Effects of the Credit Boom on the Soundness of Vietnamese Commercial Banks

Abstract

This paper concentrates on examining the impact of the credit boom (2007-2010) on the soundness of the commercial banking system in Vietnam by using qualitative and quantitative methods. The results show that the credit boom in the period 2007-2010 had made Vietnam's banking system face many uncertainties such as difficulties in liquidity, increased non-performing loans... The influence of the credit boom on Vietnam's banking system is assessed on basic aspects such as asset quality, profitability, liquidity, capital adequacy... The quantitative analysis of the impact is made through the regression model using variables that show the characteristic of individual commercial bank and the volatility of the economy. The data is collected from 18 commercial banks in Vietnam in the period from 2005 to 2013, taken from the database BankScope and supplemented by information from the annual financial reports of the banks. Finally, in order to avoid the possibility of credit booms in the future and their effects on bank soundness in Vietnam, some recommendations related to credit growth are proposed for the authorities and the commercial banks.