Liquidity risk, macroprudential regulation and bank performance: empirical evidence from Vietnamese commercial banks

Nguyen Tri Minh1,, Tran Ngoc Tho1, Nguyen Huu Tuan2
1 University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam
2 SSI Securities Corporation, Ho Chi Minh City, Vietnam

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This paper attempts to bridge the gap in the literature on the effects of liquidity risks and macroprudential policies on the performance of domestic banks in Vietnam. The two-way fixed effects and fixed effects generalized least squares methods were employed to analyze panel data from 31 Vietnamese commercial banks from 2006 to 2020. The results show that the liquid assets to total assets ratio has a positive effect on bank performance, which is measured by net interest margin. Stricter macroprudential regulations, which are represented by the short-term funding for mid-to-long-term loans ratio, improve domestic banks’ performance when taking the increase of foreign bank presence into account.

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