Impact of digital transformation on credit risk and liquidity risk of Vietnamese commercial banks

Abstract

In an increasingly robust global economy, the digital transformation in business operations, particularly within the banking sector, has become critical factor in helping banks enhance operational efficiency, improve service quality, and increase competitive capacity. This paper will analyze the impact of digital transformation on two material risks faced by Vietnamese commercial banks, namely credit risk and liquidity risk. The study was conducted with 24 Vietnamese commercial banks from 2016 to 2024 using the Generalized Least Squares (GLS) method. The empirical results demonstrate that digital transformation contributes to the reduction of both credit risk and liquidity risk at Vietnamese commercial banks. In adition, the positive impact of digital transformation is more significant for listed banks, with the positive effects being particularly evident in various aspects of digital transformation, including technical infrastructure, human resource infrastructure, internal applications, and online services. Therefore, the study offers several recommendations for Vietnamese commercial banks to proactively implement digital transformation strategies, including the development of digital infrastructure and technology systems, digital banking products and services, digital human resources, and the digitization of internal processes.