Managing financial risks: An empirical analysis of credit and market risk in Vietnamese commercial banks

Managing financial risks is critical for the sustainability of commercial banks, particularly in emerging markets like Vietnam. This study examines the determinants of credit risk and market risk in Vietnamese commercial banks, focusing on factors such as bank size, capital adequacy, non-performing loan (NPL) ratio, and portfolio diversification. Using a dataset of 5 commercial banks from 2015 to 2022, the research employs multivariate regression analysis to identify key drivers of credit risk and applies the Value at Risk (VaR) model to assess market risk. The findings reveal that larger banks with higher capital adequacy ratios exhibit lower credit risk, while banks with higher NPL ratios face significantly elevated credit risk. Market risk, as measured by VaR, is strongly influenced by portfolio volatility and interest rate fluctuations. These results highlight the need for robust risk management frameworks tailored to the unique characteristics of the Vietnamese banking sector. This study contributes to the literature on financial risk management by providing empirical evidence from an emerging market context. The insights are valuable for financial managers and policymakers aiming to enhance the resilience of commercial banks. Future research could explore the role of regulatory interventions and macroeconomic factors in shaping financial risks.