Impact of global economic policy uncertainty on the performance and risk of Vietnamese banks: the moderating role of bank capital

Purpose This study analyzes the impact of global economic policy uncertainty (GEPU) on the performance and risk of banks in Vietnam, while also clarifying the moderating role of bank capital in this relationship. Design/methodology/approach Utilizing panel data from 26 banks over the period 2010–2024, the study employs the feasible generalized least squares estimation method and the two-step System Generalized Method of Moments (GMM). Findings The empirical results provide robust evidence that GEPU significantly reduces bank performance and increases banking risk. Bank capital plays an important moderating role, as higher equity ratios help mitigate the negative effects of GEPU on both performance and risk. Practical implications The findings offer important policy implications for bank managers and policymakers in Vietnam to enhance banking performance and ensure financial system stability amid rising global uncertainty. Originality/value This study is the first to examine how GEPU affects bank performance and risk in Vietnam—an emerging, highly open economy with strong trade linkages to the United States and China. In addition, we extend prior work by employing the US–China Tension Index as an alternative proxy for uncertainty in robustness checks. Moreover, this research contributes to the literature by elucidating how bank capital moderates GEPU'seffects on bank performance and risk. Building on the Real Options Theory, we suggest that the “delay” decision becomes more or less pronounced depending on whether banks have higher or lower levels of capital.