The determinants of operational risk in Vietnamese commercial banks

Abstract

This paper aims at the determinants of Vietnamese banks’ operational risks following the Circular 41/2016/TT-NHNN. Using bank-level data collected from 25 Vietnamese commerical banks’ financial reports and annual reports from 2009 to 2019 and Random Effect Model - REM, we find that banks with higher non-interest income, total loans to assets ratio, more branches and employees tend to have higher capital requirements on operational risks. Furthermore, we propose some recommendations for banks and regulators to enhance operational risk management in Vietnamese commercial banks.