empirical evidence on the potential adverse of excess liquidity in order to evaluate liquidity supply solutions when a crisis occurs in Vietnam. Increased liquidity coupled with reduced demand could lead to higher levels of excess liquidity that makes banks more unstable. At the end of the research, the author proposes policy and management implications to help banks to plan liquidity risk managemnet effectively and increase their stability, especially in accordance with Basel III requirements applied after the global financial crisis 2007 – 2009.