The Impact of Credit Risk on Financial Stability of Vietnamese Joint Stock Commercial Banks

Abstract

In recent years, the economy has faced various instabilities, such as wars between some countries worldwide, which have significantly affected the financial stability of commercial banks. This study examines the impact of credit risk on the financial stability of 27 Vietnamese joint-stock commercial banks in the period 2012–2022, using panel data regression methods (OLS, FEM, REM, and GMM). Research results show that financial stability will increase if banks can control the increase in credit risk. Other factors that positively impact the financial stability of joint-stock commercial banks include the ratio of equity to total assets, loan debt to total assets, and bank scale. Factors that negatively impact the financial stability of joint-stock commercial banks include operational efficiency, the net profit on equity ratio, the net interest income ratio, economic growth, and the inflation rate. However, no impact of the credit growth variable on the financial stability of joint-stock commercial banks was found. Based on the research results, the authors propose some management implications to help Vietnamese joint-stock commercial banks increase financial stability in the future.