Macroprudential policies and bank risk evidence from Vietnam

This paper examines the impact of macroprudential policies (MPP) on reducing risks at commercial banks (CBs) in Vietnam. In the paper, the authors use secondary data collected from the financial reports of 29 CBs in Vietnam during 2009-2023 to form an unbalanced panel data set and apply the GMM model to evaluate the impact of macroprudential policies on risks at these CBs. The research findings indicate that these policies generally effectively reduce risks at CBs. Additionally, when multiple instruments are combined, they have a more substantial impact. Based on this, the authors provide several recommendations to enhance the effectiveness of macroprudential policies and mitigate risks at Vietnamese CBs. This study provides comprehensive empirical evaluations of the effectiveness of macroprudential policies in reducing bank risk in Vietnam over the period 2009–2023. By constructing a novel macroprudential policy index and applying a dynamic GMM model to an unbalanced panel of 29 commercial banks, the research offers insights into how credit-, capital-, and liquidity-related tools contribute to financial stability in an emerging market context. The study has implications for the design and implementation of macroprudential frameworks not only in Vietnam but also across other emerging financial systems striving to ensure banking sector resilience.