Determinants of the Probability of Bank Failures of Commercial Banks in Vietnam: A CAMELS Rating System Approach

Abstract

This study aims to analyze the factors affecting the probability of bank failures of commercial banks in Vietnam, in which the probability of bank failures is determined by the CAMELS rating system. We use a sample of 37 Vietnamese commercial banks over the period 2006-2020. The Logit regression model with Bayesian Model Averaging (BMA) is applied in this study. The empirical results show that the non-interest income ratio (NIIR), net interest margin (NIM), and asset growth rate (AG) are negatively associated with the probability of bank failues, whereas the loans to total assets ratio has a positive associated with the probability of bank failures. The results also indicate that the government ownership (OWNER) and bank size (SIZE) have no effect on the probability of bank failures of commercial banks in Vietnam.