The Effects of Booming Credit Growth on the Soundness of Commercial Banks: Empirical Research with the Case of Vietnam

Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 17 December 2018

The Effects of Booming Credit Growth on the Soundness of Commercial Banks: Empirical Research with the Case of Vietnam

Do Hoai Linh, Phan Anh Khoa

National Economics University, Vietnam

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10.31014/aior.1992.01.04.56

Abstract

The research aims at investigating the impacts of rapid credit growth in Vietnam, that is called booming period occurred from 2007 to 2010, on the soundness of the Vietnamese commercial banks with quantitative methods. By using bank data collected from 18 major commercial banks from 2007 to 2013, the quantitative method is reflected through a strong regression model linking with variables for both microeconomic and macroeconomic factors. The influence of the credit boom was examined on basic aspects as asset quality, profitability, liquidity, capital adequacy. The findings seld lights on is that rapid credit growth weakens commercial banks on both sounder and less sound banks. Moreover, the findings also witnessed the relationship among rapid credit expansion and soundness of commercial banks, taking account the crucial role of bank performance as a determinant of credit growth.

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