Impact of abnormal loan growth on risk of Vietnam commercial banking
Main Article Content
Abstract
This study aims to assess the effect of abnormal loan growth on bank risk in Vietnam, using balance data, including 390 observations of 30 banks from 2007 to 2019. pooled regression method (pooled OLS), fixed effects model, random effects model, and GMM method (generalized method of moments). Anomalous loan growth initially helped banks reduce risk. However, this relationship is non-linear and heterogeneous. Our findings suggest that the pursuit of excessive lending is much more From the research results, the article makes some suggestions to limit the bank's risk that the pursuit of lending too much is more likely to lead to Banks having to accept greater risk.
Article Details
Keywords
Commercial banks, Risk, Abnormal loan growth
References
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Alessi, L., & Detken, C. (2011). Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity. European Journal of Political Economy, 27(3), 520-533.
Altunbas, Y., Gambacorta, L., & Marques-Ibanez, D. (2012). Do bank characteristics influence the effect of monetary policy on bank risk? Economics Letters, 117(1), 220-222.
Amador, J. S., Gómez-González, J. E., & Pabón, A. M. (2013). Loan growth and bank risk: new evidence. Financial Markets and Portfolio Management, 27(4), 365-379.
Arellano, M. (2002). Sargan's intrumental variables estimation and the generalized method of moments. Journal of Business & Economic Statistics, 20(4), 450-459. doi: https://doi.org/10.1198/073500102288618595
Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of econometrics, 68(1), 29-51.
Bikker, J. A., & Metzemakers, P. A. (2005). Bank provisioning behaviour and procyclicality. Journal of International Financial Markets, Institutions and Money, 15(2), 141-157.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of econometrics, 87(1), 115-143.
Bond, S. R. (2002). Dynamic panel data models: a guide to micro data methods and practice. Portuguese economic journal, 1(2), 141-162. doi: https://doi.org/10.1007/s10258-002-0009-9
Cecchetti, S., & Kharroubi, E. (2012). Reassessing the impact of finance on growth (No. 381). Bank for International Settlements.
Clair, R. T. (1992). Loan growth and loan quality: some preliminary evidence from Texas banks. Economic Review, Federal Reserve Bank of Dallas, Third Quarter, 1992, 9-22.
C Cornelli, G., Frost, J., Gambacorta, L., Rau, R., Wardrop, R., & Ziegler, T. (2020). Fintech and big tech credit: a new database (No. 887). Bank for International Settlements.
Dell’Ariccia, G., Igan, D., & Laeven, L. U. (2012). Credit booms and lending standards: Evidence from the subprime mortgage market. Journal of money, credit and banking, 44(2‐3), 367-384.
Foos, D., Norden, L., & Weber, M. (2010). Loan growth and riskiness of banks. Journal of Banking & Finance, 34(12), 2929-2940.
García-Herrero, A., Gavilá, S., & Santabárbara, D. (2009). What explains the low profitability of Chinese banks?. Journal of Banking & Finance, 33(11), 2080-2092.
García-Suaza, A. F., Gómez-González, J. E., Pabón, A. M., & Tenjo-Galarza, F. (2012). The cyclical behavior of bank capital buffers in an emerging economy: Size does matter. Economic Modelling, 29(5), 1612-1617.
Ghosh, S. (2010). Credit growth, bank soundness and financial fragility: Evidence from Indian banking sector. South Asia Economic Journal, 11(1), 69-98.
Gorton, G. (2009). Information, liquidity, and the (ongoing) panic of 2007. american economic review, 99(2), 567-572.
Gourinchas, P. O., Valdes, R. O., & Landerretche, O. (2001). Lending Booms: Latin America and the World. Economía, 1(2), 47-99.
Hansen, L. P. (1982). Large sample properties of generalized method of moments estimators. Econometrica: journal of the Econometric Society, 50(4), 1029-1054.
Hess, K., Grimes, A., & Holmes, M. (2009). Credit losses in Australasian banking. Economic Record, 85(270), 331-343.
Kashif, M., Iftikhar, S. F., & Iftikhar, K. (2016). Loan growth and bank solvency: evidence from the Pakistani banking sector. Financial Innovation, 2(1), 1-13.
Keeton, W. R. (1999). Does faster loan growth lead to higher loan losses? Economic review-Federal reserve bank of Kansas City, 84(2), 57-75.
Kindleberger, C. P., & Aliber, R. Z. (2011). Manias, panics and crashes: a history of financial crises: Palgrave Macmillan.
Köhler, M. (2012). Which banks are more risky? The impact of loan growth and business model on bank risk-taking (No. 33/2012). Deutsche Bundesbank.
Laeven, L., & Majnoni, G. (2003). Loan loss provisioning and economic slowdowns: too much, too late? Journal of Financial Intermediation, 12(2), 178-197.
Le, T. (2019). The interrelationship between liquidity creation and bank capital in Vietnamese banking. Managerial Finance, 45(2), 331-347.
Le, T. D. (2020). The interrelationship among bank profitability, bank stability, and loan growth: Evidence from Vietnam. Cogent Business & Management, 7(1), 1840488.
Lepetit, L., Nys, E., Rous, P., & Tarazi, A. (2008). The expansion of services in European banking: Implications for loan pricing and interest margins. Journal of Banking & Finance, 32(11), 2325-2335.
Minsky, H. P. (1977). A theory of systemic fragility. Financial crises: Institutions and markets in a fragile environment, 138-152.
Rossi, S. P., Schwaiger, M. S., & Winkler, G. (2009). How loan portfolio diversification affects risk, efficiency and capitalization: A managerial behavior model for Austrian banks. Journal of Banking & Finance, 33(12), 2218-2226.
Saunders, A., Strock, E., & Travlos, N. G. (1990). Ownership structure, deregulation, and bank risk taking. The journal of finance, 45(2), 643-654.
Schularick, M., & Taylor, A. M. (2012). Credit booms gone bust: Monetary policy, leverage cycles, and financial crises, 1870-2008. american economic review, 102(2), 1029-1061.
Sinkey, J. F., & Greenawalt, M. B. (1991). Loan-loss experience and risk-taking behavior at large commercial banks. Journal of Financial Services Research, 5(1), 43-59.
Alessi, L., & Detken, C. (2011). Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity. European Journal of Political Economy, 27(3), 520-533.
Altunbas, Y., Gambacorta, L., & Marques-Ibanez, D. (2012). Do bank characteristics influence the effect of monetary policy on bank risk? Economics Letters, 117(1), 220-222.
Amador, J. S., Gómez-González, J. E., & Pabón, A. M. (2013). Loan growth and bank risk: new evidence. Financial Markets and Portfolio Management, 27(4), 365-379.
Arellano, M. (2002). Sargan's intrumental variables estimation and the generalized method of moments. Journal of Business & Economic Statistics, 20(4), 450-459. doi: https://doi.org/10.1198/073500102288618595
Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of econometrics, 68(1), 29-51.
Bikker, J. A., & Metzemakers, P. A. (2005). Bank provisioning behaviour and procyclicality. Journal of International Financial Markets, Institutions and Money, 15(2), 141-157.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of econometrics, 87(1), 115-143.
Bond, S. R. (2002). Dynamic panel data models: a guide to micro data methods and practice. Portuguese economic journal, 1(2), 141-162. doi: https://doi.org/10.1007/s10258-002-0009-9
Cecchetti, S., & Kharroubi, E. (2012). Reassessing the impact of finance on growth (No. 381). Bank for International Settlements.
Clair, R. T. (1992). Loan growth and loan quality: some preliminary evidence from Texas banks. Economic Review, Federal Reserve Bank of Dallas, Third Quarter, 1992, 9-22.
C Cornelli, G., Frost, J., Gambacorta, L., Rau, R., Wardrop, R., & Ziegler, T. (2020). Fintech and big tech credit: a new database (No. 887). Bank for International Settlements.
Dell’Ariccia, G., Igan, D., & Laeven, L. U. (2012). Credit booms and lending standards: Evidence from the subprime mortgage market. Journal of money, credit and banking, 44(2‐3), 367-384.
Foos, D., Norden, L., & Weber, M. (2010). Loan growth and riskiness of banks. Journal of Banking & Finance, 34(12), 2929-2940.
García-Herrero, A., Gavilá, S., & Santabárbara, D. (2009). What explains the low profitability of Chinese banks?. Journal of Banking & Finance, 33(11), 2080-2092.
García-Suaza, A. F., Gómez-González, J. E., Pabón, A. M., & Tenjo-Galarza, F. (2012). The cyclical behavior of bank capital buffers in an emerging economy: Size does matter. Economic Modelling, 29(5), 1612-1617.
Ghosh, S. (2010). Credit growth, bank soundness and financial fragility: Evidence from Indian banking sector. South Asia Economic Journal, 11(1), 69-98.
Gorton, G. (2009). Information, liquidity, and the (ongoing) panic of 2007. american economic review, 99(2), 567-572.
Gourinchas, P. O., Valdes, R. O., & Landerretche, O. (2001). Lending Booms: Latin America and the World. Economía, 1(2), 47-99.
Hansen, L. P. (1982). Large sample properties of generalized method of moments estimators. Econometrica: journal of the Econometric Society, 50(4), 1029-1054.
Hess, K., Grimes, A., & Holmes, M. (2009). Credit losses in Australasian banking. Economic Record, 85(270), 331-343.
Kashif, M., Iftikhar, S. F., & Iftikhar, K. (2016). Loan growth and bank solvency: evidence from the Pakistani banking sector. Financial Innovation, 2(1), 1-13.
Keeton, W. R. (1999). Does faster loan growth lead to higher loan losses? Economic review-Federal reserve bank of Kansas City, 84(2), 57-75.
Kindleberger, C. P., & Aliber, R. Z. (2011). Manias, panics and crashes: a history of financial crises: Palgrave Macmillan.
Köhler, M. (2012). Which banks are more risky? The impact of loan growth and business model on bank risk-taking (No. 33/2012). Deutsche Bundesbank.
Laeven, L., & Majnoni, G. (2003). Loan loss provisioning and economic slowdowns: too much, too late? Journal of Financial Intermediation, 12(2), 178-197.
Le, T. (2019). The interrelationship between liquidity creation and bank capital in Vietnamese banking. Managerial Finance, 45(2), 331-347.
Le, T. D. (2020). The interrelationship among bank profitability, bank stability, and loan growth: Evidence from Vietnam. Cogent Business & Management, 7(1), 1840488.
Lepetit, L., Nys, E., Rous, P., & Tarazi, A. (2008). The expansion of services in European banking: Implications for loan pricing and interest margins. Journal of Banking & Finance, 32(11), 2325-2335.
Minsky, H. P. (1977). A theory of systemic fragility. Financial crises: Institutions and markets in a fragile environment, 138-152.
Rossi, S. P., Schwaiger, M. S., & Winkler, G. (2009). How loan portfolio diversification affects risk, efficiency and capitalization: A managerial behavior model for Austrian banks. Journal of Banking & Finance, 33(12), 2218-2226.
Saunders, A., Strock, E., & Travlos, N. G. (1990). Ownership structure, deregulation, and bank risk taking. The journal of finance, 45(2), 643-654.
Schularick, M., & Taylor, A. M. (2012). Credit booms gone bust: Monetary policy, leverage cycles, and financial crises, 1870-2008. american economic review, 102(2), 1029-1061.
Sinkey, J. F., & Greenawalt, M. B. (1991). Loan-loss experience and risk-taking behavior at large commercial banks. Journal of Financial Services Research, 5(1), 43-59.
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