Tìm kiếm tài liệu miễn phí

Non-performing loans: Affecting factor for the sustainability of Vietnam commercial banks

Non-performing loans: Affecting factor for the sustainability of Vietnam commercial banks. Non-performing loans are becoming the main factor influencing the sustainability of Vietnam’s financial system. In order to enforce the financial system in general and the banking system in particular, this study aims to examine the determinants of Non-performing Loans (NPLs) in the Vietnamese banking system.

Đánh giá tài liệu

0 Bạn chưa đánh giá, hãy đánh giá cho tài liệu này

  • 5 - Rất hữu ích 0

  • 4 - Tốt 0

  • 3 - Trung bình 0

  • 2 - Tạm chấp nhận 0

  • 1 - Không hữu ích 0

Mô tả

Journal of Economics and Development, Vol.17, No.1, April 2015, pp. 93-106

ISSN 1859 0020

Non-Performing Loans:
Affecting Factor for the Sustainability of
Vietnam Commercial Banks
Nguyen Thi Minh Hue
National Economics University, Vietnam
Email: huenm@neu.edu.vn

Non-performing loans are becoming the main factor influencing the sustainability of Vietnam’s
financial system. In order to enforce the financial system in general and the banking system in
particular, this study aims to examine the determinants of Non-performing Loans (NPLs) in
the Vietnamese banking system. Particularly, four factors, including the lag of NPLs in the last
year, Loans-to-Asset ratio, Total asset and the Dummy (state-owned or not) were observed and
estimated by quantitative method Ordinary Least Square in order to declare the relationship
between them and the rate of changes in NPLs. The results showed that the four factors (Growth
rate of Loans, Total Assets of Banks, NPLs in the last year and the Dummy variable) actually
helped the growth of NPLs in recent years. Further, some implications to the bank management
are withdrawn.
Keywords: Bank-level factors; macro factors; Non-performing loans (NPLs); Vietnamese
commercial banks,

Journal of Economics and Development


Vol. 17, No.1, April 2015

1. Introduction

To start with, Sanjeev (2007) constructed
a model in order to derive which factors affect the changes in the number of NPLs in the
Indian banking system. In order to clarify the
relationship between the independent determinants and NPLs, he used primary data collected
from structured questionnaires to the managers
of the 37 Indian commercial banks. Hence,
Sanjeev used Hypothesis testing – the Z test
with a 99% significant level of one tail to test
the effects of endogenous and exogenous factors on the changes in the number of NPLs. The
result showed that the exogenous factors made
more of a contribution to the changes in NPLs
than the endogenous factors. Particularly, in
listed internal factors, lack of motivation of
managers, managers not being fully competent in appraising the value of collateral, lack
of effort to reduce costs, lack of effort on the
part of managers, lack of manpower, and lack
of focus on top managers, are the accepted
independent variables among many internal
factors. Otherwise, almost all external factors
including Central and Local government control, political intervention and soft budget constraints have a high influence on the adjustment
of NPLs. Only economic downturns and willful
default by borrowers are the two insignificant
variables, which means that they do not greatly
affect the number of NPLs..

In recent years, the term “Non-performing
Loans” (NPLs) has became more common in
Vietnam’s banking system. Unexpectedly, in
the year 2012, the ratio of NPLs in Vietnam
sharply increased, appearing in most of the
commercial banks’ announcements. Moreover,
this situation turned out to be more complex
when different institutions publicized discrepant numbers of the ratio of NPLs. The annual
NPLs growth rate had sharply increase from
2007 to 2012, with an average growth rate of
approximately 43.11% per year.
Acknowledging the danger of this high ratio
to the economy and the shortage of quantitative research on this topic, it is necessary to detect and discuss the factors that determine the
rise or fall of the rate of NPLs in commercial
banks. Obviously, recent research on the problems of NPLs in Vietnam was not easy to find
out, particularly quantitative research. There
was a little quantitative research which used an
econometric model to find out the main factors
(particularly the endogenous factors) that influence the rate of changes in NPLs in Vietnamese
commercial banks. Therefore, the purpose of
this study was to find out and analyze the determinants of the NPLs in Vietnam’s commercial
banks by using the data from banks in the period from 2010 to 2012. In doing this, this study
preferred to use both descriptive and quantitative analysis to find out the result and some implications in NPLs management activities.

In a similar study, Louzis et al. (2010) were
also working on a model testing the effect of
macroeconomic and bank specifics factors on
the changes in NPLs in the banking system of
Greece. The outcome was that the macroeconomic factors (such as unemployment, GDP,
national debt) and the role of banks in managing their organizations had strong effects on

2. Literature review
There had been lots of researchers working
on the topic around NPLs, looking at aspects
such as its causes, consequences and solutions
to manage unexpectedly high NPLs ratios.
Journal of Economics and Development


Vol. 17, No.1, April 2015

ratio such as Return on Asset (ROA), Return
on Capital Employed (ROCE) and so on. Based
on the regression result, the operation of AMCs
in Thailand and the enhancement in macroeconomic variables were successful in reducing
the number of NPLs in Thai and Malaysian
banks. Furthermore, the banks that had larger
assets and better ratios would generate smaller
bad loans. As a result, the reform of the banking system in Thailand and Malaysia after the
1997 financial crisis contributed a big improvement to the economy. Moreover, Jarmo (2001)
and Gerlach and W. Peng (2005) also gave a
contribution on an analysis of the correlation
between macroeconomics, property prices and
banking crises substantially.

NPLs. The specialty of this research is that the
author created different models for different
panels, including: time lag, long-run or shortrun coefficients. Due to their results, the lagged
dependent variable is significant and negatively
related to the fact that when NPLs in the previous quarter decrease, they would increase
in the following quarter. Furthermore, for the
mortgage loans, macro-factors were the key influence on NPLs. Additionally, for the long-run
model, all of the variables are significant. The
size of GDP growth negatively implies that the
number of NPLs would increase when there
was an economic crisis. Besides, unemployment is the most sensitive factor and it positively affects the NPLs. When the unemployment
rate increases, creditors lose their ability to pay
back their loans because of their wages being
cut. In addition, mentioned in this research are
some other variables such as lending rate, sovereign debt and so on. Other researches on the
same topic can be listed as Xu (2005), Zeng

Nevertheless, we can see that one of the
most popular solutions that is commonly used
is the establishment of AMCs. As Xu (2005)
stated in her research, according to the lessons
from Thailand, Malaysia and Korea, China also
established Asset Management Corporations
(AMC) to resolve the NPLs. In addition, Wang
and Perser (2011) also examined the resolution
of NPLs in some Asian countries like Japan and
South Korea to declare the lessons and solutions for China’s banking system which used
the AMCs to decrease the amount of NPLs and
its consequence on the economy. While the
NPLs in Japan was substantially released by
the government, particularly by restructuring
the loans, both China and Korea left NPLs to
the AMCs to resolve, based on the RTC of US.
They organized auctions in which they only
sell NPLs that makes the NPLs’ price fluctuate,
attracted more foreign investors to buy NPLs
and made a large contribution when investors
injected money into the economy. Other related

After deriving the root causes of the NPLs,
many authors gave comments on the resolution
of the NPLs all over the world. Initially, in order to test the relationship between macroeconomic variables like GDP growth or real estate
prices, the number of loans sold to the AMCs,
the bank size, performance and the decline of
NPLs, Inoguchi (2012), followed the studies of
Ueda K. (2000), Hu et al. (2004), and Hosono
K. (2010) and built a model to test how much
these factors above could decrease the number
of NPLs. Particularly, the macroeconomic variables she mentioned are the GDP growth or the
real estate price index, while the bank size and
performance here could be seen as the bank’s
Journal of Economics and Development


Vol. 17, No.1, April 2015

too much on the loans (80% - 90%), hence,
when the economy went down, the interest rate
charged on loans shot up. Their profit could
not pay back the interest payments, hence, they
were vulnerable to go bankrupt.

documents are Klingebiel (2000), Fung et al.
(2002), Pornavalai and Cynthia (2002).
In addition, Klingebiel (2000) made a more
detailed study of the AMCs by using two approaches: a centralized and a decentralized approach. The first approach can be known as the
only AMC which was set up by the government
in order to buy the NPLs from the credit institutions. Otherwise, the second approach refers
to small AMCs, launched and operated by a
parent bank for the main purpose of handling
its bad loans. The paper then also was followed
by the deep analysis and further comparison of
some other countries’ AMCs operation such as
Swedish, Spain, Philippines, and Mexico.

One study that works on the specific data of
Vietnam commercial banks is that of Do and
Nguyen (2014). Using data of ten commercial
banks in Vietnam between 2005 and 2011, this
research aims to identify the determinants of
non-performing loans in Vietnam. The result
shows that both macroeconomic and bank-specific factors exert considerable influences on
the rate of non-performing loans. Specifically,
a lower GDP growth rate results in a higher
NPLs ratio while a higher inflation rate leads to
a greater level of NPLs. Besides, the empirical
result shows a significant positive relationship
between the previous NPLs/bank size/loans to
assets ratio and the current NPLs, and a negative one between banks’ inefficiency/worst
performance and the level of NPLs. This study
uses operating expenses to calculate the inefficiency of banks, however, there is a lack of
transparency of the operating expense figures
in the Vietnamese banking system. However,
this research does not test for the best-fit model
but uses the Pooled OLS. Besides, the number
of banks included in the data set is quite small.
All of these weaknesses reduce the reliability
of this result.

Besides, Vietnamese researchers also gave
contribution to the topic of NPLs. Minh (2012)
said that the NPLs in Vietnam increasingly go
up, comprising 10% of total loans (calculated to
June 2012) and these belong mostly to the stateown companies. He also mentioned the case
of South Korea – the KAMCO (Korean Asset
Management Corporations) operation and then
suggested some solutions for the Vietnamese
banking system in NPLs reduction. Additionally, Vietnamese researchers’ also wrote about
the factors which were involved in the changes
in the NPLs rate of Vietnam commercial banks.
An illustration is given by (Vu T. D., 2013)
who divided the causes of NPLs increases into
four groups: from banks, customers, collateral
(depreciation of the asset) and other objective
causes (mainly dependent on economic status).
Further, he also stated that if banks loosen their
screening and monitoring of the loans they
give to customers, the opportunities for NPLs
increases. In addition, in customers’ groups, it
is said that many firms and businesses relied
Journal of Economics and Development

To summarize, all studies mentioned the
NPLs definition, their determinants and the
experiences of other countries in resolving
them. However, the majority of Vietnamese
studies analyzed theoretically and objectively.
It is difficult to find research using a quantitative method. Consequently, the purpose of

Vol. 17, No.1, April 2015

this study, following lots of models above, is
to construct a regression model which has customized ideas from (Klein, 2013) and uses the
best method out of three methods: the Fixed Effects Method, the Random Effects Method and
the Ordinary Least Square method to estimate.
Besides, to enhance the reliability of the result,
this study mainly focuses on testing the effects
of the four bank-level determinants that are
publicly announced (i.e. total assets, the growth
rate of Loans to Assets ratio, and the lag variable of NPLs in one previous year), on the level
of changes in the case of NPLs in Vietnam.

operations of banking when they limited their
lending activities in order to avoid NPLs. Since
firms could not find exposure to the funds they
needed, their activities became stagnant and
then resulted in a big negative influence on the
real economy. As we can see from the Figure
1, the NPLs ratio increased in the opposite direction with the recovery rate of the economy
which implied that the higher NPLs rate, the
lower the GDP growth. More precisely, the
growth rate of NPLs ratio delayed all the activities of the financial system.
Beside some endogenous factors belonging to the commercial banks themselves, the
changes in NPLs can also be affected by some
macro factors such as economic cyclicality and
government management.

3. Circumstance of non - performing loans
in Vietnam’s commercial banks
The high rate of NPLs in 2012 led to lots
of negative effects on the economy, predominantly the adverse selection problem. Consequently, fears of uncertainty in the financial
markets suddenly increased which delayed the

The very first reason that led to NPLs was
that the business environment had to face
lots of difficulties since the financial crisis in

Figure 1: NPLs ratio and GDP growth in Vietnam 2008-2012







NPLs Ratio





GDP Growth

Source: SBV’s annual report 2008-2012
Journal of Economics and Development


Vol. 17, No.1, April 2015

Tài liệu cùng danh mục Ngân hàng - Tín dụng

Mô hình CAMELS

Hệ thống phân tích CAMELS được áp dụng nhằm đánh giá độ an toàn, khả năng sinh lời và thanh khoản của ngân hàng. An toàn được hiểu là khả năng của ngân hàng bù đắp được mọi chi phí và thực hiện được các nghĩa vụ của mình và được đánh giá thông qua đánh giá mức độ đủ vốn, chất lượng tín dụng và chất lượng quản lý. Phân tích theo chỉ tiêu CAMELS dựa trên 6 yếu tố cơ bản được sử dụng để đánh giá hoạt động của một ngân hàng, đó là: Mức độ an...

Engineering With Nature - Alternative Techniques to Riprap Bank Stabilization

Commodity-level analysis illustrates the size of opportunities and the importance of technology. In many African countries with large amounts of suitable but currently uncultivated land, transfers of technology could pro- vide large benefits to local populations. To reduce risks and increase benefits, greater effort will be needed to identify local comparative advantage, assess the technical viability of proposed investments, improve weak institutional frameworks for land governance, and level the playing field for smallholder competitiveness. A closer look at the underlying data (yield gap, availability of uncultivated area, and area cultivated per rural inhabitant as a proxy for farm size) for some countries in Sub-Saharan Africa and Latin America and the...

Đề thi nhân viên tín dụng ngân hàng Sacombank 2010

Tài liệu tham khảo cho các bạn có mong muốn thi tuyển vào ngân hàng có tư liệu ôn thi tốt đạt kết quả cao

Federal Reserve Bank of New York Staff Reports - Why Are Banks Holding So Many Excess Reserves?

Golden Jubilee Savings Bonds. In 2007 the Ghanaian government issued $50 million worth of five-year “Golden Jubilee” savings bonds, available for purchase at approved financial institutions until June 2008, to both Ghanaians living in Ghana and abroad. Its objective was to raise money for infrastructural development projects in all ten regions of the country, raise awareness of the importance of saving, and diversify financial instruments on offer to the market. Holders of the accrual bonds do not receive the fixed 15 to 15.5 percent interest, compounded semiannually, until redemption. 403 Unfortunately, according to Strategic African Securities Limited (SAS), the lead advisors...

Chuyển dịch cơ cấu tín dụng thúc đẩy quá trình tái cơ cấu kinh tế tỉnh Hậu Giang

Bài viết Chuyển dịch cơ cấu tín dụng thúc đẩy quá trình tái cơ cấu kinh tế tỉnh Hậu Giang tìm hiểu về thực trạng chuyển dịch cơ cấu KT tỉnh HG, tín dụng ngân hàng đối với chuyển dịch cơ cấu KT tỉnh, những mặt tồn tại và một số giải pháp đề xuất.

Bài giảng chương V: Khủng hoảng tín dụng dưới chuẩn hay thị trường các công cụ thu nhập cố định mới hình thành

Bài giảng "Chương V: Khủng hoảng tín dụng dưới chuẩn hay thị trường các công cụ thu nhập cố định mới hình thành" cung cấp cho người học các kiến thức về thị trường tín dụng thế chấp, nguyên nhân khủng hoảng (bùng nổ và suy thoái của thị trường nhà, hành vi của định chế tín dụng và tâm lý đầu cơ của người mua nhà, thực tiễn án dụng tín dụng rủi ro cao trong thế chấp - Chứng khoán hóa,...). Mời các bạn cùng tham khảo nội dung chi tiết.

Giáo trình Tài chính quốc tế: Phần 1

Phần 1 cuốn giáo trình "Tài chính quốc tế" do PGS.TS Nguyễn Văn Tiến biên soạn cung cấp cho người đọc các kiến thức: Đại cương về tài chính quốc tế, thị trường ngoại hối - Forex, cán cân thanh toán quốc tế. Mời các bạn cùng tham khảo nội dung chi tiết.

Building Community Disaster Resilience Through Private–Public Collaboration

Natural disasters—including hurricanes, earthquakes, volcanic eruptions, and floods— caused over 220,000 deaths worldwide in the first half of 2010 and wreaked havoc on homes, buildings, and the environment. To withstand and recover from natural and human-caused disasters, it is essential that citizens and communities work together to anticipate threats, limit their effects, and rapidly restore functionality after a crisi

Các câu hỏi thường gặp về thẻ thanh toán

Đối với thẻ thanh toán có nhiều khái niệm để diễn đạt nó, mỗi một cách diễn đạt nhằm làm nổi bật một nội dung nào đó. Sau đây là một số khái niệm về thẻ thanh toán: · Thẻ thanh toán (thẻ chi trả) là một phương tiện thanh toán tiền mua hàng hoá, dịch vụ hoặc có thể được dùng để rút tiền mặt tại các Ngân hàng đại lý hoặc các máy rút tiền tự động. · Thẻ thanh toán là một loại thẻ giao dịch tài chính được phát hành bởi Ngân hàng, các Tổ chức tài chính hay các công ty....


.....Môn: Thanh Toán Quốc Tế..Nội dung trình bày... Tìm hiểu ULB 1930.. Sec & Các mẫu sec.. So sánh hối phiếu và sec.. I. Tìm hiểu ULB 1930...1.Hình thức của hối phiếu:.Hối phiếu cần phải có các nội dung sau đây:.. I. Tìm hiểu ULB 1930...2. Về người kí phát hối phiếu:. Là người bán hàng hay là người xuất khẩu. Có trách nhiệm kí phát hối...

Tài liệu mới download

Từ khóa được quan tâm

Có thể bạn quan tâm

Đề thi IQ vào các ngân hàng
  • 12/06/2011
  • 79.373
  • 992

Bộ sưu tập

Danh mục tài liệu