Assessing credit risk tolerance in the context of the Covid-19 pandemic in Vietnam- case study with Stress Test

Abstract

This study provides evidence of the high credit risk tolerance in Vietnam’s banking industry to be caused by the Covid-19 pandemic. The data is updated to 2020, which is the year the pandemic took place in Vietnam. Stress Test was chosen as the main method for this study. The scenario is built based on the reality be recorded in Vietnam in 2020. The results show that BIDV, Vietinbank and Vietcombank are all able to bear the reasonable risks against the serious impacts of the Covid-19 on credit activities. However, even with Vietinbank, one of Big four banks in Vietnam, it still has difficulties absorbing risks. This fact raises the requirement to strengthen risk management solutions in 2021 while the fourth phase of the Covid-19 pandemic is developing more seriously in Vietnam.