A FINANCIAL ASSESSMENT FOR VIETNAM’S BANKING SYSTEM USING FINANCIAL SOUNDNESS INDICATORS

Abstract

                  This paper is an attempt to analyze captial adequacy, asset quality, earnings and profitability, and liquidity of Vietnam’s banking system using financial soundness indicators (FSIs). The results show that the capital adequacy ratio has been always higher than the 8% minimum requirement of the Basel Committee, and even well above the 9% minimum requirement of the State Bank of Vietnam. However, the asset quality has not remained secure recently because of high amount of outstanding nonperforming loans. Measuring indicators of earnings and profitability, including ROA, ROE, interest margin to gross income, etc. all showed downward trends in 2012 and 2013. Overall, the liquid asset ratio was quite stable in 2008-2012, which indicates that periods of liquidity crisis were only temporary, thus required more intervention and correction efforts from monetary authorities.