Foreign bank presence and financial risk: A threshold analysis of fintech, competition, and macroeconomic uncertainty

Abstract

This study investigates the nonlinear impact of foreign bank presence (FBP) on financial risk in Vietnam over the period 2010- 2024, with a focus on three moderating factors: fintech development, macroeconomic uncertainty, and market power. By integrating Panel Threshold Regression techniques with machine learning algorithms, the findings reveal that the effects of FBP are not fixed or linear but vary significantly depending on contextual thresholds. Specifically, FBP contributes to greater financial stability when fintech maturity is moderate, market competition remains within an optimal range, and macroeconomic conditions are relatively stable. However, once these thresholds are exceeded, the stabilizing effects may reverse. The impact of FBP also differs markedly across banking segments, showing more positive effects for smaller, privately-owned banks and during the pre-COVID-19 period. This research provides new empirical evidence from a rapidly integrating emerging economy, offering insights into the conditional dynamics of financial integration amid digital transformation and rising uncertainty. Policy implications are proposed concerning conditional financial liberalization, risk segmentation, and the development of early-warning frameworks tailored to Vietnam's context.