The impact of shadow banking activities on risk-taking in Vietnamese commercial banks

Abstract

Abstract: Engaging in shadow banking activities may result in significant risks for banks and increase systematic risk as well. If the risk level is too high, it can lead to contagion to other banks. Therefore, the impact of shadow banking activities on risk-taking in Vietnam commercial banks needs to be clarified in the context of volatile financial markets. This article employs secondary data collected from the annual audited financial reports of 31 Vietnamese commercial banks and the World Bank database from 2010 to 2022. Regression results using the two-step system generalized moment estimation method show that participating in shadow banking activities will increase the risk-taking level of banks. Therefore, Vietnam commercial banks should be cautious when participating in shadow banking activities; the State Bank of Vietnam should issue specific regulations on disclosing information related to shadow banking activities as well as have a risk management and control mechanism for these activities to ensure the safety of the banking system’s operations.